By Gwang S. Han • Guest Columnist
Simply put, I question if there is a problem with the current system at Harris Regional Hospital and Haywood Regional Medical Center, supervised by Carolinas HealthCare in Charlotte. Since retiring in 2007 after 33 years in Sylva specializing in obstetrics and gynecology, I paid little attention to the hospital’s future. Some old patients share their complaints of deteriorating quality care, emergency room problems, or the lack of good doctors; they never complain about the business structure established in merging two hospitals. However, I wonder why and how they arrived at this business model; what triggered it? Did local hospital management, boards of trustees, groups of physicians elect to merge, or did Carolinas HealthCare offer a deal too good to refuse?
The real problem appears loss of revenue for Harris Regional Hospital caused by a continuous drain of patients mostly to Asheville doctors, as stated by Steve Heatherly, Harris Hospital administrator. This has occurred since 2007 and increased almost 25 percent between 2007 and 2010, according to Becky Johnson of The Smoky Mountain News. Hospitals do not admit patients: doctors do. Patients are not stupid and can judge the quality of care they receive, especially women.
So what happened in those two years? Can identifiable causes explain the decline of the Sylva hospital? Did the “loss of a few doctors” cause the large migration of patients? Or was deteriorating quality of care at Harris Regional Hospital not the main reason for people to flee to Asheville for medical care? Was the hospital so poorly run that it needed outside help, or were the replacement doctors in certain specialties not providing the same quality of care people received from those few doctors who left?
The uproar from complaints by a few Sylva physicians appears confined to the business aspect of medical practice, as if recently implemented organizational system is the reason patients go to Asheville. Hospitals do compete; doctors also compete in providing quality medical care. Doctors are the main workhorses and hospitals play supporting roles for physicians to carry out their jobs. Healthy competition between hospitals and between physicians does not lead to a downhill path and death: to the contrary.
The two hospitals must have reasons to elect the “big daddy” approach instead of allowing two not-necessarily-close siblings to pool their energy and financial resources and use their combined synergy to retain their deserved market share instead of worrying about the eventual demise of one or both medical facilities. Size of business offers some advantage with its flexibility to maneuver, deep pockets, and ability to negotiate with insurance companies for remuneration. However, “big daddy” doesn’t have a reason to feel charitable toward these two ducklings (not necessarily ugly). It calculated its “take” by offering mighty financial power and business acumen, namely a bigger business market and bigger referral base. There is some truth in old saying that the friendship between two competing entities is inversely proportional of square of distance. This might have been the reason the hospitals chose Carolinas HealthCare instead Memorial Mission Hospital.
To me, the problem seems that the perfect picture doctors and hospitals have drawn is not what they expected to see and is not a perfect one. Is there someone or some organization to blame for the ugly picture or for the unfair deals as claimed by a few Sylva doctors? Let me remind you that these two hospitals have existed in two different business environments in a geopolitical-business sense and have two different doctors’ groups employing different business models. Perhaps Sylva has the advantage of being located in the bottleneck of two major highways and experienced an earlier introduction of medical specialties than in towns west of Sylva. Haywood has the handicap of being close to Asheville, the capital city of WNC.
The population and industry in Jackson County can’t support the hospital and the number of doctors in Sylva unless they are draw patients from surrounding communities. In fact, a lot of patients the Sylva hospital claims to have lost are not from Jackson County, but those from other communities who sought medical care in Sylva because they found better care than from doctors in their local community or it lacked specialists.
As the first board certified obstetrician and gynecologist west of Asheville, I witnessed on the ground level how people sought better care for their needs. Women are smarter, far more discerning, and more selective in choosing their doctors than men, in general, when looking for quality. The majority of medical decisions in the family are made by the woman in the house. They don’t mind of traveling distances seeking “better care.” Sixty five percent of my patients were not from Jackson County, but I doubt I could have attracted so many patients from different areas unless they thought it better. Most patients came by the word-of-mouth from other people, in fact more than 90 percent.
I think the two hospitals should maintain their separate identities and invest strength and financial resources in areas where they provide the best care: internal medicine, pediatrics, obstetrics and gynecology, and the surgical fields. Harris Hospital has taken many missteps wasting its resources with misguided objectives (one example is purchasing spine table so scarcely used). It would benefit from a modern Women’s Center, including a new labor and delivery room with modern, appealing décor instead of using the 1970s ugly, depressing facility. The year I arrived, about 250 deliveries occurred in the Sylva hospital; at its peak, close to 900 deliveries happened in one year (there were many fewer in Waynesville). I believe almost two- thirds of the deliveries were for people outside of Jackson County. Obviously, field of women’s and children’s health care can be a successful enterprise for this hospital.
