A long-awaited affiliation of the hospitals in Haywood, Jackson and Swain counties will become official in January 2010.

That’s when a newly created hospital company, dubbed MedWest Health System, will take over day-to-day operations for Haywood Regional Medical Center and WestCare’s two hospitals: Harris Regional in Sylva and Swain County Hospital in Bryson City.

At the same time, the two companies will enter into a management contract with Charlotte-based Carolinas HealthCare System, which currently runs 29 hospitals in North and South Carolina.

HRMC and WestCare officials say joining forces with each other and with Carolinas HealthCare will bring many benefits, whether it is gaining expertise in hospital management or buying medical supplies in bulk.

With the country mired in a recession and possibly headed toward an overhaul of the health care system, some hospital board members see the need to partner up sooner rather than later.

“It’s a no-brainer. Something’s gotta happen,” said Fred Alexander, chairman of WestCare’s board of trustees. “What do you want to be in the storm, the aircraft carrier or the two little PT boats?”

HRMC officials were especially optimistic about the new venture, likening their company to a phoenix rising and making multiple allusions to the “dark days” when Haywood Regional failed federal inspections and lost its Medicare status, followed by an exodus of private insurance companies. The hospital was forced to cease all but emergency operations, touching off a financial and public relations crisis.

“We’ve come a long way,” said Mark Clasby, chairman of the HRMC board.

“It’s a new day,” said HRMC CEO Mike Poore. “We are no longer looking toward the past. We are looking toward the future.”

 

Vying for CEO

In the next few weeks, the new board of directors for the joint venture will have to decide who will become MedWest’s CEO. Both HRMC CEO Mike Poore and WestCare CEO Mark Leonard are vying for that position though they publicly downplay the competition.

“This is the right thing for all of our communities,” said Poore. “That’s more important than if I’m the CEO or Mark is the CEO.”

HRMC and WestCare will keep their existing boards, but they will retain autonomy in only limited areas, like approving credentials for doctors. Their main influence will be appointing representatives to the joint MedWest board, which will make most major decisions.

As of now, no name changes are planned for the three individual hospitals. The name “MedWest” will primarily be used for legal and accounting purposes.

“If we try to call this hospital MedWest tomorrow, a hundred years from now, they’re still going to call us [by the same name],” said Poore.

John Young, group vice president for Carolinas HealthCare’s western region, repeatedly stressed that his company was not interested in taking a dictatorial approach in running the three hospitals.

“We believe healthcare is a local event,” said Young. “Healthcare in this community will not be run out of Charlotte.”

Poore said the goal is to expand services locally, rather than send patients off on long trips to receive treatment at affiliate hospitals.

 

Advantages of partnering

WestCare has already experienced the benefits of affiliation in the past. CEO Mark Leonard said after Harris Regional Hospital integrated with Swain County Hospital, his company was able to improve services and introduce new programs.

Leonard said the goals with this affiliation are the same: reduce cost, improve patient outcomes, and expand services. The hospitals can split the cost of expensive new medical equipment they couldn’t afford otherwise. And by pooling their patient base, the hospitals can attract specialty physicians.

Linking up with Carolinas HealthCare, the nation’s third largest nonprofit public system, would also allow HRMC and WestCare to gain insight on best practices in financial management, staff recruiting, and safety and quality improvement.

Clasby said there are provisions for leaving the joint operating agreement, though he would not give specifics.

But leaving the agreement is far from anyone’s mind at this point, as HRMC and WestCare prepare to deal with a possible overhaul of the health care reform, an aging population, and a shortage in nursing and clinical staff.

“We want to be better strategically positioned,” said Alexander. “The last thing we want to do is just be a rural hospital hanging on by our fingertips.”

The joint board that will run the eventual Haywood Regional Medical Center-WestCare affiliation needs to have a sitting Haywood County commissioner as a permanent member, as one Haywood County commissioner is now suggesting.

Commissioner Mark Swanger worries that the interest of Haywood County’s citizens — who own the buildings and property at HRMC — could be compromised if a commissioner is not on the new joint board. HRMC now operates as a public hospital, and most of its dealings are subjected to the state’s open meetings laws. The new venture with Carolina’s HealthCare System will form a private nonprofit, entitling citizens to very little knowledge about the decisionmaking process.

Swanger’s reasoning makes good sense: “While I don’t doubt the motives of anyone involved in this now, 10 years from now we will have an entirely different cast of characters, so counting on the trust issue is not good business in my view. I think a commissioner needs to be part of the operating agreement so the citizens who have the financial investment in the physical plant of Haywood Regional are property represented.”

