Survival Tactics for the Independent Rural Hospital
Rural Health Care Leadership Conference
February 12, 2013
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Presenter
Mike Williams, president & CEO
Community Hospital Corporation
Please note that the views expressed by the conference speakers do not necessarily reflect
the views of the American Hospital Association and Health Forum.
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Perspective
Total Number of All U.S. Registered Hospitals 5,754
Community Hospitals 4,985
Rural Community Hospitals 1,987
Critical Access Hospitals* 1,325
Urban Community Hospitals 2,998
Community Hospitals in a System 2,941
Community Hospitals in a Network 1,508
American Hospital Association’s Hospital Statistics, 2012 edition, data from 2010 annual survey.
* American Hospital Association Trend Watch (April 2011)
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Community Hospital Opportunities
• Community commitment
• Do what you do well
• Clinical integration
• Operational efficiency
• Advances in technology
• Meaningful use/financial improvement
• Strategic alternatives to preserve independence
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Challenges
• Growing number of uninsured
• Recruitment of physicians/specialists
• Physician alignment
• Policy and market changes
• Medicare and Medicaid cuts
• Economic downturn pressures
• Access to capital
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Partnership Conversations
• Community need
• Clinical service breadth
• Physician alignment and strength
• Revenue, sustainability
• Managed care leverage
• Compatibility of purpose
• Reputation
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Partnership Considerations
The more $$$ you need, the less control you will
have in your local governance.
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Partnership Considerations
Responsible action is more favorable than the last possible moment.
• Think proactively
• Board dynamic is critical
• Define your optimal terms
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Partnership Options
Among a continuum of options, each is unique:
• Clinical affiliation
• Joint venture relationship
• Lease relationship
• Merger
• Sale
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First, Get Your ‘House’ in Order
• Assess market position: know your market clout; it provides a position of strength during conversations with potential partners and physicians.
• Assess finances, profits: know operational areas of challenge and profitability.
• Industry transformation: educate the local board and hospital management about inevitable industry changes such as increased regulatory scrutiny and declining reimbursement rates.
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Next, Understand Your Strategy
• Clinical services: understand the hospital’s clinical
strengths, areas that can be expanded, and what is
lacking to appropriately serve area populations.
• Infrastructure: explore shared infrastructure and
areas where the hospital needs guidance
• Know what you are willing to give up.
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Potential “For Sale”
Where’s the fruit? Characteristics of a targeted community hospital: • Likely to target non-performing organizations
– Room for quick fiscal improvement – Stable demographics (but not as significant a factor) – Physician recruitment opportunity – Limited available capital for improvements
• In addition, look for: – Minimal managed care – Niche player – sole community provider – Opportunity for higher margins – Control Issues
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Tactics
• Target indirect stakeholders – Commissioners
– Physicians
– Former Board members
• Promise of $$$ – Can be very “promising”, particularly to a city or
county commissioner struggling with funding
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Case Study: St. Mark’s Medical Center
• Community-based acute care hospital built
in 2005 in Central Texas – 45 beds
– 2,280 annual admissions
– 10,050 ER visits
– 213 Employees
• Financial losses two years in row
• Looking for strategic partner – Operational and financial turnaround
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The Process
• Operational Assessment – Productivity, supply chain, clinical quality analysis
• Financial Analysis
• Medical Staff and Leadership Interviews
• Market Analysis – Demographics, market share
• Findings & Recommendations – Partnering opportunities
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Market Share by Facility
Source: St. Mark’s Medical Center (SMMC) facility inpatient discharges; Thomson Reuters, State Data Analyst; THCIC data inpatient discharges; April 2007 – March 2008; Normal Newborns excluded; SMMC does not report to THCIC
41.1%
10.8%12.0%
7.5%
28.6%
System Market Share
SMMC
Hospital B
System D
System C
All Others
Hospital Name
Market
Patients % Down
St. Mark's Medical Center 1,690 41.1%
Hospital B 443 10.8%
Hospital C 288 7.0%
Hospital D 247 6.0%
Hospital E 190 4.6%
Hospital F 170 4.1%
Hospital G 142 3.5%
Hospital H 94 2.3%
Hospital I 74 1.8%
Hospital J 73 1.8%
Hospital K 59 1.4%
Hospital L 51 1.2%
Hospital M 46 1.1%
Hospital N 46 1.1%
All Others 497 12.1%
Total Discharges 4,110 100.0%
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PSA Discharges
Source: SMMC facility inpatient discharges; Thomson Reuters, State Data Analyst; THCIC data inpatient discharges; April 2007 – March 2008; Normal Newborns excluded; SMMC does not report to THCIC
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PSA Discharges SMMC
System
D
Hospital
B
System
C
Hospital
E
Hospital
F
All
Others
Total
Market
Patients
General Medicine 399 44 123 38 1 32 112 749
Orthopedics 109 52 24 36 31 166 418
Pulmonary Medical 202 25 126 25 11 25 78 492
Cardiovascular Diseases 156 50 74 26 62 8 55 431
Cardio\Vasc\Thor Surgery 7 58 3 31 104 8 61 272
General Surgery 146 44 17 32 6 20 101 366
Obstetrics Del 251 70 33 5 39 398
Neuro Sciences 55 28 15 18 19 46 181
Nephrology/Urology 85 26 40 11 6 8 33 209
Normal Newborns 198 49 1 21 2 28 299
Oncology 20 23 8 25 1 29 106
Neonatology 64 38 1 11 4 17 135
Gynecology 55 16 8 15 25 119
ENT 9 3 2 6 5 12 37
Psychiatry 6 2 1 1 19 29
Rehabilitation 88 3 0 16 107
Obstetrics ND 35 11 1 3 4 54
Ophthalmology 0 1 0 1 2 4
Alcohol & Drug Abuse 3 0 3
Grand Total 1,888 542 444 330 190 172 843 4,409
Total Excl NN 1,690 493 443 309 190 170 815 4,110
Outmigration by Facility
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Source: SMMC facility inpatient discharges; Thomson Reuters, State Data Analyst; THCIC data inpatient discharges; April 2007 – March 2008; Normal Newborns excluded; SMMC does not report to THCIC; Outmigration does not include SMMC or Hospital B
Hospital Name
Market
Patients % Down
System D 52 12.4%
Hospital L 44 10.5%
System C 36 8.6%
Hospital F 31 7.4%
Hospital I 13 3.1%
Hospital K 12 2.9%
All Others (<12 Discharges) 97 23.2%
Total 285 68.2%
Orthopedic Outmigration
Hospital Name
Market
Patients % Down
Hospital E 62 14.4%
System D 50 11.6%
System C 26 6.0%
Hospital F 8 1.9%
All Others (<8 Discharges) 55 12.8%
Total 201 46.6%
Cardiovascular Diseases Outmigration
Hospital Name
Market
Patients % Down
System D 70 17.6%
System C 33 8.3%
Hospital K 10 2.5%
All Others (<10 Discharges) 34 8.5%
Total 147 36.9%
Obstetrics Delivery Outmigration
Hospital Name
Market
Patients % Down
System D 44 12.0%
System C 32 8.7%
Hospital F 20 5.5%
Hospital O 10 2.7%
All Others (<10 Discharges) 97 26.5%
Total 203 55.5%
General Surgery Outmigration
Recommendations & Outcome
• Become part of CHC
– Agreement to manage St. Mark’s
• Affiliate with System D (St. David’s/HCA)
– Clinical affiliation
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Summary
• Assess the future
• Be optimally efficient, clinically sound, geographically essential and mission-focused
• Community hospitals are an essential provider in the continuum of healthcare services
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