In summary I don’t see a problem with the business structure since Harris Hospital has its own boss and administrative system with the help of Carolinas HealthCare. It should work with Haywood County in areas useful for both institutions. The key now is to regain the confidence and trust of people in this area. I kept the following message at the entrance of my office: “Please don’t come to see me unless you have trust in me.” It may take a long time for trust to return, but the two institutions have no other option but to try. Don’t underestimate consumers, clients, or patients and their ability to discern the quality of care or their knowledge of their health issues. Additionally, the residents of Jackson County should be concerned and become more actively involved in this effort. I wish them the very best.
Gwang S. Han, MD, FACOG, is a retired Jackson County physician.
When Dr. Bob Adams walked into a hospital-wide meeting of Jackson County doctors in early January, he believed he had finally mustered the critical mass to demand action, action that so far had been elusive despite a year of working internally to bring change.
But, he made a fatal miscalculation. The message doctors would ultimately send up the chain that night to the WestCare board of directors would be rejected.
Some doctors had become disillusioned with the Charlotte-based management firm that had been at the helm of the MedWest venture since its inception two years ago. They voted 31 to 3 to ask the board of directors to go to Mission Hospital, hear what it had to say and consider whether it would be a better partner.
It’s rare for the majority of doctors at a hospital to make a formal and pointed request to their board of directors. The issue had been escalating for months by then, and as the community would later learn, had not yet reached its climax.
A core group of concerned doctors began meeting in early 2010, discussing their perception of problems at Harris, which was struggling financially and had lost 10 percent of its inpatient business to Mission. Initially, they took their issues up directly with MedWest CEO Mike Poore. Unsatisfied, however, they opened a line of communication with the hospital board of directors, sitting down with key members in one-on-one meetings.
By summer, however, the airing of concerns became a standing topic at the monthly meetings of all the Harris’ physicians, marked by a heated exchange or two with Poore before the roomful of doctors.
Eventually, Poore knighted the core group of concerned doctors with an official title — the “kitchen cabinet” committee — in an apparent attempt to address the issues.
Meanwhile, doctors ramped up their line of communication with the hospital board, a rather brazen move to go over Poore’s head.
“We go in and sit down and talk and start expressing our concerns directly to the board,” said Dr. Randy Savell, a long-time gastroenterologist at Harris. “They were surprised. They suggested they had no idea how things were.”
The meetings with the board continued for several weeks, and while the board members were willing listeners, the doctors couldn’t spur them to take action.
“We never got anywhere, but they were being very surprised and shocked and concerned,” Savell said.
Some in the core group oscillated between caring about the management structure and just going back to doing what they did best: caring for patients.
“After a while, you get worn out. You get tired of fighting,” said Dr. Earl Haddock, a pulmonologist at Harris.
Two of the doctors in the “kitchen cabinet” had been on the hospital board themselves but had resigned earlier that year after growing disenchanted.
“The thing that struck me is nobody asks questions,” Dr. Waverly Green said of why he resigned from the board. “If it was a place where there would be honest discussion and be about the future of the hospital, I am happy to be a part of that. but I am not going to sit in a room and rubber stamp things that to me make no sense.”
The group of concerned doctors decided to take matters into their own hands. In December, some of them drove to Asheville for a behind-the-scenes meeting with the CEO of Mission, Ron Paulus. It was a renegade move, unauthorized by the rest of the medical community at large, but they liked what they heard.
So in early January, they called a meeting of all the doctors under WestCare and asked them to take a stand. Discussion dragged on for more than an hour.
Getting out of the MedWest partnership wasn’t an easy proposition. There was an escape clause built in at the three-year mark, but it could only be exercised by a three-fourths majority of the MedWest board, which was comprised equally of seven members each from WestCare — comprised of Harris and Swain hospitals — and Haywood Regional.
But, there was a little-known loophole. A clause in the MedWest contract allowed either side to pull out if the financial viability of one of the partners was at risk. It just so happened there was bad financial trouble brewing next door in Haywood. The Haywood hospital was running so low on cash, word on the street was it might not be able to make payroll.
