The Johnson County hospital building boom
AdventHealth is set to build an 85-bed hospital in a wealthy area of south Overland Park that already has four full-service hospitals within 10 miles.
Last month it announced plans to build yet another one: a 200-bed hospital in Lenexa, just west of the Interstate 435 loop, also a well-to-do area.
AdventHealth leaders said they were responding to demand from a growing part of the metro.
But there’s another reason to build on the far edge of the area’s wealthiest county.
“By putting your hospitals beyond the outside of the ongoing growth or sprawl within a metro area, you have eliminated most of the poor people,” said James Dockins, a professor at Rockhurst University who studies health care management.
And while residents of lower-income areas must do without, he said, Johnson County patients may actually face higher health care bills because of the medical building boom there.
The announcements by AdventHealth, the nonprofit formerly known as Shawnee Mission Health, are just the latest expansions in an ongoing rush to claim or hold onto a slice of Johnson County, where large hospitals, “micro-hospitals” and free-standing emergency rooms already crowd the map.
The University of Kansas Hospital, Olathe Medical Center, St. Luke’s Health System and HCA Midwest Health (which owns hospitals throughout the Kansas City area) have also significantly expanded their operations there in recent years.
Meanwhile, large sections of Wyandotte and Jackson counties remain health care deserts, deemed “medically underserved” by the federal government.
In other industries, it wouldn’t necessarily make sense to expand in a part of town that’s already saturated, while ignoring areas that have little to no competition. But it makes sense for hospitals because in general, the amount of money they make for a given procedure depends on who is paying.
AdventHealth plans to break ground this fall on its 85-bed hospital at 165th Street and Antioch Road, sandwiched between the two wealthiest ZIP codes in the state of Kansas: 66224, where the median household income is $156,180, and 66221, where it’s $149,461.
Dockins said that means a lot of working-age high earners with private health insurance, which pays better than Medicare (a government program for older Americans) and much better than Medicaid or treating the uninsured.
Patrick Sallee, the CEO of three Vibrant Health safety net clinics in Wyandotte County, said the hospitals are flocking to Johnson County to try to capture more of those patients with private insurance, rather than expanding in his county, where more people who are uninsured or on Medicaid would be coming through their doors.
It’s not an equitable health care system, he said, but it’s like that almost all over the country and it’s not the hospitals’ fault.
“I think they’re doing what the business structure drives them to do,” Sallee said. “In general I wish the structure was different. The structure incentivizes the behavior, and the behavior is to compete like hell for commercial patients.”
That’s worsening the inequality of health care access between the haves and have-nots in Kansas City.
There are now at least 15 emergency rooms in Johnson County (including two that are just for kids), the same number as Jackson and Wyandotte counties combined. There are 12 emergency rooms in Jackson County (including one that’s just for kids and one that’s just for military veterans), a county that is larger in both population and square miles. There are three in all of Wyandotte County, which typically ranks as the least healthy county in the metro area.
It’s not all rosy for Johnson County, either, Dockins said. Emergency rooms are the most expensive place to get care, and the number of them popping up in the county should raise questions about who’s paying for all that health care infrastructure and whether it might be put to more efficient use elsewhere.
There is one place where the system is different: Maryland. Since the 1970s, the state has had a unique “all-payer” system in which a central state commission sets prices for all hospital services, rather than insurers negotiating individually.
Individual hospitals are paid different amounts to encourage competition, but patients don’t pay different amounts based on who insures them, and the system also tries to account for the amount of uncompensated care each hospital provides to the uninsured.
Bob Atlas, the president and CEO of the Maryland Hospital Association, said it’s not perfect, but it generally does make it easier for hospitals to operate in poorer areas, whether rural or urban.
“By having Medicare and Medicaid pay essentially the same as commercial payers … hospitals are not, if you will, disadvantaged by being in a community with what we in the field would call ‘a challenging payer mix,’” Atlas said.
Some states have dabbled in similar models, but the amount of money in the health care industry has changed dramatically since the 1970s and many hospitals now oppose all-payer models because they like the freedom to negotiate with smaller groups of payers.
There’s been no buzz about bringing all-payer to Kansas or Missouri.
Which means that at a time when several hospital systems in Kansas City are expanding, none of them are getting any closer to patients like Michael Brantley.
Brantley, a Kansas City, Kansas, artist, has been battling sarcoidosis, an inflammatory condition that has caused him to at times lose his vision and his ability to move without pain.
“Transportation is an issue, and at the moment right now I am borrowing my mother’s car in order to even get back and forth” to doctor appointments, Brantley said when The Star interviewed him last month for another story. “I lost my car when I was sick and I haven’t been able to make enough money to get another car.”
