Q: Do you foresee the issuance of bonds in the near or distant future? If so, for what purpose?

A: Not in the near future. After the $113 million bond issue last December, we decided not to incur additional debt until we have a clearer picture of the future health care payment system and also are able to strengthen our balance sheet ratios. We have plans for a new hospital facility to replace some of our older beds. That will require some additional debt financing. We would categorize this project as one for the distant future. With the continuing movement of care to outpatient services, we will need some expansion in ambulatory care facilities. Where these facilities will be located and how they will be financed has not been determined.

Q: In your opinion, are any changes needed to make it easier for health care institutions to issue bonds?

A: We have not experienced any difficulty in issuing bonds in the past. But that doesn't mean we won't have problems in the future. The federal $150 million limitation [on nonhospital debt] may be a problem for very large academic medical centers that are likely to have significant nonhospital facilities. It may also be a problem for large hospital financings under a single master indenture. Our affiliates were worried about that. We are quite a ways from even being close to exceeding [the $150 million limitation]. I think not being able to use tax-exempt financing for professional buildings may be more of a problem for some institutions, including ours.

Q: Has Rush formed networks to cut costs and provide a broad spectrum of care?

A: Rush began to develop the vertically integrated health care delivery system in the early 1970s. The system includes the academic component to produce the health professionals, and managed care plans to contract directly with businesses and clinical programs of hospitals and medical staffs. The system has evolved over the years to form a closer relationship among Rush's hospitals. The plan is to have geographic coverage of the Chicago metropolitan area; be self-contained; include primary, secondary, and tertiary care capabilities; have both managed care and fee-for-service options. [We also plan to] train health professionals with the educational programs at the academic center. All components of the system are in place except we have some gaps in the geographic coverage.

Q: Where do you need to fill gaps?

A: In the far northwest, south, and southwest suburbs.

Q. How competitive is the Chicago market? How does it compare to Minneapolis, which has undergone significant consolidation?

A: It's nowhere near Minneapolis. And California, of course, is different from everybody. But it is very competitive. Hospitals are choosing up sides. We're not the only one looking for affiliates. Affiliates themselves are shopping around. Most of the hospitals came to us as opposed to us going out and asking if they want to affiliate with us.

Q: Are for-profit institutions such as Columbia/HCA a formidable threat?

A: The for-profit instutions have never been a significant factor in Illinois. Humana had a little one in [nortwest suburban] Hoffman Estates and one in Springfield [in downstate Illinois]. The most significant one was the Humana purchase of the Michael Reese systems. And they really didn't want Michael Reese Hospital. They had to take that along with the health plan, which is what they really wanted. So we don't see the for-profit hospitals as a major threat at all, either to Rush or even any of the Rush system hospitals.

Q. Why haven't the for-profits been successful here?

A: The for-profits have tended to be smaller hospitals not in major urban areas. They are more popular in the South, Southeast, Southwest, and in more of the rural areas. It's very hard to compete in a place like Chicago, where we have major academic medical centers and rather sophisticated community hospitals.

Q: What is Rush's prescription for prospering in the changing health care environment?

A: We believe we're structured to function successfully under any of the proposed health reform plans or in the absence of any governmental restructuring of the system within the present trend of health care financing and delivery.

Q: What are the biggest short-term challenges facing Rush?

A: One of our short-term challenges is to provide a structure in partnership with our medical staff that will allow the hospital and physicians to function as an integrated unit for contracting with managed care plans. And we are working on that. We also need in the short term to fill in the geographic gaps and to provide the structure, including an information system, for an improved continuity care for patients that utilize multiple system services. The system is going have to be lot stronger. We're kind of a loose group right now.

Q: What are Rush's long-term challenges?

A. In the long term, we're concerned about the source of financing for the academic programs in both research and education. For a system that includes an academic health center to be cost competitive, the cost of graduate medical education and education of nurses and other health professionals needs to be financed proportionately over the entire health care system of both governmental mental and private payers. The essence there is that the health plans and employers don't want to pay you for doing research and education. They're looking for the best price for health care because that's what they're buying. So, [though we] have the colleges, we still have to be competitive with systems that provide only patient care.

Q: What is your opinion of health care proposals al the federal level?

A: I'm not an advocate of any of the health care reform proposals that are now in Congress. The concept of universal health care coverage and availability is certainly a goal I support. But the plan to achieve that goal needs a lot of work.

It shouldn't be necessary to disrupt the health care system of 85% of the population in order, to provide services for the balance of the population.

Combining changes in the Medicare care plan with needed reforms only confuses the issues. The Medicare reductions and reimbursement proposed to finance other health reforms is likely to create an access problem for Medicare patients.

I believe that reforms taking place in the private sector are more dramatic than what's likely to come out of federal reforms in future. It appears to me what [Congress is] going to agree on will be modest, but helpful. I think [Congress] will provide some insurance reform.

Q: What portion of your patients receive Medicaid assistance?

A: About 15% of Rush's patients are covered by the, Medicaid program. This is approximately 34,000 hospital days annually, making Rush among the largest providers of care to Medicaid patients in Illinois.

Q: What is your opinion of the Medicaid program?

A: Major reforms are needed in the Medicaid program at the national level to provide some consistency and equity among the states.

The Medicaid program has been underfunded in Illinois for many years and is now being partially funded by a hospital tax. Gov. [Jim] Edgar has a concept, but not a plan to reform the system. His concept of providing managed care programs is a good idea for some categories of Medicaid recipients.

But this alone is unlikely to solve the total underfunding problem. His proposal to pay the backlog of Medicaid claims [by restructuring the states debt] is commendable. My guess is that [passing the plan] is going to be a problem since it is an election year. The politics are going to be a problem in this legislative session.

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