To solve the short-term cash flow crunch, Haywood had gone up the chain to Carolinas for an emergency loan. Harris, however, was being asked to co-sign for the loan, putting its own revenue stream on the hook should Haywood default.
In realty, Harris would never be asked to cough up the money. Haywood’s revenue stream — about $100 million annually — along with all its equipment and its hospital building were also on the hook as collateral and would be tapped first before Harris would ever have to ante up. Essentially, there was more than $250 million guaranteeing a $10 million loan.
But, Carolinas was outside its comfort zone. This marked the first time it had ever loaned money to any of the 34 hospitals it manages. So it wanted the kitchen sink as collateral.
The Jackson doctors theorized the financial straits at Haywood were grave enough to exploit the loophole and engage in talks with Mission.
Little did the doctors know, however, that the WestCare board faced a grave choice — co-sign the loan to help bail out Haywood or comply with their own doctors’ request to meet with Mission. Doing both, it turned out, would not be an option. There was a catch to the loan with Carolinas. As long as MedWest owed Carolinas, the hospitals were prohibited from negotiating with a new partner.
Business-wise, it made sense. Carolinas didn’t want to prop up MedWest only to have it walk away still owing money. But to the unhappy physicians, it played out like a game of Mousetrap — and they were the ones sitting under the cage.
The WestCare board ultimately had faith in the MedWest venture and co-signed Haywood’s loan.
“We believe the future is bright for all three hospitals, even though the challenges are many. It is time to look forward, assuring the full potential of MedWest-Haywood, MedWest-Harris and MedWest-Swain is realized,” the MedWest board said in a statement this week. “Is this a short-term process? No, it is not. It will take months of hard work. But, we are confident in the expertise of our medical staffs and in the skill and dedication of all our employees.”
The doctors, however, felt ignored in their pleas to consider other options.
“We said ‘We aren’t telling you to dump Carolinas.’ We are just saying go talk to Mission and see if we made the best choice,” said Dr. Waverly Green, a pulmonologist at Harris. “Two days later, they signed documents that tied us up even tighter to Carolinas. That told me the board didn’t want input from the medical staff.”
One of the board members, Bob Carpenter, resigned from the board a few days later in a show of solidarity with the doctors.
“The bottom line is our hospital is in serious shape, and our trustees need to be looking at alternatives,” Carpenter said. “The community needs to keep pressure on the board to seek alternatives and do the right thing for this community.”
It turns out Harris was not merely hamstrung by Haywood’s loan. Harris was beholden to Carolinas for its own financial security as well. Carolinas had pulled strings to help Harris out of a pinch over an outstanding $15 million loan with BB&T, dating back to hospital construction projects a decade ago. Under terms of the loan, BB&T required Harris to have 75 days cash on hand.
Last year, Harris wasn’t able to maintain that balance and dipped below the cash-on-hand threshold that BB&T required. Carolinas tapped its relationships in banking circles, essentially putting in a good word for Harris, and convinced BB&T to temporarily relax its cash-on-hand requirement.
Harris currently has 56 days of cash-on-hand instead of the mandated 75. If Harris sent Carolinas packing, it could jeopardize the leniency BB&T had extended on the loan terms.
The door had been closed on any escape hatch Harris may have had, Savell said.
To be clear, the concerned doctors don’t believe in a conspiracy by Carolinas to make the hospitals financially dependent as a way of keeping MedWest intact. Adams thinks Carolinas just wasn’t paying close enough attention to the day-to-day operations, which after all is the expertise Carolinas was supposed to be providing in exchange for its management fee.
“They would never have allowed them to spend what they spent at Haywood without having the resources to back it up,” Adams said. “They would never have allowed Harris to be run in the ground even if that was a planned maneuver because it created a huge backlash. You don’t poison the components.”
John Young, a vice-president for Carolinas’ western hospitals, said that Carolinas doesn’t tell MedWest what to do — it’s the other way around.
“We work for the local boards. We have no control mechanism,” Young said.
It’s rare to find physicians and hospital management in lockstep on everything. Now, however, the WestCare board must find a way to rebuild the fractured relationship with physicians.
“For every member of the medical staff that has talked to the board, to walk away feeling like nothing was going to be done was a difficult thing for us,” said Dr. Earl Haddock, a cardiologist at Harris.
