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Former St. Luke's CEO Ed Dahlberg Shares his Thoughts on Court Decision

February 14, 2014

I agree with one statement made by Idaho Attorney General Lawrence Wasden: “… The rules have to change.”

The court’s recent decision regarding the St. Luke’s/Saltzer Medical Group integration basically says, “we don’t like the results of our current health care system, but we can’t allow it to change based on current law.”

Our health care system was never “invented.” It evolved.

Clearly, health care needs change. However, the environment in which it operates also has to change to be consistent with the technology and the understanding of where we are today.

That being said, isn’t one of the intended outcomes of competition to breed innovation and new thinking? Products, processes and business models change all the time, advancing and improving the industries in which they evolve.

One simple example to make a point. The invention of digital photography had business altering implications. Some businesses grew and innovated, while others failed when they didn’t adapt. Change can be uncomfortable and consequential.

Couldn’t the new competition in health care be among successfully integrated systems? Today’s physicians and hospitals as separate entities can often be incentivized for opposite outcomes. Integration is designed to bring efficiency by aligning those incentives.

The reason there are general contractors in construction is to integrate the work of different “subs” and to focus accountability. Why wouldn’t that be considered positive in health care?

No question health care is complex and not easy to explain. For example, is the cost of health care determined by the price of a given procedure or the costs of caring for a population on a per person per year basis?

Idaho has always ranked very positively on a per person, per year basis.

It is worth noting that the most expensive procedures are those that are performed but that weren’t necessary. It’s a pattern that the current approach unintentionally incentivizes.

Can St. Luke’s, or Saint Al’s for that matter, fairly be evaluated on costs based on state or national averages? Clearly the answer is no.

Nationally, states get paid differently by Medicare. For example, in other states in the Northwest, providers can get paid about 15-25 percent higher for the same diagnosis than do Idaho providers. And when that business approaches 50 percent of an entity’s volume, the impact is astounding.

So, basing any analysis on a percentage of Medicare is flawed. On a state basis, should Luke’s and Al’s really be compared to hospitals that don’t have NICUs, open heart surgery, highly sophisticated cancer programs, trauma centers? That would be like saying McDonald’s and Chandlers steakhouse should charge the same for their meals.

Furthermore, should hospitals, physicians and caregivers be held totally responsible for the results of U.S. health outcomes? We’re more than half again as obese as any other nation in the world! Our teenage pregnancy rate at one time was more than three times Canada’s. Many other civilized nations’ social norms are very different than ours. If we like our social norm, we just have to understand it’s going to cost more. These are decisions societies make, not health care providers.

Of course, the prices in Twin Falls needed to be adjusted. The community had a marginal, old facility in need of massive update and highly inadequate financial reserves. They needed to rebuild themselves. How else do you do it? The new costs of bringing that community current had to be covered.

It is hard to reconcile how a health care system that needs change and is working to bring about change should be restrained by laws that need to be changed. I couldn’t agree more with AG Wasden and Judge B. Lynn Winmill on this point.

Ed Dahlberg, of Boise, is the retired president and CEO of St. Luke’s Health System.