There’s little doubt among those who have been following the affiliation of WestCare and HRMC that the board members from both hospitals are working with the best interests of their communities at heart. The driving force here is to provide three communities — Haywood, Jackson and Swain counties — with stronger, better delivery of health care services for many years into the future.

What if, however, some kind of cataclysm occurs at Carolina’s HealthCare and its smaller entities become expendable or begin to be treated as mere profit centers for certain types of specialized care rather than as stand-alone hospitals? Or if a future CEO from Charlotte begins to make decisions without regard to citizens in this region?

The kind of scenario described above is not likely to occur, and we would hope that the board members from this region — whomever they are — would stand up for our citizens. But county commissioners — and most elected officials — typically operate from a different mindset because at any monthly meeting they face reminders that they serve the public’s interest, whether it is someone complaining about taxes or a neighborhood group seeking help about barking dogs disrupting the peace.

This one is easy. Citizens in Haywood County — and those of Jackson and Swain, for that matter — would have another measure of confidence in this affiliation if a county commissioner gets a seat at the table.

Haywood Regional Medical Center and WestCare are in the final stages of forming a partnership, with plans to launch a new joint venture as early as January.

The two entities will join forces under a new umbrella organization with a single CEO and new board of directors. While daily operations will be merged, the arrangement stops short of a full merger with the assets and long-term balance sheets remaining separate.

Haywood County Commissioner Mark Swanger questioned how the interests of the public will be safeguarded under a new joint venture.

Currently, Haywood Regional is a public hospital. The public and media are allowed to attend hospital board meetings, and finances, policies and nearly all its records are open. The new joint entity will be a private nonprofit, however, entitling the public to only very limited disclosure about operations.

Swanger said the new entity won’t be required to operate in a transparent manner, and thus the public’s vested interest in Haywood Regional could be thwarted.

Swanger expressed his concerns at a county commissioner meeting this week, which was attended by Mark Clasby, chairman of the HRMC board.

Swanger suggested a slot for a county commissioner should be a reserved on the new governing body.

“Has there been thought of having a county commissioner serve on that board to ensure our county government and citizens have as much transparency as possible?” Swanger asked Clasby.

Swanger said he wants to see a stipulation guaranteeing a Haywood County commissioner a seat on the joint operating board written into the bylaws.

“While I don’t doubt the motives of anyone involved in this now, 10 years from now we will have an entirely different cast of characters, so to count on the trust issue is not good business in my view,” Swanger said. “I think a commissioner seat needs to be part of the operating agreement so the citizens who have the financial investment in the physical plant of Haywood Regional are properly represented.”

Swanger asked Clasby to deliver the suggestion to the rest of the hospital board. The current hospital board will continue to exist once the new entity is formed, but which decisions will lie with the Haywood Regional board versus the new joint operation board has not been stipulated.

The new joint board will have 14 members: seven appointed by Haywood Regional and seven appointed by WestCare. County commissioners appoint the members of the Haywood Regional board, which in turn will appoint members to the joint operating committee, giving commissioners a small, albeit twice-removed, measure of control.

Although the board of Haywood Regional Medical Center could lose much of its control following its affiliation with WestCare, it will remain a public, county-owned entity nonetheless.

Haywood Regional and WestCare have announced their intention to unite under a newly created umbrella organization. The hospitals would be managed jointly, with just one CEO at the helm and one operating budget. That new organization will be run by a new board, comprised equally of members from both Haywood and WestCare.

“The joint operating company will sit atop the two entities. WestCare will remain its separate entity and Haywood will remain ours,” said Haywood County Commissioner Kirk Kirkpatrick. “To my knowledge there is nothing about the agreement that would change the public status of Haywood Regional.”

That public status means county commissioners appoint board members, the hospital’s books are open to the public and board meetings can be observed.

“We are under the impression that our hospital will still have a hospital authority with open board meetings,” agreed Pam Kearney, HRMC board member.

But it could be stripped of much of its power. Haywood’s current hospital board will likely no longer have hiring and firing authority over its CEO or autonomy over budget decisions, for example. Those would likely fall under the purview of the new board, which won’t be public. Members of the public and media would not be entitled to attend meetings of the joint entity where most decisions would likely be made.

Mike Poore, CEO of Haywood Regional, said the details of the arrangement are in the early stages to say the least. Exactly what power will remain with Haywood Regional’s existing hospital board and what will be delegated to the new entity will be refined over the lengthy affiliation process.

“There are a thousand things we still have to do,” said Roy Patton, an attorney and HRMC board member. “This whole thing is not a done deal. Whether it is done still depends on an awful lot of due diligence.”

This week, a team from Haywood Regional is at WestCare poring over all its financial ledgers and books.

“And vice versa they will be looking at everything within our organization,” Poore said, calling the two entities “deep into due diligence right now.”

