Minnesota Nurses Association and North Memorial Health Care, Park Nicollet Health Services, Children’s Hospitals and Clinics, Fairview Health Services, HealthEast Care System and Allina Health

On December 6, 2012, the MNA and North Memorial Health Care, Park Nicollet Health Services, Children’s Hospitals and Clinics, Fairview Health Services, HealthEast Care System and Allina Health have reached agreement on new three-year contracts which are being unanimously recommended by the MNA Negotiating Committee for ratification by the membership.

The new contracts will be effective from June 1, 2013 through May 31, 2016.

Minnesota Nurses Association and the Hospitals are pleased to have reached agreement on the contracts in early negotiations and will now be able to focus on continuing to provide excellent care to our patients.

The opportunity for success in these early negotiations is enhanced by a limited agenda. Twin Cities hospitals made a huge concession to promote an early settlement. The contract talks will focus only on wages for nurses. An agreement now would mean that MNA nurses working in Twin Cities hospitals will continue to be among the highest paid in the country.  The average hourly rate for an MNA nurse working in a Twin Cities hospital is more than $44. Annualized, this rate translates into a salary of more than $91,500. That’s based on actual earnings from a survey of payroll data at hospitals in the Allina Health, Children’s Hospitals and Clinics of Minnesota, Fairview, HealthEast, North Memorial and Park Nicollet systems. The Twin Cities hourly rate is significantly higher than the national level. According to the most recent Bureau of Labor Statistics data (2011), the average hourly rate for registered nurses nationally is $29.03.

Agreeing to early negotiations limited only to wages also means that the current benefit and pension programs for MNA nurses will remain without changes if a new three-year contract is reached. While that’s good news for nurses, it doesn’t change the reality that a new approach to retirement security is needed. This isn’t just an issue for hospitals and nurses, but for the country.

Conversations, new solutions needed

The problem with pensions is the same challenge facing Social Security. It’s a math problem. We are living longer than ever before. A baby born about the time Social Security was created could expect to live only to about age 64 – a year less than the retirement age originally set by the program. In other words, the expectation was that people would work a full career, then draw benefits for only a few years.

For hospitals, the economic reality of pensions is significant. The cost of the pensions as a percentage of payroll has grown from 6.4 percent in 2007 to an estimated 11.4 percent for 2013. That’s unsustainable over the long-term.

If early negotiations are successful, a new contract for MNA nurses that deals only with wages resolves some issues. It would avoid the uncertainty that comes with protracted negotiations and the threat of a possible strike.  It also avoids the time and energy that goes into conducting traditional negotiations. 

Hospitals, though, are operating in a demanding environment today. Those who pay for health care, including individuals, insurers and government programs, are demanding that hospitals and other health providers do more for less. Hospitals are achieving that goal. The cost of health care has risen by less than 4 percent over the past year, a remarkable contrast to the double-digit increases routinely seen over much of the past two decades. The dramatic slowdown is the result of fundamental changes in how health care is delivered, and Minnesota hospitals are leading the way by delivering that care with innovation. It’s a fact that Twin Cities hospitals are recognized among the best in the nation when it comes to quality care. 

Building on this success will require basic changes in the cost structure of hospitals and other health care providers. Quality care requires outstanding care providers. Attracting and retaining the best nurses, for example, has pushed full-time nursing salaries in Twin Cities hospitals to among the highest levels in the country.

If a fair settlement can be reached on a new three-year contract, we  are hopeful that nurses and their unions will join hospitals in finding new and better ways to address the other pressing issues challenging hospitals.

Working together to find fair solutions on managing costs, including pensions, will take time and patience. In the immediate future, though, the hospitals’ full commitment will be to reach an agreement in early negotiations. 

• Negotiations will begin now even though the current contract does not expire until June 1, 2013.
• Items for discussion will be limited to wages only. Agreement on wages and approval of the proposal by nurses and the hospitals will result in a new three-year contract (extending to 2016) between MNA and the hospitals.
• There is an absolute deadline of December 25, 2012, to reach agreement.
• If no agreement is reached before December 25, the MNA and the hospitals will return to traditional negotiations starting next spring.

There is a lot at stake for all of us – nurses, the hospitals, fellow employees and the communities we serve.  The following are some questions and answers on the negotiations and what early talks mean:

Q: Why begin negotiations now when the contract doesn’t expire until June 1, 2013?

