PORTLAND — Bill Caron is the president and CEO of MaineHealth, Maine’s largest health care delivery network, which has nine member hospitals — plus NorDx labs and other entities — with combined annual revenues of nearly $2 billion.

The network, founded by Maine Medical Center in 1994, is now one of the state’s largest employers, with its members employing approximately 16,000. Its hospitals are often the largest employers in their respective communities.

Over the past year, MaineHealth announced a number of cost saving measures, including 50 layoffs, a hiring freeze, the eliminaton of 175 vacated positions, and 120 voluntary buyouts at Maine Medical Center; the closure of the emergency department at St. Andrews Hospital in Boothbay Harbor; and a scaling back of the number of beds at Damariscotta’s Miles Memorial Hospital.

The network has reportedly seen its cash position erode because of millions in unpaid reimbursements it is owed by MaineCare, the state’s Medicaid program, and by a $160 million investment in an electronic medical records system that was failing to charge patients properly.

Caron has headed MaineHealth since October 2000 and was its vice president and treasurer for three years prior to that. He was also vice president of finance and treasurer of Maine Medical Center from 1992 to 1997. Prior to that, he spent 17 years with the global accounting firm Ernst & Young.

Caron’s base salary was $1,058,110, with bonuses of $69,896 in fiscal 2011, according to MaineHealth’s IRS filings.

Maine’s hospitals are in the midst of a period of consolidation, with many joining networks like MaineHealth or Brewer-based Eastern Maine Healthcare Systems. They are also confronting an aging population in Maine and a shifting policy landscape under the federal Affordable Care Act (or ObamaCare), which aims, among other things, to increase access to primary care physicians.

Q: What is MaineHealth and what is its reason for existing?

It’s a story that starts in the mid-1990s when a number of hospitals in the southern part of the state were talking to each other and asking if they could work together to integrate care and increase quality and patient safety. There was also the thought that you could get more efficient the more scale you had through purchasing goods and services more effectively. So they created what is now called MaineHealth, which is an integrated delivery system with a decentralized governance model. All our members retain their own boards and reserve to themselves, to the local community, a certain level of decision making. A lot of systems out there are more top-down than ours.

So what you have seen over the past 16 years is the building of a very significant health system relative to the size of Maine. Our service area is the 11 southernmost counties in the state, and inside those counties we are the dominant provider of care. Our vision and mission is to work together so that our communities are the healthiest in America.

Q: What are the challenges facing health care providers in Maine and networks like yours?

The focus is on what I would call delivery system redesign. How are we going to pay for the care of this baby boomer generation that is coming on? As everyone knows, the older people are, the more resources they consume. But we have this tsunami coming. As our population ages, our Medicaid population is going to explode on us, particularly in this state, and it breaks the bank.

So if we don’t figure out how to provide that care more efficiently and with better quality, and take those dollars we save to pay for the added demand of the baby boomer generation, then we’re in trouble. The system is going to collapse.

Q: MaineHealth is a big network and continues to expand. Ultimately, what’s the right scale for you to fulfill your mission?

If you add up all our revenues, we’re just under $2 billion. We’re big enough to do what we need to do from a scale standpoint. We have the clinical horsepower, we have enough people that if we want to effect a change, we can do it throughout the region.

Now the health care world is crazy in the sense of all these mergers and acquisitions that occur. I hear colleagues of mine around the country say, “Unless you can be an $8 billion to $9 billion health care system, you’re not going to survive.” I don’t believe that, and we’ll do fine. But I could be wrong, and five years from now the MaineHealth system could determine that we have to be part of a large system in Massachusetts. But I just don’t see it.

Q: So is competition good or bad in your industry?

We need competitors out there because if you ever built a system in the state of Maine where 100 percent of the providers in the southern part of the state were in the same organization, the state or federal government would be running the organization, because you’ve just created a public utility.

But would I rather it not be that way? If I could spend two hours with you, I could explain why I believe competition in health care doesn’t lower costs; it leads to higher costs. And in a rural state like Maine, we need to take a scarce resource and make sure everybody collaborates.

The problem in health care is that unit cost isn’t the issue; utilization is the issue. If you have competition in health care, you’re going to drive over-utilization, which far outweighs any unit cost savings — doing procedures you don’t need because you need to justify the equipment you just bought. And the other problem in competition is that the user is not the purchaser, but rather the employer or the federal or state government. Since we’re isolated from the big decisions about paying for health care, we’re not motivated to seek the lowest price and the highest quality.

But back to your basic question: Is it good to have competitors? Yes. I have to say that because that’s what the Federal Trade Commission and the AG’s office says.

Q: How is the implementation of the Affordable Care Act affecting the landscape you’re operating in?

The day you say you are going to give more access to individuals, you’ve got to have the primary care capacity to take care of them. It’s going to be a challenge for the state, because there will be spots around the state where we won’t have the right supply of physicians.

The ACA — which increased access for 40 million people — was partially financed by going to the American Hospital Association and cutting a deal to cut hospital reimbursement across the country by $151 billion over the next ten years. So we know that for the next six years we are going to get underpaid by the Medicare program even relative to inflation by a couple percentage points a year.

It’s hard to argue about expanding access. The problem is that it’s making the cost to acquire care more expensive. And that’s the challenge we have. We’re doing better, but we’re not nearly as good as we need to be in driving costs out of the system.

Q: Your flagship, Maine Medical Center, this week announced staff reductions, including 50 layoffs. What are the unforseen pressures that are driving these cost-cutting moves at this and other Maine hospitals?

Whether you’re talking about Maine Med or the state of Maine as a whole, the pressures that are bearing on us are due to significant cuts in the Medicare program. In addition to that one to two percent cut to every hospital (to finance the ACA), there was another two percent cut phased in by the sequestration cuts.

What was not anticipated by any hospital in Maine, including Maine Med, is that the volume (of demand) would flatten out the way it has in the past couple of years. There’s been no growth to absorb some of the reimbursement costs. On the outpatient side there’s actually been a decline in volume in the Portland market and some other spots, which is very unusual. We also were surprised by the increasing level of bad debt and charity care, because we believed that had leveled off with the economy.

Q: MaineHealth is closing the St. Andrews emergency room and scaling back the number of beds at Miles Memorial to reduce costs. Can the United States not afford to maintain the health care infrastructure we have?

The cost of health care is consuming far more of our gross national product than people are comfortable with. The policy question is (this): What is the right percentage of dollars to spend? I’ve heard people say, “Bill, it should be limitless; we should pay less for defense.” I don’t control those things. Someone is going to decide at a big picture level what is the right number. And from a big picture standpoint, there are more and more demands, the population is getting older, and the percentage of GNP is going up.

We’re going to continue having a discussion in this country about whether the state or federal government should be the single payer. I am not a believer in the single payer. I like the employer-based finance system, even if it has problems right now. But if the Affordable Care Act doesn’t get us the reforms we need — and we need reforms in health care — I personally believe it’s our last shot as a country. Otherwise we will have the state or federal government running a single payer health system. There’s no other way to balance it.

Colin Woodard can be
contacted at 791-6317 or at:
cwoodard@pressherald.com