“We are at the very beginning of this,” Kearney added.

Haywood Regional’s hospital board is appointed by county commissioners. How members are appointed to the board of the new joint entity are among the issues to be hammered out.

Poore said it is not unprecedented for a public hospital to come under the umbrella of an entity that’s not public, yet remain public itself.

“I think there are several examples of that within the state,” Poore said.

 

State statute

Haywood Regional’s status as a public hospital dates to its construction with publicly-backed bonds. The hospital building belongs to the county, and that ownership won’t change. While the daily operations of WestCare and Haywood will be co-mingled, each hospital will keep a separate balance sheet and its assets will remain segregated.

That is largely the reason Haywood Regional will still be considered a public hospital, even if it’s autonomy is siphoned off. State statute specifies a change in status occurs only if a public hospital is sold or leased.

“My understanding is that the ownership of the facility would rest with the county, and it wouldn’t be sold or leased,” said Jeff Horton, the director of N.C. Division of Health Service Regulation.

Another layer in affiliation is a management contract with Carolinas HealthCare System, a network of 23 hospitals based in Charlotte. The initial length of the contract could lock Haywood Regional and WestCare in for up to a decade, but a management contract does not qualify as a sale or lease, and therefore doesn’t trigger the state statutes regarding Haywood’s public status. If it did, the ultimate decision would rest with Haywood County commissioners. It appears commissioners will dodge such a vote, however.

“Right now with the anticipated structure it doesn’t appear there is any need for a change or for us to vote on it,” Kirkpatrick said.

If negotiations start heading in a different direction, however — one that would jeopardize the hospital’s public status and therefore land in the commissioners’ laps — Poore said he would let the commissioners know right away.

The commissioners, at least as a whole, haven’t drawn any lines in the sand about the ultimate structure the hospital takes on.

“I don’t know that it would matter to me as long as the services are better,” said Commissioner Kevin Ensley. “But I would want to listen to the medical community and hear what their consensus would be. I would also want to know what our hospital board thinks. We have appointed some really good people that understand the medical community.”

Patton said the hospital board hasn’t expressed a proclivity one way or the other, but it would be a major step to undo the hospital’s public status and wouldn’t be taken lightly, he said.

“Personally I would have to feel very comfortable if there would be a change like that,” said Patton, an attorney and member of the hospital board. “I would have to feel like that change is for the betterment of healthcare in this county and the area and that it would outweigh the benefits of being a public hospital.”

By Becky Johnson & Julia Merchant • Staff writer

Haywood Regional Medical Center and WestCare announced plans to join forces under a newly created parent company. In addition, they will enter a management agreement with Carolinas HealthCare System, a large hospital system based in Charlotte with 25 hospitals under its wing in North and South Carolina.

“We will gain access to the knowledge and expertise of an organization that has a proven track record of helping hospitals improve their bottom line and grow services in communities,” said Mike Poore, the CEO of Haywood Regional Medical Center.

The decision to enter a partnership with each other and a management contract with Carolinas HealthCare System was approved by unanimous votes by both the HRMC and WestCare boards in separate meetings Monday night (April 20).

The arrangement stops short of a complete merger of HRMC and WestCare. The hospitals will not merge their assets or balance sheets. However, daily operations from a revenue and expense standpoint will be managed jointly.

WestCare CEO Mark Leonard compared the arrangement to the partnership entered into by Harris Regional in Sylva and Swain County Hospital in Bryson City. Both continue to function somewhat independently, although daily affairs are managed as a single unit.

“The two organizations remain separate and district but there was a new parent,” Leonard said.

The primary advantage of a management contract with Carolinas HealthCare is an economy of scale to get better rates and prices on everything from insurance reimbursements to the cost of medical supplies.

“They can go to suppliers whether it is for linens or medical equipment and say, ‘We represented 2,000 or 3,000 beds and we want a better price or we go somewhere else,’” said Dr. Richard Lang, an HRMC radiologist.

Health care conglomerates, often organized under one flagship hospital, are increasingly common. On the other hand, rural hospitals flying solo are increasingly rare. Smaller hospitals struggling to stay relevant in the rapidly changing world of health care are increasingly partnering up.

“I believe this makes really good sense for medical coverage for this section of Western North Carolina, to keep a viable system available to the people here,” said Cliff Stovall, HRMC board member.

HRMC and WestCare will retain autonomy in some areas of operation, but will give up autonomy to the joint parent company in other areas.

“They are going to delegate much of their roles to this (new) board,” Poore said of the current WestCare and HRMC boards.

Exactly how much control would remain with the individual hospitals has yet to be worked out.

