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John August article April

Healthcare Insights: Rhode Island Can Be a Model for Successful Healthcare Labor Relations

John August

In recent issues of Healthcare Insights, we have reported on increased strikes, conflicts, and new organizing, especially the unprecedented early successes in physicians organizing unions.

A brief refresher on the scale of conflict is:

  • According to the Bureau of Labor Statistics (BLS) there were only 85 major strikes in hospitals from 1993-2021.
  • According to the Cornell-ILR Labor Action Tracker, there were 40 strikes in healthcare and social services (most of these are in hospitals) in 2022.
  • According to Becker’s Healthcare Report, there have been 18 strikes in healthcare in 2023 (not counting the recent 3-day strike at Kaiser Permanente).

We reported on the largest private sector organizing victory at Allina Health in Minnesota where 800 attending physicians and advanced practice professionals organized with Doctors Council SEIU. As of this writing physician organizing continues to accelerate elsewhere.

We have identified deep-seeded systems issues that contribute to this conflict, which include:

  • Inflation and post-pandemic financial and experiential stress on health systems and workers
  • Staffing shortages
  • Increasing cost structures and industry-wide flat or declining margins due to revenues not keeping up with cost trends
  • Increasingly rapid consolidation, mergers, and acquisitions of health systems and physician practices which causes great concern and conflict, especially in collective bargaining where hard-fought gains are often challenged in new and larger systems’ ownership who are looking to economize and reduce labor costs
  • Unprecedented workforce shortages in nearly all job classifications
  • Relatively low pay for health care workers who are not doctors, nurses, and therapists
  • Burnout, moral injury, and high turnover among health care workers
  • Low worker engagement scores
  • Shifts to risk-based insurance reimbursements which increasingly pay for value instead of volume of services; to be successful in this environment, health systems must make heavy investments in electronic integrated medical information, new care models, training, and changes in scope of practice. These pressures often impact workers’ schedules, compensation, and other conditions of employment.

All of these trends have been with us for decades. The pandemic increased the level of stressors inherent in these system dynamics paving the way for the increased labor relations and labor-management strife we have seen in the past several years.

To further understand how these forces, play out, we will look at a snapshot of industry dynamics. In so doing, we can learn how one healthcare market fares with finances and workforce challenges. We can understand the pressures that lead to conditions for possible changes in the organization of health systems and priorities, including consolidation. Such are the underlying dynamics that lead to conflict. We can also consider how successful known examples could be developed to improve and ameliorate the many stressors on the system and create opportunity for improved healthcare delivery and workforce stability and confidence.

The challenge: can health systems and unions use their combined influence with elected and regulatory leadership in a state to propose delivery system reform that could improve quality, stabilize costs, and improve patient outcomes? In so doing, many of the underlying causes of labor strife could be ameliorated, an outcome that all would welcome.

For the past seven years, I have had the opportunity to work closely with healthcare labor, management, and policy makers in the state of Rhode Island.

For context about the potential usefulness of this healthcare market snapshot, here are some salient facts and events about the healthcare market in Rhode Island:

  • Rhode Island is a relatively small healthcare market with a population of 1 million people. Its healthcare systems are made up of formerly free- standing community hospitals which now compete for patients as part of consolidated systems which struggle financially. As such, it is a market ripe for takeover by larger systems
  • Efforts to consolidate and merge health systems have been underway for many years in Rhode Island. There have been two failed efforts to merge the two largest health systems in the state, LifeSpan and CareNew England, most recently in 2022. There was a failed effort by Partners (Mass General/Brigham) health system of Boston to acquire Care New England in 2021.
  • Out of state for profit systems entered the market and struggle financially, while as we go to press these systems are being sought after by an Atlanta, GA-based health system.
  • Healthcare unionization in Rhode Island is higher than most states. A majority of the hospitals are unionized primarily by local affiliates of SEIU, Teamsters, AFT, and a large independent union of nurses and healthcare professionals, UNAP. Major labor agreements will expire in 2024 and 2025 covering nearly 10,000 healthcare workers.
  • During the merger discussions between LifeSpan and Care New England, the healthcare unions formed a coalition, and successfully bargained an industry-wide agreement. Since the merger itself failed, the collective bargaining agreement was not implemented, but it remains a sign of the possibility and potential of labor-management cooperation in a very challenging environment.

Last month, the Rhode Island Foundation (RIF) released a comprehensive report: “Examining the Financial Structure and Performance of Rhode Island’s Acute Hospitals and Health Systems”. 

