Healthcare finance reform requires Union follow through

The healthcare industry has been the single most vigorous creator of jobs in the country in recent years. And healthcare has created a range of jobs, from hourly janitorial gigs to middle-class nursing positions to upper-middle class physicians and executives, to CEOs paid millions of dollars a year.

Many of the non-managerial jobs not only pay well, but are unionized. While unions have been slowly worn down and out in the automotive, aerospace and other sectors, they have become quite healthy, if not robust, in healthcare. The California Nurses Association, for example, was key to getting a staffing ratio mandate signed into law and surviving voluminous legal battles about a decade ago. Healthcare labor unions stage walkouts and work slowdowns on an ongoing basis throughout the country these days.

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But the Service Employees International Union, which represents hundreds of thousands of hospital workers in various chapters throughout the country, seems to be losing its way by creating political intrigue in which it mostly fails to follow through.

The SEIU has been doing this through the ballot box. Chapters have been sponsoring voter initiatives intended to cap executive pay or payments to hospitals.

The most recent example of this occurred in Massachusetts. The SEIU had been pushing a ballot initiative that would have imposed a floor and ceiling as to what hospitals in the Bay State could charge for patient services. It could have cut payments to Partners HealthCare, which operates by far the most expensive hospitals in the state, by about $400 million a year.

A couple of years ago, the SEIU in California pushed a similar ballot measure that would have not only limited payments but capped executive pay at hospitals as well.

In both instances, the SEIU backed off the ballot measures in lieu of cutting deals. In Massachusetts, it agreed to the establishment of an independent commission to study healthcare pricing, more funding for community hospitals, and perhaps more union jobs. In California, the union there agreed to help hospitals seek more funding from the Medicaid program--an announcement made in a doozy of a press conference.

The problem is, such issues regarding pricing and executive pay are critical to controlling healthcare costs in the coming years and decades. When a union uses such an issue as leverage and then backs off as soon it gets what it believes is a satisfactory tradeoff, it becomes an issue that remains perennially unaddressed. It also sends a signal to providers that there is no real pushback for rising prices and increasing the pay for executives. Consumers' voices at the ballot box--the one unified way for them to express their desires on the matter--are eliminated. They may think something is being done when they read about such a ballot measure the first time or two in the newspaper or online, but by the time the election rolls around, they have forgotten about it altogether.

The one time the SEIU actually went through with a ballot measure to cap executive pay at a district hospital in California, it prevailed, although it was stymied in a subsequent court battle. But it is extremely pricey and contentious for hospitals to fight these measures in court, and there is no certain chance of victory, making them a formidable tool to get them to reform their pricing practices and bring cost increases to heel.

Certainly there are cogent counterarguments for not going all the way through with these ballot propositions. The unions' primary mission is to protect and enhance the position of their members. And, they cannot take extreme measures such as prolonged strikes without endangering public safety, which means they have to resort to other measures to gain negotiating leverage.

But by not being pressured to control costs and executive pay, eventually hospitals will have to confront the spiral themselves. Value-based payment initiatives will only work to a certain extent. The seven-figure C-suite jobs will always go last. The real cost-cutting would be in the hundreds of front-line positions.

If that occurs, the SEIU and other unions may wind up being haunted by their half ballot measures. --Ron (@FierceHealth)

Related Articles:
Massachusetts ballot proposition to equalize hospital payments could be disastrous 
California: The Golden State for healthcare financial cynicism 
Union drops CA initiatives to cap hospital CEO pay, limit patient charges 
Union pushes initiative to cap hospital CEO pay, charges 
District passes cap on hospital CEO pay

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