A: Reaching early agreement and assuring labor peace is so important for the work we do as employees and organizations, and in caring for patients in the community.  In order to achieve this important goal and avoid the problems associated with the 2010 negotiations, we decided to try something new – a one-issue (wages only) negotiation that could be achieved quickly and without the animosity that often accompanies traditional bargaining.

Q: Why is there an absolute deadline of December 25 of reaching an agreement?

A: This is a new approach and we hope it succeeds. By concluding negotiations before December 25, 2012, we avoid all the uncertainty and cost that comes with protracted negotiations and the threat of a possible strike.  We also can avoid all of the time, energy and money that goes into conducting traditional negotiations.  Reaching agreement on a new three-year contract before December 25, 2012, would be a great benefit to our employees, our patients and our community.

Q: Why are negotiations limited to wages? 

A: Certainly there are other issues in the current contract that are problematic for the hospitals that we would like to negotiate. However, we made the significant concession to limit the contract negotiations to wages to reach agreement by December 25.   By having a limited agenda – one that focuses on wages only – we increase the likelihood that a new contract can be achieved early and without a costly labor dispute.  This should be important because everyone — employers, insurance companies and the government — is looking for ways to cut payments to hospitals.  Most importantly, it assures our patients they will continue to receive the high quality care they expect from Twin Cities hospitals.

Q: If the early talks fail, is a nurses’ strike more likely next summer?

A: We believe most nurses working in the Twin Cities Hospitals want to avoid a strike. Nurses and hospitals want to continue providing outstanding care for patients.  If an agreement isn’t reached by December 25, 2012, it will make negotiations more difficult because more issues will be at stake as we return to traditional bargaining. 

The hospitals and MNA agreed to complete negotiations no later than Dec. 25, 2012. In order to achieve that ambitious goal, the hospitals and the MNA agreed to limit the negotiations to wages only. If an agreement is not reached by Dec. 25, the hospitals and MNA would return to the normal contract negotiations process and all terms of the contract could be up for consideration.

A statement from the Twin Cities hospitals said, “We believe early negotiations limited to wages would lead to a fair contract for our nurses and the peace of mind that comes with a fair settlement achieved without the distractions that can accompany protracted negotiations. Most importantly, an early settlement of the contract is in the best interests of the patients we all serve.”  

It’s no wonder that the future of Medicare is one of the most contentious issues in this year’s presidential race. Both President Obama and Governor Romney promise to protect Medicare while putting it on more solid financial footing and each has accused the other of undermining the long-term viability of the program. That boomer iceberg runs deep.

Voters will sort out the accusations and promises when they go to the polls Nov. 6. While the outcome of the election remains very much in doubt, the debate over Medicare’s future is evidence of a very real trend already affecting Twin Cities hospitals. Both the Obama Administration and the Romney-Ryan ticket project $716 billion in Medicare cuts over the next 10 years. How do they achieve the reductions? Most of the cuts will come from payments to hospitals and other health providers.

Private payers – individuals, employers and insurers – also are demanding that hospitals deliver the same high quality care at lower costs. 

This is coming at a time when hospitals are managing patients who are older and dealing with more chronic illnesses than in years past. It also is coming when Minnesota hospitals are facing rapidly increasing costs for uncompensated care – the charity care provided by hospitals and the bills that go uncollected. According to the Minnesota Department of Health, uncompensated care has more than doubled since 2004. The year-to-year increase in uncompensated care has averaged more than 12 percent since the middle of the last decade.

The trends are showing up on hospitals’ balance sheets. A study published by the St. Paul Pioneer Press in June found that operating income for Twin Cities metro hospitals and clinics fell about 21 percent, from about $363 million during fiscal 2010 to about $288 million last year. Nationally, the Health Care Advisory Board reported that if things remain on the same path, operating margins for the typical hospital could fall as much as 19 percent over the next 10 years.

In the face of these realities, Moody’s Investors Services reported earlier this year that downgrades of the debt of not-for-profit hospitals outpaced upgrades by 32 percent.  Simply put, the cost of borrowing money for many hospitals will increase, adding further pressure on the bottom lines.

What does this mean? Hospitals have to provide care in ways that are smarter, more efficient and less expensive. And, they have to do it without compromising quality or safety.

