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One thing is certain: It’s not easy being a community hospital executive today. While all hospitals face challenges in our rapidly changing industry, community hospitals find themselves in a particularly difficult environment. And the challenges confronting community hospitals as a sector - challenges which range from increased competition to access to capital - have important implications for the entire U.S. healthcare system.
That’s because community hospitals are essential providers of healthcare in cities and towns throughout the country. They are in many ways the cornerstone of our healthcare system – and constitute the frontline of hospital care for many Americans. Whether you are an executive at a large urban teaching hospital or at a small community hospital, the health and vitality of the community hospital sector has ramifications for your institution.
With that in mind, we recently asked some community hospital executives about the biggest issues they see community hospitals facing as a sector – and about ways their own institutions are addressing those challenges. Of course, every community hospital’s culture is unique. (In fact, I’ve been known to joke that, if you’ve seen one community hospital, you’ve seen…one community hospital.) But, despite their individual differences, some common themes emerged from our conversations. In this whitepaper, I’m pleased to share three of them with you.
The Threat Of Increasing Competition, Especially From Physicians Themselves
It’s not surprising that this is a “hot-button” issue for today’s community hospitals. Specialty service providers – such as ambulatory care centers and imaging centers – are free to focus on providing profitable services to well-insured patients. Often partially or fully owned by local doctors, such centers compete with community hospitals for profitable services, while community hospitals still must provide less profitable services and care for the uninsured. Small wonder that community hospital executives are concerned.
For community hospitals in some areas, physician-owned specialty hospitals are an additional worry; in a 2005 American Hospital Association survey of community hospital CEOs, 30% of the respondents said that physician-owned limited-service hospitals operated in their area.
How can community hospital executives respond to increasing competition? One key is differentiation. There are a variety of ways to stand out from the competition – and the increasing emphasis on transparency in clinical performance offers an opportunity for hospitals that have good results to let that be known.
For example, Thomas A. Biga, Executive Director of Clara Maass Medical Center in Belleville, New Jersey, a 465-bed hospital that is an affiliate of the Saint Barnabas Health Care System, explains that the state of New Jersey issues an annual hospital report card that, as an indicator of quality of care, measures hospitals’ adherence to best practices for treating three common conditions: heart attacks, pneumonia, and congestive heart failure. Clara Maass, Biga says, takes the indicators, which involve adherence to evidence-based medicine protocols, very seriously – and ranks among the top hospitals in the state in the New Jersey 2006 Hospital Performance Report.
He indicates that Clara Maass has achieved its high marks thanks to a strong collaborative effort among its physicians, administrators, nurses, and other staff, with a great deal of attention paid to adherence to medical best practices. Clara Maass has then capitalized on its strong performance through public relations and marketing activities, including press releases to local media outlets and advertisements in local newspapers. Physicians affiliated with the Hospital received letters of congratulations and copies of the ad for display, and the Hospital held ice cream celebrations to thank and congratulate staff.
Community involvement is another means of differentiation for community hospitals, because it allows them to increase their relevance and value to their localities. Michael V. Sack, President and CEO of Hallmark Health, a nonprofit healthcare system serving some of Boston’s northern suburbs, has developed an intriguing approach to community outreach. Since Sack took the helm in 2003, he says Hallmark Health, which includes a 134-bed hospital, Lawrence Memorial Hospital of Medford, Massachusetts, and a 234-bed hospital, Melrose-Wakefield Hospital, has emphasized rebuilding its connection to the communities it serves.
Sacks says he asked employees living in Hallmark Health’s core communities if some employees would be willing to volunteer on a community outreach team representing their town. Hallmark Health then gave each of the teams small amounts of financial support and encouraged them to find opportunities to support that town and its organizations. As a result, he says, the Hospital is involved in a wide variety of community outreach efforts, working with a range of groups – from town administrators to schools and Chambers of Commerce.
Through the outreach team program, Hallmark Health has supported programs ranging from sponsoring road races to planting flowers, serving meals, and donating a defibrillator to a senior center. Sack reports that the outreach program has been very successful – and has resulted in good publicity and valuable goodwill. And the organization is seeing an increase in usage by its communities: Hallmark Health saw a 3.3% increase in inpatient population volume in 2006.
Adequate Access To Capital –
Especially To Fund The Acquisition Of New Technologies
Access to capital can be challenging for community hospitals, in part because of the uncertain reimbursement environment hospitals face over the longer term. At the same time, however, new – and often expensive – technologies continue to be developed. Moreover, it’s been predicted that hospitals will increase their spending on information technology in the next few years – as they increasingly adopt technologies such as electronic medical record systems. What’s a community hospital executive to do?
Here, too, Sack has taken an interesting approach. After taking a hard look at the services it provided, he says, Hallmark Health decided to sell some of it underperforming or nonessential assets. These included office practice properties, a vacant hospital building, a nursing home, and a durable medical equipment company. “We needed capital to develop our core medical services, and additional borrowing was out of the question, “ Sack says. “So we raised our own capital” in this way. A delegation that included the CEO, the CFO, and the chairperson of the Board visited the bond rating agency and described the changes and the plans to rebuild Hallmark Health. Sack adds that Hallmark Health has had four bond rating upgrades in three years. “They must have liked what we had to tell them,“ he notes.
Affiliation with a larger institution is another way that community hospitals may increase their access to capital. Biga points out that Clara Maass, which joined the Saint Barnabas Health Care System in the 1990s, benefits from better access to capital as part of the Saint Barnabas System – and also benefits from the fact that a healthcare system has more leverage negotiating reimbursement rates than a smaller, stand-alone institution.
Affiliation with a larger institution can have other pluses, as well. The community hospital benefits from the branding of the larger organization and probably has an edge in physician recruiting. On the other hand, community hospitals and their constituent communities often fear a lack of autonomy and control in the event of an affiliation with a larger institution. Please visit PhillipsDiPisa.com for full article.
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