The Rhode Island Foundation is one of the oldest and largest community foundations in the nation. It provides, research, advocacy, and policy suggestions to Rhode Island’s non-profit sector, including healthcare. In December, 2022, the RIF authorized the study referred to above, and in so doing stated at that time:

“Rhode Island has the building blocks of a strong regulatory infrastructure; however, Rhode Island, like many other states, has a patchwork of state laws and regulations that address the four domains***, with various levels of oversight and enforcement mechanisms available to the regulating state agency and department. The Rhode Island health care system is regulated at its components, usually at the licensed facility level, and in general, no agency or department oversees the entire “system of care.” No authority exists for state agencies or departments, either alone or in concert, to regulate entire “systems of care” in a comprehensive and cohesive manner.” (emphasis added).

***(i) delivers and supports financially stable, high-performing, locally accountable health care systems by integrating oversight and accountability functions; (ii) eliminates duplication in reporting and oversight; (iii) increases transparency into provider financials and solvency; (iv) creates data-driven accountability; and (v) can be funded and sustained to improve quality, affordability, equity and access to care for Rhode Islanders.

The study compared healthcare financial, workforce, utilization trends with neighboring states, Connecticut and Massachusetts. In most categories, Rhode Island tended to fare worse that their neighboring states in important categories of having lower wages and lower operating margins. Among the major concerns in Rhode Island is “outmigration of care” to neighboring states as well as Rhode Islanders going to work out of state after receiving their training and education in Rhode Island.

Salient features of the Rhode Island health systems:

  • RI Health System statewide operating margin declined from -0.8% in FY 2018 to -3.4% in FY 2022.
  • Between FY 2018-2022, RI acute care hospitals’ operating costs grew faster than its net patient revenues. RI’s statewide average operating expenses/adjusted discharge rose by 17% between FY 2018-2022 whereas its average net revenue/adjusted discharge rose by 9%
  • All three states experienced a significant decline in acute care inpatient hospitalizations between 2019 and 2020 (i.e., during the COVID-19 pandemic). RI experienced the greatest decrease in utilization with a 14% decrease in discharges compared to a 7% decrease in CT and 10% decrease in MA
  • In RI, healthcare workers – except for licensed practical nurses (LPNs) and nursing assistants – were paid less than their peers in both CT and MA in 2022. Healthcare workers in MA received the highest salaries for most health care positions except for physician assistants.
  • Hospitals in RI experienced a 17% lower average standardized inpatient price per stay paid by private employer-sponsored health plans in 2020 when compared to hospitals in MA and CT. ▪ Compared to hospitals in CT and MA, hospitals in RI experienced a 29% to 7% lower average standardized outpatient 2020 price per service paid by private employer-sponsored health plans.
  • The state’s largest RI-based health systems currently have bond ratings that reflect the current challenging financial environment.
  • RI experienced a 21% increase in direct patient care labor costs/adjusted discharge between FY 2018 and FY 2022

This snapshot of Rhode Island healthcare finances establishes the framework in which collective bargaining will take place for 10,000 healthcare workers in the coming year.

For the health systems:

  • Costs outpace revenue
  • Inpatient utilization continues to decline
  • Regionally, wages tend to be lower than in neighboring states
  • Borrowing for capital improvements is expensive given challenged bond ratings

Worker expectations in collective bargaining are heightened due to:

  • Impact of inflation on wages over the past several years
  • Pandemic related stress with expectation that wages and conditions ought to reflect significant improvement

Rhode Island Labor, management, and most political leadership have expressed a strong desire to maintain local control of healthcare delivery. This sentiment is reflected in many healthcare markets across the country with the well-borne out fear that if out of state systems, for profit systems, and private equity firms take over, health care quality, access, and costs tend not to be stabilized in the local market.

Looming over these trends in Rhode Island is the current implosion of the Steward Health system in Massachusetts. Steward was formed with private equity funds, and its own for-profit business model in 2010. Steward came into being as long standing private Catholic hospitals failed. Today, the Steward system is facing its own financial crisis, leaving Massachusetts with a repeat of its inability to serve its population over a decade ago.

Where collective bargaining and public policy can merge: Integration vs. Consolidation

Unions will advocate for their members to achieve important gains in this post-inflation, post-pandemic period. That advocacy will continue contract cycle after contract cycle. In our snapshot of Rhode Island, it is quite clear that the system pressures will continue to make it very difficult to reach satisfying settlements in what have been and will continue to be very difficult collective bargaining negotiations.

There is always the looming threat of systems takeover from larger entities, which adds to tensions in collective bargaining.