Twin Cities hospitals are responding with innovative solutions. One example is RARE, Reducing Avoidable Readmissions Effectively. By working closely with patients to inform them in easy-to-understand language about their care needs after hospitalization, to carefully plan discharges and through other techniques, the goal is to reduce readmissions. The ambitious goals could save privately insured patients $30 million just by the end of this year, with more savings for Medicare and Medicaid. The first signs are that the program is succeeding.

Other efforts are underway and more are coming. Staffing models will have to be flexible to make sure that nurses and other caregivers are where they can be most effective and efficient. Wages and benefits for hospital employees will be subject to tight reins. And, of course, all this has to be done with an eye on continuing to deliver the highest quality, safest care. 

Make no mistake about it: These are challenging times for Twin Cities hospitals. But innovation will assure that Minnesotans will continue to receive the best care in the country. Hospitals will navigate around all the icebergs.

The study compared health care with other public-facing industries and found some striking similarities in consumer expectations. “Like (other) industries before them, health care companies are recognizing that customer retention comes with repeatable, memorable experiences that match individuals’ wants and needs.”

There also are notable differences between health organizations and other industries. For example, personal recommendations drive the decisions of health care consumers more than in other industries. “In some instances, patients are also less forgiving than a disappointed retail customer,” said the study.

Jason A. Wolf, writing in his blog, “Hospital Impact,” (read here) succinctly summarized the study’s significance:

“(P)atient experience… (is) a central component of all we do…This commitment is not only about making people happy, it also is about considering the comprehensive nature of experience, which I suggest represents the critical interplay of quality, safety and service. We can no longer consider these distinct efforts, but rather must strive to structure opportunities in which we can create unparalleled care encounters and exceptional moments of truth.”

What does this mean for hospitals? The PwC study suggests at least three things: 

Flexibility. Hospitals need to be able to provide patients with the care they need when it’s needed. That requires flexible staffing and caregivers working in teams to respond most efficiently and effectively to where they are needed, areas in which hospitals in the Twin Cities already are in the national forefront. 

Transparency. Understandable and easy-to-access measures of value and quality have become more and more important to consumers, particularly as they are beginning to spend more of their own money on health care costs. Again, Minnesota is a national leader in defining quality and providing useful information to consumers.

Exceptional caregivers. Twin Cities hospitals have fared well in patient satisfaction studies because of their recognized quality and the outstanding quality of caregivers. While consumers are becoming more cost-conscious, they are most concerned with the perceived value they receive. The demand for high-value, high-quality care reinforces the emphasis Twin Cities hospitals have placed on compensation for caregivers. For example, full-time registered nurses at Twin Cities hospitals are among the best-paid in the country.  Nurse salaries in the Twin Cities are more than 15 percent higher than the national average.

These three issues, of course, are just the beginning. Hospitals are undergoing fundamental changes in response to health reform and cuts in payments from private payers and government programs. Through all the innovation going on at Twin Cities hospitals, customer satisfaction will continue to be an important driver. And, as PwC points out, there are consumer satisfaction lessons to be learned from other industries.

The article was based on research conducted by Commonwealth Fund. The highly-regarded non-profit organization compiled a scorecard on health system performance in 306 hospital referral regions across the country. Four of the seven top-performing communities nationally are in Minnesota. St. Paul ranks first, followed by number three Rochester, Minneapolis at fourth and St. Cloud seventh.

“Where you live in this country largely determines, for better or worse, the kind of health care you will receive,” according to Karen Davis, president of the Commonwealth Fund. (The report, “Rising to the Challenge,” is well worth reading. An executive summary of the report can be found here. A link also is posted in the “Issues” section of this website.)

The commitment of Minnesota hospitals and health systems to high quality care is a key factor in the state’s enviable rankings. For example, hospitals took the lead in creating the Minnesota Alliance for Patient Safety (http://www.mnpatientsafety.org/ ) – an innovative partnership that brings together hospitals with the Minnesota Department of Health, the Minnesota Medical Association, the Minnesota Board of Nursing and more than 45 other stakeholder groups to constantly improve patient safety and quality care.

“I’m not surprised at all that Minnesota cities did so well,” said Edward Ehlinger, commissioner of the Minnesota Department of Health (and quoted in Modern Healthcare’s article). “There’s a long history in this state of working as a community for the health of everyone.”

