Okie Forum: Hospital Bailout and Medicaid Expansion Economics Exposed

Hospital Bailout and Medicaid Expansion Economics Exposed

G. Keith Smith, M.D., co-founder and managing partner of Surgery Center of Oklahoma

The April 27th edition of the Oklahoman contains an article by Silas Allen about the impending closure of Oklahoma State University’s osteopathic hospital in Tulsa. Hospital officials think they can stay open if a bunch of taxpayers that never utilize their facility pony up $18.25 million bucks to bail them out. This isn’t their first bailout it turns out.

In 2009, a trust was formed by the city of Tulsa to prevent a shutdown, a trust into which $5 million dollars of “state” money was pledged every year for 5 years. St. John’s Hospital in Tulsa managed the hospital during this time, but their agreement has expired and they are no longer interested in being involved.

To make its case for a bailout, the hospital claims that it provides a vital role in preventing an even more severe doctor shortage in Oklahoma by providing residency-training programs for students enrolled in the osteopathic school. The thinking is that residents who train in Oklahoma will stay in Oklahoma to practice. That this “stay-home-itis” would trump practice conditions and financial considerations young physicians examine when deciding where to locate is not credible as evidenced from all of the foreign trained physicians who practice in the state, but let’s move on.

Here is a quote from the article… see if this sounds familiar:

“An economic impact study released Friday shows the OSU Medical Center contributes 2,375 jobs to the Tulsa area, generating more than $120 million in income.

According to the internal study prepared by OSU’s Oklahoma Cooperative Extension Service, the hospital generated about $1.2 million in state sales tax during the 2011-12 fiscal year.”

Think of all of the jobs they could have created if they had lost $100 million dollars! Why, they could have eliminated unemployment from this whole region if allowed to lose a billion. Medicaid expansion, socialism and crony capitalism (corporatism) all share this faulty and absurd model of finance and economics, don’t they? No one ever asks how many jobs were destroyed by the tax confiscation inflicted to keep this entity afloat, do they? Even fewer recognize that this failure is due to the lack of a market for this enterprise.

It turns out that the giant St. Francis Hospital wants nothing to do with the osteopathic hospital either. If you guessed that there is one hospital system (one singled out for their abusive billing practices by TIME magazine) that is interested in “partnering” with the osteopathic hospital, you would be correct. Here is the Tulsa World’s account of this “merger.” Mercy Oklahoma City, however, wants no part of this marriage without a dowry, Mercy’s future bride much prettier with an $18.25 million taxpayer bailout in her purse. St. Johns and St. Francis don’t even want her with a stuffed purse! Talk about ugly!

Maybe Mercy is afraid that there aren’t going to be enough doctors around for them to employ and they want their own doctor production factory. Or maybe they are planning on charging so much for the “care” delivered there that the facility will become a profitable not for profit hospital. In either case, the people in Tulsa will be ringside witnesses to the economics and finance of Medicaid expansion, crony capitalism and corporatism should this bail out and merger materialize. This merger, of course, will be destructive of the goal of recruiting physicians to work in Oklahoma. I still say letting the rural physicians own the hospitals in which they work (just like the old days) would be the greatest recruiting move ever for rural medicine, a much better move than the taxpayer shakedown about to happen in Tulsa.