There is a growing consensus that the trend toward consolidation is NOT the answer to improved costs and quality.

While mergers and consolidations often describe their purpose as creating the means for integration of facilities, services, and actual work designed to create more value (quality/cost), there is little evidence that these outcomes have occurred.

By contrast, we have seen major public efforts in care integration that have been very successful. Among the largest recent examples of this success has been the New York State Medicaid Reform program known as Delivery System Reform Incentive Program (DSRIP). That program which was in effect from 2014-2020 saved the state of New York $17 billion on an upfront investment of $8 billion.

That $8 billion investment created the means to integrate (not merge or consolidate) hospitals, nursing homes, pharmacies, home care providers, addiction and counseling centers, and all community-based organizations in 25 geographical areas around the state of New York. Every Medicaid-eligible New Yorker, some 6.2 million women, children, and men were designated for care in one of the 25 newly formed Performing Provider Systems (PPS).

Investments were made in integrated electronic medical records systems, information systems that created the means to have full systems patient data collection for all healthcare providers in a PPS, and workforce planning and development to hire, train, and deploy the workforce needed to actively participate in the improvement domains to achieve the goals of the program.

There are attributes in the DSRIP model that can be implemented in other healthcare markets beyond Medicaid:

  • Identify key targets of health improvement for the state population
  • Identify targets for cost-savings that are in the best interest of patients such as reduction in unnecessary hospital and emergency room admissions
  • Identify targets for reductions in health outcomes based on race and ethnicity
  • Identify targets to improve chronic condition indices by increasing primary care visits and preventive screenings such as mammograms, bone density screenings, a(1)(c), blood pressure, and cholesterol

Financial savings to health systems would likely require shifts in workforce utilization, but there need not be lay-offs. Rather, agreements could be reached on implementation of re-training, redeployment, with carryover of full seniority rights, benefits, and wages, with opportunity for wage improvements based on new positions that would be created to implement the changed care delivery models across the state. Alignment of labor to transformed care models is often a source of tension and conflict. With foresight and planning, such change could benefit all parties.

There is already experience in Rhode Island that sets the stage for labor management collaboration to work on health system delivery reform:

In 2021-22, the industry and four labor unions engaged in unprecedented collective bargaining in anticipation of the proposed merger of the state’s two largest health systems, Landmark and Care New England. 80% of Rhode Island patients utilize these two systems. Innovative system wide agreements were reached.

  • Currently the Hospital Association of RI and the RI AFL-CIO and its four major healthcare unions have formed an unprecedented new entity called the RI Healthcare Workforce Education Center. Its mission is to build industry-wide strategies in recruitment, support for new entrants into healthcare fields with finances and educational system navigation, and industry-wide workforce forecasting.

Labor strife in healthcare seems inevitable given the challenges the industry faces.

The question is: will that strife ameliorate or solve the underlying causes of workforce shortages, financial fragility of health systems, unmet needs in modernization, technology, and capital investment needed to keep up with and stay ahead of demands of patients and communities, and at the same time improve wages and working conditions to stabilize the labor markets, let alone reward and recognize a workforce so injured from the experience of the pandemic?

Not likely!

Collective bargaining can and must evolve to more of a sectoral approach than an employer-by-employer approach. Healthcare represents a rare opportunity to experiment successfully with sectoral bargaining: everyone needs healthcare, most of the revenue in healthcare is government-sourced, and as the healthcare industry in most states and markets, it is the largest driver of economic activity.

Such an approach also requires dialogue with government, creating a tri-partite labor, management, and state government approach to problem-solving with agreements on regulation, funding, and goals all based on mutual interests.

Employer-by-employer collective bargaining is not likely to solve the underlying causes of strife. Along with principles of labor-management dialogue on an industrywide basis, systems solutions can be identified, experimented with, and much learning can be catalogued and built upon.

Rhode Island is a place where the ingredients for positive change seem achievable.

John August is the Scheinman Institute’s Director of Healthcare and Partner Programs. His expertise in healthcare and labor relations spans 40 years. John previously served as the Executive Director of the Coalition of Kaiser Permanente Unions from April 2006 until July 2013. With revenues of 88 billion dollars and over 300,000 employees, Kaiser is one of the largest healthcare plans in the US. While serving as Executive Director of the Coalition, John was the co-chair of the Labor-Management Partnership at Kaiser Permanente, the largest, most complex, and most successful labor-management partnership in U.S. history. He also led the Coalition as chief negotiator in three successful rounds of National Bargaining in 2008, 2010, and 2012 on behalf of 100,000 members of the Coalition.