Minnesotans long have fared well in national measures of population health. Some of our good health fortune is due to our hearty ancestors. There’s a good gene pool at work in Minnesota. Increasingly, though, it’s becoming clear that geography affects more than just inherited health.

As the Commonwealth report notes, the quality care patients receive in Twin Cities hospitals depends not just on what happens in the hospital, but on many other factors, including public policy. “The findings show that local health system performance is linked across all dimensions – with better access to care associated with higher quality and better outcomes. This interconnectedness underscores the need for health insurance, payment, and delivery system reforms to improve care experiences and outcomes, while at the same time slowing cost growth,” according to the Commonwealth report.

Over the years, Minnesota has done a good job of managing this “interconnectedness.” But maintaining the cooperation that Commissioner Ehlinger and others tout is critical to assuring that public policy and marketplace realities go hand-in-hand to improve quality and enhance satisfaction while controlling costs. The biggest challenge for all is whether we collectively can overcome today’s contentious environment to keep Minnesota a good state in which to get sick…and a better state in which to stay healthy.

The economics of health care are changing faster than almost anyone imagined. A non-profit research group, Altarum Institute, estimates that the cost of health care has risen by less than 4 percent over the past year, a remarkable contrast to the double-digit increases routinely seen over much of the past two decades.

Altarum researchers, writing in a recent issue of The New England Journal, (read here) believe the downward pressure on costs isn’t just a fallout from the recession, but a signal of fundamental changes in healthcare and in government spending:

“A repeat of the rapid growth seen at the end of the 1990s seems unlikely, thanks to ongoing structural changes in the health care system and our vastly different fiscal situation: the federal budget surplus in the late 1990s reduced the pressure on the government to constrain health care spending; no such surplus is on the horizon today. Moreover, in an era of increased price transparency, the private sector is not likely to ratify substantial cost shifting.” (“When the Cost Curve Bent — Pre-Recession Moderation in Health Care Spending,” by Charles Roehrig, Ph.D., Ani Turner, B.A., Paul Hughes-Cromwick, M.A., and George Miller, Ph.D, Aug. 8, 2012, NEJM

The downward trend likely will continue. Economic and political realities will drive reductions in government spending on Medicare and Medicaid. Much of the savings that have been achieved to date have come from reductions in the amount federal and state governments pay to hospitals and other care providers. At the same time, hospitals and other health providers are being squeezed by health plans which are under pressure to cut costs. 

This has come at a time when the demands on hospitals are increasing. With the recession adding to the ranks of those without health insurance, hospitals have seen the cost of uncompensated care increase significantly.

Health reform is bringing more changes to hospitals. Eventually, reforms promise a health system that places a premium on quality, value and consumer satisfaction, but the transition is putting enormous economic pressures on hospitals and requiring that they change in fundamental ways.

Fortunately, Minnesota is ahead of the curve. Hospitals in Minnesota long have been recognized for their quality. Earlier this year, the Agency for Healthcare Research and Quality ranked Minnesota’s health care system as the nation’s best and cited the quality of hospitals as one of the core strengths. Minnesota hospitals have delivered outstanding care while managing costs. According to the latest data from Kaiser State Health Facts, the cost of an inpatient day in a Minnesota hospital is about 10 percent below the national average.

All this gives Minnesota hospitals a head start on reform, but the transformation still will be challenging. Hospitals will be rewarded for keeping patients healthy and out of hospital beds. Hospitals are at the center of new initiatives to coordinate the care a patient receives, working with primary care clinics, pharmacists and other providers to deliver the best health outcomes for every person. In return, care providers will share financial incentives and risks for the health outcomes they deliver.

What will this mean for Twin Cities hospitals? Thoughtful belt-tightening. Fewer hospital admissions will mean changes in how hospitals are managed, with a priority on flexible staffing. Innovative use of technology will free nurses and other caregivers from some routine duties, giving them more time to focus on the patients who need more attention. That will require teams of caregivers that are able to adapt to the needs of patients and not be bound by rigid and out-dated work rules.

The economic and political realities of health reform will demand new thinking and cooperation from nurses, doctors, hospital administrators and others. Through it all, though, one thing is certain: Twin Cities hospitals will continue to meet Minnesotans’ expectations for the highest quality in care.