Independent Hospitals Fight to Survive
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Arlene Weintraub
The Fiscal Times
September 10, 2010

QUINCY, Mass. — When Claire Contos needed colon-cancer surgery recently, she could have gone to a top teaching hospital in Boston, 13 miles north of here. Instead, she chose the Quincy Medical Center.

"There’s a lot of compassion and understanding here," says Contos, 83, who has lived in Quincy for 64 years. "I’d never have that same feeling" in Boston. Her surgeon was Dr. Thomas Fitzgerald, the son of a Quincy nurse and doctor she had known for years. "He’s devoted to his patients," she says. "I can call him anytime, day or night."

Contos’ affection for her local hospital, which was built 120 years ago to serve local shipbuilders and workers in nearby granite quarries, is echoed by many of Quincy’s 90,000 residents. But now, there are serious questions about whether the medical center can maintain its independence from corporate ownership or, over the long run, survive.

To staunch the red ink, the medical center laid off 14 nurses
and technicians and brought in a hospital turnaround specialist.


The 196-bed hospital — which gets more than 80 percent of its inpatient revenue from Medicare, Medicaid and another state plan — is saddled with a deficit of more than $4.5 million, hospital officials say. To try to stanch the red ink, the medical center laid off 14 nurses and technicians, shook up its management team, and brought in hospital turnaround specialist John Kastanis. as interim CEO.

Woes Across the Board
Quincy Medical’s woes mirror the financial troubles facing many independent community hospitals nationwide that are not part of a health system or owned by a chain. Banks have grown reluctant to hand out loans in a lagging economy, making it difficult for hospitals to pay for capital improvements. Medicare and Medicaid reimbursement rates haven’t kept up with hospitals’ costs, administrators say. And many independent hospitals lack the clout to get higher payments from insurers and steeper discounts from suppliers because they aren’t part of larger hospital systems, says Samuel Steinberg, a hospital consultant in Daytona Beach, Fla.

The new health overhaul law could exacerbate these financial problems. For example, it will require hospitals to adopt electronic health records and track and report patient outcomes. That will put more pressure on hospital profit margins, which average 1 percent to 2 percent, Steinberg says. The law also will make further cutbacks in Medicare and Medicaid payments.

Some stand-alone hospitals, such as St. Vincent’s Hospital in New York City, have shut down. Others are joining hospital systems. St. Luke’s Hospital near Toledo, Ohio — which spent years laying off staff, freezing wages and cutting services in a bid to remain independent — just became part of local chain ProMedica Health System. "Hospitals need to become much more efficient by joining together," says Randy Oostra, president and CEO of ProMedica, which now owns 11 hospitals.

Over the past decade, the number of independent community hospitals has declined, either because of mergers or bankruptcies, according to the American Hospital Association. From 1999 through 2008, the number of independent hospitals has fallen by 290. So far this year, 70 hospitals and long-term care centers have been targets of acquisitions — 14 of which have been independent non-profits, according to Irving Levin Associates, a Norwalk, Conn., firm that tracks merger activity in the health care industry.

But some hospitals, reluctant to give up local control, are scrambling to stay independent:

-- Doylestown Hospital in Pennsylvania, which has rebuffed offers from potential buyers, is trying to expand its reach by partnering with other hospitals to provide cancer and other care. At the same time it’s keeping a sharp eye on staffing levels. "We’re conscious of our costs," says CEO Richard Reif. "We have to be."

-- Holyoke Medical Center in Massachusetts, which is running low on cash, recently scraped together $2 million in state grants to keep going, according to CEO Hank Porten.

-- Community Medical Center in Missoula, Mont., in an effort to attract new, high-paying patients, is bringing in a pediatric surgeon on a visiting basis from Seattle Children’s Hospital —the only such surgeon to set up shop in Montana. Community Medical also joined with five other local hospitals to set up a virtual purchasing system, in an effort to get price breaks on equipment and services such as air ambulances.

-- Boca Raton Regional Hospital in Florida, after losing $120 million in 2008, considered among several options the idea of joining a hospital chain. The board of directors decided instead to bring in a consulting firm that specializes in turning around ailing facilities. Today the hospital, which says it made a small profit in fiscal 2010, remains determined to stay independent. While joining a hospital chain could help reduce some administrative costs, it would threaten its close ties with the community in terms of philanthropy and support from volunteers, says CEO Jerry Fedele. "When you combine with a big organization, you still have fundamental challenges that a merger or sale does not address, it’s not a panacea."

Taking Drastic Measures
Meanwhile, to save money Quincy Medical Center has frozen and cut wages; eliminated some ambulatory care services and reduced staffing in the operating room. "I had staff here on weekends when there were no cases," says Karen Conley, chief nursing officer. "They were sitting around waiting for emergencies."