Cover Story

THE HOSPITAL

Here is what Connecticut's Stamford Hospital is up against this morning: A 20-year-old Guatemalan woman lies unconscious in the critical-care ward. Her new daughter, four months premature, is in neonatal. Since she is an illegal immigrant, Medicaid won't pay her bill, mounting at $2,000 a day. No one will.

In the oncology unit, an old woman with breast cancer grows weaker. "I don't think she's leaving the hospital," says her doctor, who hopes she will refuse the chemotherapy that would painfully prolong her life. There is another pressure, says social services nurse Susan Worland: "The insurance company keeps calling me, saying: "When can she go home? When can she go home?'"

Downstairs, 20 clerks are working the phones, pressing insurers to pay a day or two sooner. Stamford has one of the best collection records in the state, but an average receivable still runs 65 days. Madeline Hunter and four other workers slog through thousands of pages of patient records, searching for omissions that might trigger costly Medicare audits.

It is a morning of typically crushing complexity, a true mirror of the health-care industry and the monumental economics it confronts. Making Americans well has been a massive undertaking for almost as long as modern hospitals have been around. Now, the people who pay the bills have revolted, completely changing the way medicine is practiced and paid for. With his plan for wholesale reform soon to undergo congressional debate, President Clinton has set the stage for further revolution.

Amid such turmoil, there is an underlying reality: Stamford Hospital is up against itself. Like most of the nation's 5,300 community hospitals--the nonprofit and for-profit institutions that handle the bulk of short-term acute care--it has become an anachronism. "I wish we could call this something else, because 'hospital' connotes something that's going to be a dinosaur soon," says Philip D. Cusano, CEO of nonprofit Stamford.

That prospect alarms many. Hospitals are pillars of American towns--the places where most people are born and where many die. We fear and avoid them yet welcome the security of their presence. The changes raise unsettling threats to the standard of medicine that we've come to take for granted.

This is the story of a single community hospital and three of its professionals--a surgeon, a nurse, and an administrator. Their jobs and lives at Stamford present a vivid portrait of the challenges that face hospitals everywhere as they struggle to remake themselves.

The problem isn't new. Hospitals have been a growth industry through much of this century, expanding as more Americans received health insurance. Since 1977, though, there have been fewer inpatients, and they've stayed fewer days. As a result, 10% of the nation's community hospitals have closed. Hundreds more have been absorbed by chains (charts).

CRUEL TRAP. Stamford, a 305-bed hospital in a city of 110,000, is addressing the pressures with creative, energetic solutions as it struggles to maintain quality care. It has no choice: Neither public nor private insurers will pay for its services otherwise. Yet Stamford remains, ultimately, what it has always been: a centralized, high-overhead monolith that provides acute inpatient care--and is ill-equipped to deliver the cost savings that payers are demanding.

Community hospitals are caught in a cruel trap. Like hotels, they require a large, specialized staff: At Stamford, the ratio of employees to inpatients runs about five to one. Around the clock, workers must cook meals, wash sheets, fill prescriptions, and run lab tests. Much of that staffing represents fixed expense: It takes as long to process an insurance claim for a two-day stay, for example, as for one of two months. But the revenue attached to that overhead is falling. One Stamford ward has been shut down, and 30% of the remaining beds typically lie empty.

Some of the solutions are straightforward. Hospitals are hurriedly cutting costs, reducing staff, trimming supply bills, and rethinking inefficient processes--the biggest reason why industry profits have actually turned up in the past two years, according to consultant HCIA Inc. Many have diversified, too. Stamford now operates its own nursing home and cancer day-treatment center, and it owns half of an outpatient surgical operation. It has joined a partnership to provide home nursing and is negotiating with Host Marriott Corp. to start a retirement community.

In this way, such hospitals as Stamford are decentralizing, moving away from the traditional model that placed them at the center of U.S. medicine. But progress is slow. "There's a chassis that has been built upon that we're trying to reengineer," says Scott A. Mason of National Health Advisors Ltd., a Vienna (Va.) consultant. "It may be easier to get rid of the chassis."

A few hospitals are doing just that. A new approach known as "patient focus," for example, is behind overhauls at institutions such as Lakeland Regional Medical Center in Lakeland, Fla. There, nurses and other staff, trained to handle several jobs, form teams to care for a few patients apiece. Labs and therapy centers have been split up and relocated on each floor. Computers are in each patient's room so doctors and nurses can order tests and drugs without walking to a central station. Lakeland has spent about $10 million on the restructuring; it expects savings of $20 million a year.

Only a few institutions have made such a leap. For most, there are too many obstacles--history, culture, bureaucracy, money--to allow anything but gradual change. Yet the details of health-care reform are no less pressing: How do you cut costs without jeopardizing patients? At Stamford, Susan Worland, Madeline Hunter, and Bob Blabey show how hospitals are coping today.KEITH HAMMONDS