Gijanto/My Turn: Tale of two hospitals
Two communities: North Adams and Greenfield, Massachusetts. Not dissimilar in size, socioeconomics, industrial history or geography.
Two hospitals: one faced with a sudden and traumatic closure that has left area residents in shock and hundreds unemployed; the other getting ready to replace its surgery suite with new construction.
This is a case study in the perils faced today by standalone community hospitals, and in the benefits gained by being part of a larger system. As we watch what is happening with North Adams Regional Hospital, our hearts go out to the people who have depended on that hospital for more than a century. That could just as well be Franklin if we had not become part of Baystate Health in 1987.
Over the six years I have been president of Baystate Franklin Medical Center, I have heard people both in the community and around the hospital questioning the value of our association with Baystate Health. The recent announcement in North Adams should be a clear signal to all of just how fortunate we are to be part of one of the most highly rated health systems in the country.
Hospitals everywhere, but particularly smaller standalone community hospitals, are challenged to survive in this era of health-care reform. While there has been a lot of talk about how great reform will be — and hopefully this will prove true over time — thus far what it has meant for hospitals is lower payments and fewer patients. Combine this with rising costs and what you have is a perfect storm in which challenges can begin to spiral very quickly out of control. For instance:
The rising cost of health information systems. New requirements for what Medicare calls “Meaningful Use” are cost prohibitive for small organizations that are not financially strong.
A growing national shortage of physicians. When a small standalone hospital loses a key doctor or two, revenue takes a major hit, while recruiting new physicians to these hospitals is incredibly challenging.
Implementation of accountable care. Health care is getting more complicated by the day. We are now moving toward an environment where we are being charged with managing the health of the population of the people we serve as opposed to taking care of them only when they are sick. It takes serious resources and a wealth of talented, multi-disciplinary leaders to change an organization’s practice and culture from fee-for-service to true population health management
Capital investment. When a hospital is struggling financially, borrowing money to fund needed upgrades and improvements, or to buy sophisticated technology, is almost impossible.
Economies of scale. A small standalone hospital has very little buying clout. It’s much more effective to be able to buy in larger quantities.
In both Greenfield and North Adams, we are further challenged by the payer mix in our communities. The vast majority of our residents have their health care coverage through Medicare, Medicaid or other state-driven plans, all of which pay hospitals much less than what it actually costs to provide patient care. So it’s hard enough to break even, let alone to create any kind of operating margin or positive bottom line. And without a reasonable operating margin, a hospital’s hands are completely tied; it is simply unable to meet the challenges I outlined above.
Meanwhile, health care continues to shift from inpatient to outpatient settings. In order to reduce overall costs, primary care physicians are being encouraged to keep patients out of the hospital — which is great for patients, not great for generating hospital revenue. As health-care reform continues to unfold, the community hospitals that survive will be part of a system that includes a wide mix of outpatient services and medical providers, a research facility at the hub and a broader population base over which to spread the financial risk.
I think you get the picture.
We count ourselves extraordinarily fortunate at Baystate Franklin to be able to continue providing services that are important to our mission, even when they lose money; and to have one of the most advanced health information systems in the nation; a broad base of medical specialists and sub-specialists to draw on; strength in physician recruitment; and the ability to borrow what we need to fund major projects. At the same time, we have retained the culture, look and feel of a vibrant community hospital — which to me gives us the best of both worlds. My guess is that the people of North Adams would give anything to have what we have right now.
Chuck Gijanto is president of Baystate Franklin Medical Center and Baystate Health Regional Markets.