“All the details now have to come together,” said Mark Clasby, HRMC board member.

Hammering out the details of both the joint operation between WestCare and HRMC, along with the details of the management contract, could take another six months.

“There is a tremendous amount of work and due diligence that will have to occur,” Leonard said.

WestCare and HRMC will have just one CEO down the road, but neither Leonard nor Poore were concerned about that.

“I think both of our boards have made a brave decision to ensure not only that we keep the services that we have, but that we grow for the future,” Poore said. “It would be selfish of me not to go forward with this because it’s what’s best for the community.”

Other administrative functions, from payroll to purchasing, could also be consolidated, or could even be taken over by Carolinas as part of the management contract.

It is not known yet how much say Carolinas HealthCare Systems will have on the daily operations of the hospital or how much influence on long-range goals and strategies.

“What the trustees and physicians have heard is that Carolinas does not micromanage local leadership and local governance,” Leonard said.

When HRMC first began exploring the prospects of an affiliation with other hospitals, an outright merger was not out of the question. But leaders of the process soon realized there was little to be gained by the loss local control resulting from merger, not even the hoped-for cash infusion to upgrade equipment or expand the hospital.

“During this process, we found out even with a merger there is no cash infusion,” Clasby said.

Retaining autonomy is one reason a management contract was attractive.

“I think that’s one of the things that the board felt strongly about is that it kept control locally and got outside help to improve services,” Poore said. “The management company has really no powers or authority that are not expressly given to it.”

Haywood County Commissioner Mark Swanger said the management contract appears to be the best of both worlds.

“Under the contract, we still retain our independence, but yet we gain many of the benefits that a merger would provide. At this point I think it’s the best of the possibilities,” Swanger said. “I think it will improve healthcare, and I think it will improve the financial health and stability of both WestCare and HRMC.”

WestCare and HRMC said that patients will not be forced to leave their own county to get health care services they currently enjoy at home. Each hospital will still strive to provide the full array of medical care they do now rather than integrate clinical operations, such as cardiologists only operating in Haywood or hip replacements only being done in Sylva.

“I think it is unlikely that we would have that kind of consolidation. Our communities are 26 miles apart. Those kinds of consolidations work when you’re in a very close proximity,” Poore said. “We don’t have any plans to merge services on a local level. I think what would be more likely is that we would work together to create new services.”

That is particularly the case when it comes to highly specialized care, where there could be just one center to serve patients across the counties. Some services are too specialized to offer currently, but the larger patients base that would come with a joint affiliation could help recruit specialties the area doesn’t currently have, Poore said.

Poore says hospital staff, particularly front line staff, will see little if any change in their jobs.

Mission Hospitals in Asheville was the runner up in a quest for a management contract.

“Mission put forward an excellent proposal, but I believe the judgment was that Carolinas has the experience that no other group could match,” Swanger said.

Mission said while it appreciated the opportunity to make a pitch, it was disappointed in the decision.

John Maher, vice president for services at Mission, said that patients in the western counties have a high level of confidence in the health care provided at Mission. During the negotiation process, Mission conducted a survey in the western counties and found that 66 percent of patients preferred Mission over the other entities being considered for a management contract.

Further, Mission’s vision of an integrated comprehensive health system across the region is compromised by the decision to go with Carolinas, Maher said.

Maher also questioned how many jobs may be lost by Carolinas taking over the administrative functions of the hospitals. Those details, of how much Carolinas HealthCare would assume control of, are unknown.

“The language of the operating agreement has not been fashioned yet,” said Gail Rosenberg, spokesperson for Carolinas. “It is going to ba number of weeks before it is as to what pieces and part would be part of that.”

Leonard said he does not expect the referrals of patients to Mission from the western counties to change.

“We have a lot of respect for the folks at Mission, the specialists and sub specialists in Asheville. They do an excellent job for our communities,” Leonard said. Doctors will still have the freedom to refer patients to whomever they pleased, despite Mission not being selected for the affiliation.

“I don’t see the referral patterns changing whatsoever. Mission is a very excellent hospital,” Lang agreed.

An article that appeared in The Smoky Mountain News opinion section two weeks ago based on an anonymous interview with several nurses from the Haywood Regional Medical Center Emergency department prompted a rebuttal from hospital employees last week.

The board of the Haywood Regional Medical Center heard a glowing report last week on how the hospital’s emergency department is going following an abrupt transition four months ago.

One of the top issues that emerged during county commissioner interviews of hospital board applicants last week was the need for better-trained, better-paid and additional nurses at Haywood Regional Medical Center.

The rift between Haywood Regional Medical Center administration and the medical community needs to be repaired, and public confidence in the hospital restored, Haywood County commissioners said last week.

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