If he has a car, Brantley can continue driving 20 minutes from his house near the Quindaro neighborhood to the University of Kansas Hospital, where he found a doctor who was willing to treat him at discounted rates when he was uninsured.
If he’s forced to take the bus to his chemotherapy treatments, the ride is one to two hours each way and requires at least one transfer. He has no options closer to home.
“There’s nothing around here,” Brantley said.
Within the last five years, medical building projects in Johnson County have included:
▪ A $100 million expansion of the University of Kansas Hospital’s Indian Creek Campus at I-435 and Nall Avenue.
▪ A half-dozen “micro-hospitals” and freestanding emergency rooms opened throughout Johnson County by St. Luke’s and HCA Midwest.
▪ A $100 million expansion of Olathe Medical Center.
▪ AdventHealth’s BluHawk medical clinic in south Overland Park, near where the new hospital will be built.
▪ A $120 million expansion of HCA Midwest’s Overland Park Regional Medical Center.
▪ Smaller scale projects like a $36 million AdventHealth outpatient clinic at College Boulevard and Metcalf Avenue, an $8 million pediatric center at Overland Park Regional and St. Luke’s Mission Farms primary care and specialty services clinic at I-435 and Mission Road.
▪ More expansions still in the works, like the AdventHealth hospital in Overland Park and the one proposed for 87th Street and Renner Boulevard in Lenexa, and a new rehabilitation institute at St. Luke’s South Hospital.
The hospital systems say they’re simply trying to bring medical care closer to home.
“We’ve been building our physician network in south Overland Park,” AdventHealth CFO Karsten Randolph said in a statement announcing the new hospital on 165th Street. “It’s important that we bring these providers closer to where their patients live and work, and building a new hospital with the latest medical technology will allow them to care for more patients and provide more advanced health care services.”
But Brenda Sharpe, the president and CEO of the REACH Healthcare Foundation, said people who live in other parts of the Kansas City area would love that sort of convenience too — especially low-income patients who are more likely to have transportation issues.
“I don’t begrudge the hospitals opening new facilities,” Sharpe said. “I just wish they would open up new clinics too in areas of town that are perpetually underserved.”
The federal government’s Health Resources and Services Administration decides which areas of the country are designated medically underserved — areas the agency defines as “having too few primary care providers, high infant mortality, high poverty or a high elderly population.”
Not one square mile of Johnson County makes the list. But a large swath of Kansas City does, and so does the northeast corner of Wyandotte County around Quindaro Boulevard.
For the most part, the only medical organizations building in those places are safety net clinics that are subsidized by donations and tax dollars.
The YMCA teamed with Truman Medical Center (Jackson County’s safety net hospital) to open a clinic at 3800 Linwood Blvd. last year, and Southwest Family Health Care is seeking $4 million in donations to expand its operations in Quindaro and the Rosedale neighborhood of Kansas City, Kansas.
The HCA Midwest hospitals, which include Overland Park Regional and Menorah Medical Center, are for-profit enterprises. So are three Kansas City-area hospitals owned by Prime Healthcare: St. Joseph Medical Center, St. Mary’s Medical Center in Blue Springs and Providence Medical Center in Kansas City, Kansas.
But Kansas City’s other major health systems are nonprofits or public hospitals that, in exchange for tax breaks, are legally bound to work for the public good as well as for money.
Sharpe, whose organization works to improve health care access in underserved areas, said the nonprofit hospitals “are doing good work in their communities,” but some parts of the metro are being left behind.
Johnson County regularly ranks as the healthiest in Kansas in the Robert Wood Johnson Foundation’s annual analysis. Wyandotte County is always near the bottom. Jackson County is usually ranked near the middle of Missouri’s 115 counties, while Platte and Clay counties are near the top.
Many factors create those disparities, and experts generally agree that things like poverty and lifestyle weigh heavier than the number of nearby doctors and hospitals. But Sharpe said it would still make sense for the area’s leading medical providers to build where people are least healthy.
“In an ideal world, if we were really looking at population health outcomes, we’d be locating primary care and specialty care resources in communities that have the highest rates of poverty and the lowest rates of access to those services,” Sharpe said.
Instead, much of the new building is in Overland Park, which the consumer website WalletHub recently ranked No. 1 for health care among the 170 largest cities in America.
New medical facilities would also bring a financial boost to underserved areas that would help with some of the socioeconomic factors contributing to poor health, Sharpe said. The new AdventHealth hospital in south Johnson County, for example, is projected to create 200 full-time jobs.
