County has only one option for replacing hospital

United Health Services is only bidder for contract

The Milwaukee County agency that treats some of the area’s most vulnerable patients — those with severe mental health conditions — has long needed to replace its outdated and costly hospital in Wauwatosa.

Now only one company, after a more than two-year search, is interested in bidding on the contract.

The Behavioral Health Division’s search for an operator of its psychiatric hospital is down to Universal Health Services, a for-profit company with behavioral health hospitals throughout the country. And the company may only want to provide inpatient care.

That would leave the Behavioral Health Division with the challenge of finding a way to continue operating its emergency department and observation unit, which provide care to patients who can be stabilized and treated without being hospitalized.

They accounted for 9,085 of the 10,385 admissions at the hospital last year.

No one questions the need to replace the county’s outdated and costly hospital at the Mental Health Complex in Wauwatosa. It is projected to cost county taxpayers $36.8 million in 2017.

“We can’t provide services in an efficient and effective way,” said Mary Neubauer, a member of the board that oversees the Behavioral Health Division.

The hopes of mental health advocates and county officials that a local health system would bid to replace the current hospital ended last month when a coalition consisting of Ascension Wisconsin, Children’s Hospital of Wisconsin and Rogers Behavioral Health System decided against making a formal proposal.

The coalition, which presented a tentative proposal in May, just as a task force was nearing a decision, dropped out after determining it couldn’t produce a viable plan.

The decision left Universal Health Services, based in King of Prussia, Pa., as the lone bidder on the project. Universal has been asked to present a formal

proposal on Nov. 6.

The Behavioral Health Division’s board would then decide early next year whether to enter into formal negotiations with the company, said Michael Lappen, the division’s administrator.

Having only one option doesn’t put the Behavioral Health Division in a strong negotiating position. But Lappen said models exist for what would be a fair agreement.

Universal Health Services operates 293 behavioral health hospitals and 24 behavioral health clinics in the United States, Puerto Rico, the U.S. Virgin Islands and the United Kingdom. Behavioral health accounted for $4.6 billion of its $9.8 billion in revenue last year.

The company has experience running psychiatric hospitals that provide care to patients similar to those treated at the Behavioral Health Division’s hospital — those with severe behavioral health conditions, such as psychotic and complex bipolar disorders, who are in crisis.

But the company also is being investigated by the federal government for fraud at more than 20 of its behavioral health hospitals, according to its filings with the Securities and Exchange Commission.

The investigations include criminal investigations at five of its hospitals as well as Universal Health Services as a corporate entity.

Asked via email whether its proposal will include operating the Behavioral Health Division’s emergency department and observation unit, Universal Health Services would not comment. The details on its proposal won’t be known until Nov. 6.

The Behavioral Health Division may be able to sublease space in the new hospital, contracting with the company for support services, such as food and laundry services, that would be needed for the observation unit, where patients may be admitted for more than a day.

Its other options are more complicated.

A freestanding emergency department and observation unit would be costly to operate because it would not have the patient volume to provide support services efficiently.

Partnering with a health system to operate the emergency department and observation unit within a community hospital could be an option. But patients who need to be hospitalized would have to be transported to the new psychiatric hospital. And some patients — those who were transferred from another hospital to the Behavioral Health Division’s emergency department — would need to be transported twice.

“We would have to come up with a solution,” Lappen said. “We have to. No choice.”

At the same time, if it is unable to negotiate a contract with Universal Health Services, the Behavioral Health Division would remain saddled with an expensive and aging hospital and no clear options.

“Our old hospital just isn’t built to serve today’s patients efficiently,” Lappen said.

The Mental Health Complex was designed as a dormitory for an era when hospital stays were much longer, he said. The complex once even had a bowling alley.

As a result, patients can’t be monitored from a central location, requiring the hospital to hire additional staff. And separating patients who are experiencing severe symptoms, such as hearing voices, from other patients is difficult.

The coalition of local nonprofit health systems tentatively proposed opening a psychiatric hospital on the fifth and sixth floors of Wheaton Franciscan-St. Joseph hospital at 5000 W. Chambers St. Wheaton Franciscan Healthcare is part of Ascension, the country’s largest Catholic health system.

