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by ROM REDDY
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On the gubernatorial campaign trail last spring, a high frequency concern was healthcare. Of course, there was great concern over the cost of healthcare, but people were also discouraged that the days of the family doctor and the personal attention were fast disappearing. Many of you complained about dealing with large, sterile health systems that were often regimented, uncaring, and costly. You were right. Helping me understand this space was the work done by two great local physicians, Dr. Marcelo Hochman and Dr. Brian Cuddy.
My study of the issue confirmed what I had been preaching on the trail – the system is broken and needs to be rebuilt from the ground up one brick at a time. South Carolina has ever increasing healthcare costs and is in the bottom 10 states for healthcare outcomes.
The first step to reform is rebooting the healthcare infrastructure by separating the Medical University of South Carolina (MUSC) academic/research side from the hospital/clinical side, privatizing the hospital/clinical side and reforming state policy to favor local community hospitals and independent medical practices. This is the opposite of what we are doing today.
The statistics are alarming. South Carolina has one of the highest uninsured rates in the nation and some 22 percent of SC residents have medical debt in collection. Over 60 percent of residents have chronic disease due to rapidly disappearing primary care, especially in rural areas. What is driving this rapid increase in cost with decline in outcomes? Of course, there is never just one reason. However, a big contributor is a state that completely lacks any kind of healthcare strategy and a healthcare infrastructure that not only endangers people’s wellbeing but also creates massive financial risk for the taxpayer in the process.
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A traditional American healthcare infrastructure is built around local community hospitals and local physicians providing personalized care to their patients. This system of local care is supported by a central academic hub that provides highly specialized sub-specialty expertise that cannot be provided locally for difficult cases. The centralized academic hub also conducts clinical research , supports innovation in medicine and teaches the next generation of physicians and researchers.
Due to its specialized nature and the resources needed to support leading edge research and teaching facilities, the academic hubs typically receive state and sometimes federal support. In South Carolina, that academic hub was supposed to be MUSC, a public state institution created by state law. It worked for a while until MUSC went rogue due to a combination of bad governance, lack of strategy and lack of oversight.
Today, MUSC has undergone “mission creep” and transformed from a teaching/research institution to a sprawling publicly funded hospital system operating or affiliated with 18 hospitals statewide. This transformation has happened through taxpayer funding and debt that has allowed MUSC to acquire hospitals, build hospitals and acquire physician practices throughout the state crowding out community hospitals and converting independent physician practices to MUSC employed physicians with centralized protocols and productivity targets they must meet. Since 2010, six rural hospitals have closed – and more are at risk.
The 2024 US Department of Health and FTC study found that hospital mergers consistently raise prices for the consumer while pricing becomes opaque and service becomes less and less personal and more commercial.. Promised improvements from “scale” or size rarely materialize. What makes this worse in the case of MUSC is that much of the hospital side growth is being funded by massive debt which has doubled to more than $1.6 billion. Whether the taxpayer has technically signed on to the debt or not, believe me as a state institution we are on the hook.
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RELATED | MORE SCRUTINY OF MUSC MISSION CREEP
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Even more concerning, this MUSC behemoth now has revenues of over $8 billion, which is about one half the size of the State’s general fund budget annually. As a state institution , financial problems with MUSC can boomerang on to the taxpayer. Remember the V.C. Summer nuclear project that backfired on to the taxpayer to the tune of $10 billion due to a lack of governance and oversight. We learned from that, right? Wrong!
MUSC has only one governing board of sixteen (14 legislature appointed and 2 governor appointed) that manages both the academic side and the hospital/ clinical side. Given the complex financing involved in acquiring hospitals, building hospitals, acquiring practices, taking on massive amounts of debt, there must be some strict qualifications for the board members like experience in capital markets, large system finance, mergers and acquisitions. Wrong again!
The board consists of seven medical professionals, mostly retired or practicing physicians and dentists. The other nine are “lay” people who could be donors and friends making major, complex financial decisions with taxpayer money. This is my wheelhouse, and I am intimately familiar with the risk of leverage and the consequences when managed by unqualified people playing with OPM (other people’s money) that can be just as addictive and reckless as the real drug.
During the campaign, I said the governor should have a functioning cabinet with a health secretary who understands not just strategy but finance as well. MUSC needs to be first split into two governing boards – one for the academic side which is a different skill set and the other for the hospital/clinical side which is a risk-return business with financial implications that can boomerang on the state.
The academic side should focus on restoring MUSC to a Tier 1 institution from a middle of the pack Tier 2 and maybe even Tier 3 institution nationally. Research funding from the NIH ( National Institute of Health) is often a measure of the academic strength of an institution. MUSC’s research funding is a fraction of leading public institutions like UNC which attracts NIH research grants that may be as much as 4 or 5 times higher. No reason for this.
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Let’s get an academic board – one that can deliver results and compete to be the best research/teaching/specialty medicine institution in the nation. This part of MUSC should continue to receive state assistance.
The hospital/clinical board should be a different set of individuals skilled in hospital administration, capital markets, complex financing and mergers and acquisitions. This group should develop a strategy to separate and privatize the hospital and clinical side. I would expect several billion dollars of proceeds from the sale that should be used to retire all MUSC debt, and the balance should be rebated to the taxpayer immediately upon sale.
Finally, state policy should be changed to encourage private practices by removing non-competes for physicians, removing all the existing barriers that prevent nurse practitioners from practicing primary care with tele- health support from physicians (including registered out of state physicians) and de-regulating the environment to allow private, community hospitals to grow and thrive.
In summary a state run hospital and healthcare system that is consolidating not just hospitals but private practices under a state funded enterprise backed by taxpayer dollars with the taxpayer on the hook for debt is the opposite of a system that fosters competition and gives the consumer choice. Any wonder that our costs are up and our outcomes down?
Staytuned as The Reddyroom Podcast will tackle healthcare in one of their early podcasts this fall.
ABOUT THE AUTHOR…
Rom Reddy is a businessman from Isle of Palms, S.C.
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