Advocates say expanding Medicaid would make underserved communities more attractive health care markets. Medicaid payment rates are low compared to other insurance, but still usually a better return on investment than treating uninsured patients.
Kansas and Missouri are two of 14 states that have so far declined expansion, which is a feature of the Affordable Care Act (commonly called Obamacare). It would extend Medicaid coverage to everyone who makes less than 138 percent of the federal poverty line, or about $35,000 a year for a family of four. The federal government picks up 90 percent of the cost.
In the absence of expansion, Missouri and Kansas have some of the nation’s tightest Medicaid eligibility restrictions. In both states nearly everyone who qualifies is either a child, a frail elderly person, a pregnant woman or a person with a disability.
Faisal Khan, the CEO of the Samuel U. Rodgers Health Center safety net clinics in Missouri, said that means it’s relatively easy to link low-income patients with pediatric specialists or prenatal care at area hospitals, because Medicaid usually covers it.
But when an uninsured adult who’s not pregnant needs an MRI or surgery, “that gets a bit complicated.”
His organization has a partnership with North Kansas City Hospital for treating residents of Clay County, and Truman Medical Center has agreed to treat all Jackson County residents regardless of their ability to pay in exchange for a taxpayer subsidy.
“The folks at Truman really are committed to making this work and they do make every effort to take care of everybody we send over,” Khan said.
Truman also provides an on-demand transportation system for some of its patients.
There’s nothing like that for low-income people who need hospital care in Wyandotte County.
Sallee of Vibrant Health has an agreement with a company called Circulation to get patients to and from its safety net clinics using the ride-sharing app Lyft. But transportation becomes an issue when they need to be referred for hospital care.
Sallee said his clinics’ patients could benefit from having things like medical imaging or surgical centers closer to home, but “there’s not the resources to make that happen.”
That’s despite having the region’s largest medical center, the University of Kansas Hospital, headquartered at the southeastern edge of the county.
Steven Stites, the chief medical officer for KU Hospital, said KU has invested far more in Wyandotte County than any other health system, from expanding its main campus on Rainbow Boulevard to renovating an aging federal building downtown into a mental health center to staffing a clinic inside Wyandotte High School and helping get Vibrant Health off the ground.
But academic medical centers run on thin margins, he said, and none of those investments would be possible if KU weren’t also joining the competition for suburbia.
“When you try to do good work in an underserved area, you’ve got to balance it against an area that’s got mostly insured patients,” Stites said. “For us, on the Kansas side, that’s Johnson County.”
KU Hospital hasn’t gotten any government payments since it moved from state control to a hospital authority model more than 20 years ago (although its accompanying medical school still gets state money). Stites said that means KU has to compete in Johnson County like everybody else, or risk going the way of Bethany Medical Center, which closed in 2001 after more than a century of operation in the heart of Kansas City, Kansas.
“You can’t have a strategy of only existing in a relatively poor county,” Stites said, “because you’re not going to be able to keep the doors open unless you have tremendous support from the county or the state, a la Truman Medical Center.”
Unless someone challenges their tax-exempt status, though, there’s nothing legally binding KU or any of the other hospitals to use the money they make treating commercially insured patients to ensure everyone else has access. And there is no clear path to medical care for patients who can’t afford it, like there is in Jackson County with Truman.
An organization called WyJo Care recruits doctors to donate some of their time to treating uninsured people in Wyandotte and Johnson counties — if the hospitals where they work agree to it.
Sallee said KU and St. Luke’s both step up to treat Vibrant Health’s patients.
But other advocates for low-income residents said they’ve talked to people who have been turned away.
“There have been places, like KU, where if someone needs to have surgery or get something serious done, they just won’t accept them,” said Molly Moffett, of the Community Health Council of Wyandotte County.
Having lower percentages of uninsured people has helped make Johnson County the winner in the medical building boom. But Dockins, the Rockhurst professor, said all of that buildup costs money, and sustaining it year over year takes even more.
Hospitals have to pay for staff, electricity, janitorial services and other costs even if they’re not full. And with the exception of times like last year’s bad flu season, they’re not usually full.
The new AdventHealth hospital in Overland Park will add almost 100 beds to an area that already has hundreds in two full-service hospitals about five miles to the north (Menorah Medical Center and St. Luke’s South), one about 10 miles to the west (Olathe Medical Center) and one about 10 miles to the northeast (St. Joseph Medical Center).
Meanwhile, government programs and private sector health insurers are slowly trying to move away from the traditional model of paying by the test, procedure or night’s stay and instead bundle payments to reward providers who keep people out of the hospital.