The hospital would have been in an area where about 40% of the patients at the Behavioral Health Division live and where there is the greatest need for psychiatric care.

Sharing services, such as pharmacy and food service, and making use of two empty floors at the hospital also had the potential to lessen the hospital’s losses. The Wheaton Franciscan-St. Joseph campus lost $67 million in its 2014 through 2016 fiscal years, according to information filed with the Wisconsin Hospital Association.

Ascension, Children’s and Rogers spent hundreds of hours over several months working on their proposal but subsequently determined it was not viable.

The cost of retrofitting the St. Joseph hospital may have been a factor. Further, almost all the patients would be covered by Medicaid, which pays rates that typically don’t cover a hospital’s costs and which often doesn’t pay for inpatient care at freestanding behavioral health hospitals.

In contrast, Universal Health Services tentatively plans to open a hospital with 120 beds, allocating 60 to patients who now get care at the Behavioral Health Division’s hospital.

The other beds would be for patients with commercial insurance, which pays much higher reimbursement rates. At the same time, contracting with the Behavioral Health Division would provide a steady source of revenue for the company while entering a new market.

The company also could hire some of the staff at the existing hospital, lessening the challenge of recruiting psychiatrists and psychiatric nurses during a severe shortage.

Providing certain types of care — with the right mix of insurance — can be profitable: Universal Health Services’ behavioral health hospitals had a 22.2% profit margin before taxes last year.

Joy Tapper, the executive director of the Milwaukee Health Care Partnership, which includes the county’s four health systems, said she was disappointed and surprised by the local coalition’s announcement

to withdraw last month.

But Tapper, who praised the Mental Health Board and Lappen for their perseverance, stressed that the Behavioral Health Division needs a new hospital.

Universal Health Services is a partial solution, even if it doesn’t contract to operate an emergency department and observation unit, she said.

“Our community needs dedicated beds for this high-acuity population,” she said, “and they are a viable option.”

The patients at the Behavioral Health Division’s hospital overall tend to be sicker, with higher percentages of them having depressive, bipolar and psychotic disorders than the behavioral health patients admitted to other hospitals.

“It is a very specialized population,” Tapper said.

About 86% of its inpatient

admissions are socalled emergency detentions, in which patients are at immediate risk of harming themselves or others.

The patients can be held for up to 72 hours before a court hearing must be held to determine if they could harm themselves or others. They typically can be held for up 10 days before a second court hearing must be held before a presiding judge. The judge then can order that the patient receive further inpatient or outpatient treatment.

Milwaukee County Circuit Judge David Borowski, one of two judges who hear cases involving emergency detentions, said one concern is ensuring adequate beds and staff to treat everyone who needs care.

“The need for these services is increasing, not

decreasing,” he said.

Maintaining adequate capacity has been a longstanding challenge for the Behavioral Health Division.

Its hospital has a waiting list almost 80% of the time, requiring patients at other hospitals to wait for hours before they can be transferred.

“These are times when there just aren’t beds available for folks who may have the most serious symptoms,” Lappen said.

Transfers for 1,720 patients were delayed last year, although the length of the wait times has fallen sharply from 2015. And the Behavioral Health Division’s hospital in turn transferred 727 patients to other behavioral health hospitals last year to free beds for new patients.

The hospital has struggled for years to recruit adequate staff because of the shortage of psychiatrists and psychiatric nurses, although a recent ad campaign to recruit staff was successful.

The additional beds at a new hospital could end that problem.

The Behavioral Health Division in all likelihood would have to pay Universal Health Services to offset at least part of the cost of providing care to people now treated at the hospital in Wauwatosa.

But Lappen said the subsidy could be less than the current costs of providing inpatient care in an outdated hospital.

That would free up dollars to expand community services, he said.

Providing more services that could help keep people out of the hospital is one of the division’s long-term goals. But Lappen noted that the division has had to put a lot of resources and money into its aging hospital.

An additional benefit of Universal Health Services’ opening a hospital in Milwaukee County, he said, is it would result in more behavioral health services.

That said, the Mental Health Board that oversees the division now has only one remaining option — and that option may not include operating an emergency department and observation unit.

“We’ve got a big decision to make,” said Neubauer, the board member. “And we’ve got to make a decision that’s the best decision for the patients we serve.”