It marked a departure from an amicable relationship the Jackson medical community had always had with its board of trustees.
“There was never any adversarial relationship. It was collaborative across the spectrum. We all worked together for the same goals. I think the thing that has been particularly uncomfortable for the medical community in these last two to three years is that relationship no longer applies,” Adams said.
A saying by a patriarch of the Harris medical community has been reverberating in Jackson County for nearly 40 years, handed down through practices and still preached to new recruits today.
“Sylva is where you can practice contemporary medicine in the old-fashioned style,” so the saying goes. It was coined by Bill Aldis, an internal medicine specialist who came to Harris in the mid-1970s.
Aldis was part of a dynamic trio of upstart internal medicine specialists who sought out Sylva after medical school as a place to make their mark, perhaps even a social experiment of sorts. Their mission: to take a rural hospital with a smattering of primary doctors and see how far they could take it.
“They were at John Hopkins together and decided they were going to find a place where they could make an impact,” said Dr. Joe Hurt, a retired pathologist who came to Harris in 1978. Hurt came partly because he was impressed by the three young internists who had thrown themselves headlong into building up a rural medical institution.
“There was a tremendous amount of potential,” Hurt said.
The energy was infectious. Each new specialist who came on board joined the recruiting crusade, putting their best foot forward as a medical community to build up their own ranks in partnership with the hospital.
“A lot of the recruiting parties and events were actually held at my house,” Hurt said. “Some of the contracts between partners were worked out at my house.”
In the decade from 1975 to 1985, the number of doctors practicing in Jackson County more than doubled, bringing in the county’s first orthopedists, pathologists, radiologists and surgeons. More by fate than design, the community attracted a certain breed of physician — those who didn’t care about the lack of a country club or golf course, Hurt said.
Those early efforts set Harris on a track that still persists.
“Harris has had a long-standing tradition of attracting very good physicians. Part of the attraction was for a small hospital, this had an exceptional medical staff. Well-trained physicians, very community-oriented. There was a rapport between the physicians and community that didn’t exist elsewhere. The hospital just had a very good reputation,” Green said.
There’s one thing both sides in the debate agree on: keep going to your local hospital.
“In terms of the services, we can and should provide in our local hospitals, we are as good as anyone in the country,” the MedWest board of directors said in a statement this week.
Undermining Harris is indeed the last thing those speaking out want to do.
“There are those who felt the community deserved to know. Hopefully, there will be enough of a outcry to have an impact,” Savell said.
But, the 2,000 employees of MedWest in Haywood, Jackson and Swain counties have surely felt the sting of the negative publicity during the past week.
“I care for every single patient with every ounce of my being,” said Heather Sheppard, a nurse at Harris and director of ICU. “I stand by the care that we deliver to every single patient at Harris.”
In Haywood County, a letter was signed by 29 doctors this week reinforcing their strength and resolve to provide excellent health care.
“We believe and have substantial data to corroborate that the care at Haywood hospital is, like the care at Harris hospital, something the community can take great pride in,” the letter states.
Dr. Joe Hurt, a retired pathologist at Harris, said going public was clearly a last resort for Adams after months of working through internal channels that got him nowhere.
“I don’t think any of them wished ill against the hospital,” said Hurt.
Savell agreed that’s not what this struggle is about.
“Good care is still there. Good people are still there,” Savell said.
Even those who have publicly stood beside Adams plan to stick with Harris to the end.
“I love what I do. I love the patients. I love the hospital, and by golly, we provide excellent care, and we want to get back to that,” Haddock added.
When the Med-West venture was coined two years ago, the premise was an easy sell. Together the hospitals would be stronger than going it alone.
Both Harris and Haywood hospitals had witnessed a troubling loss of patients to Mission — a loss so troubling in fact neither hospital could afford to continue as it was. They faced a cold, hard reality: turn the course, and fast, or they would be faced with financial insolvency.
Indeed, both hospitals hoped the MedWest joint venture would shore up the erosion of patients to Mission. Both, however, seemed to have different ideas of how that would play out on the ground.
Was there enough business for both to stay the size they were, or would one ultimately evolve into the big kid on the block under the MedWest umbrella — and if so, who?
Before the merger, and even now, Haywood and Harris competed very little. Fewer than 5 percent of patients from Jackson migrated to neighboring Haywood or vice-versa.