“Why would you build inpatient beds, when we see annually, ongoing migration toward outpatient services and away from inpatient?” Dockins said. “It seems to me to be a pretty nonsensical approach to health care strategic planning to be building out all these beds so close to each other.”
But Dockins said AdventHealth had a compelling reason to expand: competitors building around its main campus on 75th Street in Merriam. That hospital, formerly called Shawnee Mission Medical Center, is now bracketed between an HCA Midwest free-standing ER 2.5 miles northwest and a St. Luke’s micro-hospital about a mile straight east.
Those small facilities don’t offer all the services AdventHealth does. But Dockins said they’re located on major traffic arteries to divert high-value patients who are having emergencies. Those patients can get stabilized at the small facility, then referred to the “mother ship” hospital like St. Luke’s on the Country Club Plaza or Overland Park Regional for whatever followup tests or procedures they need.
It’s more infrastructure, but not more efficiency.
“What this typically leads to is a significant increase in overall costs for a particular population, but not necessarily an increase in overall quality of care,” Dockins said.
In a normal market, more competition in a geographic area should drive down prices for consumers.
But hospital care is not a normal market, Dockins said. People don’t shop around during medical emergencies, and even when it’s not an emergency, hospital pricing is so opaque, shopping around is nearly impossible.
The federal government recently required all hospitals that participate in Medicare to post price lists on their websites. But the lists can be hard to find, and they’re technical enough that it’s hard for non-medical people to decode them. They also break down some procedures into many separate components, each with their own price listing, and they don’t account for the different prices each insurance company has negotiated.
“We still don’t have any clue when we go into any of these hospitals in Overland Park what the price is going to be,” Dockins said. “It’s totally camouflaged, so there’s no way the normal market forces can enter play cause nobody has a clue what the bill is going to be until two or three weeks after they leave the hospital.”
So hospital prices are set more by what they need to charge to maintain and expand their operations and what insurance companies will allow.
There’s evidence nationally that insurance companies are allowing higher costs and just passing them on to their customers.
A study by the Healthcare Cost and Utilization Project found that costs for inpatient hospital stays increased by 13 percent (adjusted for inflation) between 2005 and 2014.
Meanwhile, the average deductible for private health insurance plans rose from $303 to more than $1,200 between 2006 and 2016, according to the Kaiser Family Foundation.
In short, Dockins said, people in Johnson County are subsidizing an inefficient hospital system that is overbuilt in some areas and underbuilt in others.
The proliferation of emergency rooms — freestanding and otherwise — in Johnson County encourages residents to get care in the most expensive setting possible.
When Brian Levinson, an Overland Park resident who works in marketing, was bit by a cat last year he went to the emergency room at St. Luke’s South, near his house, where he was given a tetanus shot and antibiotics. Several weeks later he got a bill for almost $1,500, with most of it going to pay for the ER visit fee, not the medicine.
Levinson had private insurance through Blue Cross and Blue Shield of Kansas City, but he had a high deductible, so his out-of-pocket share of the bill was still more than $1,000 — until he called a St. Luke’s executive to complain and got the bill whittled down.
Levinson also said that last year he took his son to Children’s Mercy’s Blue Valley Urgent Care clinic and was unexpectedly charged extra because the clinic used something called “provider-based billing” that allows hospitals to charge facility fees even for care that was provided outside of the hospital itself.
Medicare stopped paying those fees by federal law in 2015, but the Children’s Mercy clinic was grandfathered in.
“Certainly I’m very appreciative of the access to good health care,” Levinson said. “I just think the health care providers, particularly nonprofit systems that are asking the community for support, should be transparent about their costs and should be charging reasonable amounts for the services they provide.”
St. Luke’s and Children’s Mercy didn’t respond to requests for comment.
Levinson said he’s glad he doesn’t live in rural areas where hospitals are closing, but with three hospitals already within a few miles of his house he wishes more health systems in Johnson County were investing in things like urgent care — without extra fees — rather than building more ERs.
The federal government used to require states to make hospitals prove a need for a major expansion in a given area to prevent inflated prices due to excess capacity. That mandate was repealed in the 1980s, leaving it up to the states whether to keep their so-called “certificate of need” laws.
Kansas decided not to, which Dockins said is one reason the buildup in Johnson County continues unabated.
But Khan of the Samuel U. Rodgers Health Center said such laws alone can’t close the disparities. Missouri still has one, he said, but it hasn’t stopped the same sort of medical building boom in the suburbs of St. Louis, the city where he lived and worked until last year.
Until the health care system changes at a national level, he said, hospitals will keep ignoring low-income neighborhoods to seek out the areas with the most commercially insured patients.
“Everybody’s sort of trying to feed from the same trough, as it were.”