But with the future of their medical community on the line, 1 percent here and there suddenly seemed to matter quite a lot.
While the call by some Jackson doctors to withdraw from MedWest seems like a shot across the bow to their neighbors in Haywood, Jackson doctors said they didn’t intend it that way. They aren’t questioning the quality or caliber of health care at Haywood’s hospital or by Haywood doctors. Instead, it seems desperation amidst a shifting health care landscape has seized the day.
Next week: Read more about the specific concerns raised by Jackson doctors, an analysis of hospital market share, a snap shot of finances, and philosophical view points on the MedWest venture.
Four long-time physicians in Jackson County are leaving C.J. Harris hospital after becoming disenchanted with the direction of MedWest — and even more so with Carolinas HealthCare System, a giant network of 34 hospitals that MedWest is affiliated with.
Dr. Bob Adams, a hospitalist who is leaving Harris after 36 years, fears Carolinas plans to build up Haywood as a flagship to compete with Mission. He didn’t like where that would lead.
“Harris devolves and Haywood grows,” Adams postulated. “They are playing the corporate practice of medicine. I don’t want to be a pawn in somebody else’s power struggle and be used as a widget in a big business’ plan for their benefit.”
The president of Harris, Steve Heatherly, laments the loss of the four doctors — and the circumstances.
“It is unusual in the history of this organization to have physicians leave because they were not satisfied with the strategic direction,” Heatherly said.
Making matters worse, another seven doctors in the Jackson-Swain medical community have either already left or plan to leave — for a total loss of 11.
“It is unusual to have that level of turn over,” Heatherly said, even though only four of the 11 actually chalk up their departure to “dissatisfaction with the hospital.”
Lessening the blow somewhat, seven new doctors are moving to Jackson and Swain in coming months. They had already been recruited and were intended to bolster the physician ranks.
Now, however, the hospital will see a net loss instead of gain and a gap in a few key specialties.
Dozens of doctors, of course, aren’t going anywhere.
“We must not forget that we still have an extremely skilled and dedicated medical staff of nearly 230 physicians who are choosing to stay in our communities and work in our hospitals to take care of our patients,” Dr. Robin Matthews, an ob-gyn in Haywood County who chairs the Physician Leadership Council of MedWest.
Many of the 2,000 employees of MedWest have rallied to their hospitals’ defense during the past week.
“The hard decision is to stay here and fight for this place to succeed,” said Dr. Casey Prenger, the medical director of the hospitalist group at Harris. “We believe in our hospital and our community, and it is our privilege and honor to take care of you.”
There are huge challenges, however, facing Heatherly and MedWest: hold MedWest together, turn the corner financially, recapture market share from Mission, quell the doctor uprising, and recruit new doctors to fill the holes.
For the group of Jackson County doctors who went public with their concerns last week, the decision wasn’t an easy one nor was it taken lightly.
“They aren’t trying to hurt anything. They are trying to fix something,” said Dr. Gilbert Robinson, an anesthesiologist at Harris for 10 years.
Even those who spoke out aren’t certain now was the right time, or if it will do any good.
But, the ball was in Adams’ court. When he decided to go public, the core group who had been fighting alongside him during the past year to bring about change internally weren’t going to leave him on a limb by himself, so they reached out and grabbed on as well.
“I decided I wanted to let the community know what was happening to their hospital. The only thing that is going to change is if the community starts standing up for itself to Carolinas and the WestCare board,” said Dr. Waverly Green, a pulmonologist at Harris who is leaving as well.
Adams hopes the issues he raised aren’t construed as a parting shot or chalked up to sour grapes.
“They are portraying those of us who had concerns and discomfort about where we are as being disgruntled and outliers,” Adams said.
But in fact, hospital administration has gone out of its way to praise Adams and the others who are leaving.
“It is regrettable. They will be missed in this community. They are outstanding physicians who have provided years of service to this community,” Heatherly said.
Even doctors in neighboring Haywood, who rightfully have reason to be miffed by Adams’ shot across the bow at MedWest-Haywood, have been complimentary.
“He is a great doctor and wonderful human being. I just happen to disagree with them completely,” said Dr. Marvin Brauer, chief of staff at MedWest-Haywood and a hospitalist like Adams.
While Adams will soon be gone, others who support him will still practice at Harris and will continue carrying the torch to fix perceived problems.
Some of them are even on Harris’ payroll. Technically, the entity they are speaking out against writes their paychecks, putting them in an uncomfortable position at best, a vulnerable one at worst. Normally, few doctors would be willing to take a career gamble like that.
The difference at Harris likely comes down to their new president, Steve Heatherly. Heatherly has been with Harris since the 1990s, part of that time as a physician liaison and serving in a variety of vice president roles and as chief operating officer.
In hopes of quelling dissension among Jackson doctors, Heatherly was promoted two months ago as the president of Harris. It gave Jackson doctors one of their own at the helm — rather than the previous hierarchy where they answered to a single CEO for the entire MedWest venture, Mike Poore, who they were acutely aware hailed from Haywood and still had his base office there.
Jackson doctors have hope that Heatherly will help right the ship.
“I believe Steve is at the place he needs to be to help turn WestCare around, due to his experience and background and skill set. I don’t know of anyone else that would be better at this point in time,” said Bob Carpenter, a former MedWest board member from Sylva who resigned in January over the same issues troubling the doctors.
Even Adams agreed.
“I think the WestCare board and Steve Heatherly are doing their best to work with medical staff now,” Adams said.
Many doctors — even those who are in near lockstep with Adams’ pointed assessment of the MedWest landscape — wish he had given Heatherly more time to fix things before going public.
Dr. Randy Savell, a gastroenterologist doctor at Harris, said Heatherly faces a difficult future.
“He is between a rock and a hard place,” Savell said.
Heatherly’s boss is technically Carolinas, and he answers to them daily. But, he must also answer to the hospital board of directors, all the while winning the good graces of nurses and doctors by proving he will address their concerns.
Heatherly doesn’t downplay the reality that a hospital lives and dies by its doctors. If the doctors are good, people will get their health care locally.
“That leads to more volume through the hospital, which helps solve the business dilemma,” Heatherly said.
That business dilemma — dire financial straits for both Harris and Haywood — looms large in the debate.
Harris has lost more than 10 percent of its in-patient business to Mission Hospital during the past five years.
As a result, Harris is struggling financially and has been losing money for at least three years. It’s now in its third round of layoffs in four years.
“Our hospitals must confront the fundamental business reality that expenses cannot continue to be greater than revenue,” Heatherly said.
If the financial picture was rosier, the paranoia among Jackson doctors that Carolinas is trying to siphon its patients off to Haywood could simply melt away.
For now, Heatherly is stuck in a Catch 22. Rather than shrink, Harris must find a way to regain the market share lost to Mission.
“No organization can cut its way to prosperity, especially not a hospital, where quality patient care is our business. ‘Thrive-ability’ will happen when more patients come through our doors to see our brilliant doctors and caring staff,” Heatherly said.
Harris’ financial problems are largely because it lost several doctors back in 2006 and 2007, Heatherly said. When patients needed a doctor’s appointment, they were forced to look elsewhere and ended up walking right into the open, waiting arms of Mission in Asheville.
Heatherly, who started at Harris in the 1990s, had taken a hiatus for a few years to work for a physician management firm. When he came back to Harris in ?, job No. 1 was recruiting physicians to fill the void.
“The organization was having trouble recruiting physicians to replenish the supply to the local community, and it created a constrained access,” Heatherly said.
In 2008 and 2009, WestCare brought in 10 new doctors. It also bought out several private practices in order to put existing doctors on the hospital’s payroll — reflective of a national trend by doctors who increasingly prefer to work directly for a hospital rather than run their own private practices.
Those moves came at a financial cost, but Heatherly said the influx of doctors stopped the bleeding of market share. Unfortunately, it hasn’t come back up yet either.
“Now that we’ve had success in rebuilding our medical staff, we need more patients from our local communities using our local hospitals. Only then can we expect more positive financial results,” Heatherly said.
Heatherly’s belief in doctors as a core business strategy for the hospital seems genuine. He stresses it even when discussing other topics, like when the long-awaited renovations to Harris’ emergency room will be re-started.
“As we move forward, we have to assess that we have the right medical staff in place to offer ongoing appropriate access to care, and then those opportunities to evaluate facility expansion will be driven by the ability to generate sustained financial results,” Heatherly said.
Heatherly was speaking off the cuff, not reading from a prepared statement. But, his hospital administrator’s version of Alan Greenspan’s famous Greenspeak can be boiled down this way: doctors must be shored up first, which will bring back patients, which will bring back money.
By Julia Merchant • Staff Writer
The Smoky Mountain News caught up with Carolinas Healthcare System Chief Operating Officer and President Joe Piemont this week. The hospital system — the largest in the Carolinas and the third largest public non-profit system in the country — recently entered into a joint management contract with Haywood Regional Medical Center and WestCare Health System.
Here’s some of what Piemont had to say.
Smoky Mountain News: Will Carolinas Healthcare receive a cut of the profits under the management contract?
Joe Piemont: No. Management contracts generally consist of a base management fee and some opportunities to earn incentives, provided Carolinas Healthcare hits benchmarks detailed by the local board. These benchmarks are set each year and can be related to financial or clinical performance or strategic mission, among other things.
SMN: Did Carolinas Healthcare want HRMC and WestCare to join forces before entering into a management contract?
JP: We strongly encouraged them to talk to one another because we thought for the long-term it would be in their best interest to explore some permanent form of combination. The relationship needed to start between HRMC and WestCare. I think that those two communities share a lot of similarities. They are separated by the mountain to be sure, but if you look at the challenges they’re going to face, they’re simply going to be better off doing it together.
SMN: How will the hospitals benefit from being part of the Carolinas Healthcare System?
JP: We bring various economies of scale and economies of skill to our colleagues and teammates in our system. Scale economies are things such as purchasing — we’re able to get everyone in the system a better price on supplies. Economies of skill mean that rather than having to study things on their own or rely on a myriad of consultants and experts, we provide the hospitals with assistance. We have a full array of subject matter experts.
SMN: Can you estimate a timeline for the management contract process?
JP: I think a short timeline is probably six months. I think you’ll see more concerted and combined activities before the end of 2009.
SMN: Has Carolinas Healthcare ever entered into a management contract with a hospital that has lost its federal healthcare funding status, like Haywood Regional Medical Center did?
JP: We have not. We’ve never seen that before. I think Haywood acted very quickly to get on a path to recertification. They were all over it, and that was very clear to us. I think they’ve done a remarkable job of getting back on their feet.
SMN: Who will the CEO report to, and how will this impact local control?
JP: The CEO will not only be accountable to the board of the combined enterprise, but will also have administrative contact inside Carolinas Healthcare. It shouldn’t impact local control at all. We as management make recommendations for certain actions, but the board makes the decisions. Our authority is no greater than the CEO’s authority has been traditionally.
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.
One of three hospitals courting Haywood Regional Medical Center and WestCare for a partnership has dropped out of the running.
That leaves Mission Hospital of Asheville and Carolinas HealthCare System, a 23-hospital conglomerate based in Charlotte, still in contention. Both have submitted formal proposals, kicking off the next round in the lengthy affiliation process.
WestCare and Haywood Regional have each appointed blue-ribbon committees to steer the process. They will hold a joint meeting Monday (Feb. 16) to review the proposals and kick off discussions of which one is best. The formal proposals are a follow-up to talks held with the entities last summer.
While there’s only two left at the table, others would likely be interested in a partnership with Haywood Regional and WestCare. But invitations were only extended to the three. A fourth was ruled out following the discussions last summer, and others were ruled out earlier in the process.
It could be another six months before WestCare and Haywood Regional have made their decision. They have to weigh what each brings to the table, from medical expertise to a cash infusion, said Mike Poore, CEO of Haywood Regional.
An affiliation could follow a tier of options: an outright merger, a long-term lease, a year-to-year contract or some sort of loose partnership.
While playing Novant and Carolinas against each other would certainly give the home hospitals leverage in the negotiations, Haywood and WestCare still have plenty of bargaining power. If neither proposal meets the standard they want, they can simply choose none of the above, said Haywood County Commissioner Kirk Kirkpatrick, an integral player on the steering committee.
“If either is not beneficial to both Haywood and WestCare then we have to reconsider,” Kirkpatrick said. “It would be bad business not to.”
If neither of the large entities works out, Haywood and WestCare could still pursue a partnership of their own without hitching up to a larger entity.
“I feel like we have a qualified and competent CEO at Haywood and West Care. If they can put something together for the benefit of the entire community they will,” Kirkpatrick said.
Novant will not say exactly why it pulled out, although the economy is a likely culprit. Novant operates Forsyth Medical Center in Winston-Salem and a host of smaller hospitals across the state.
A spokesperson for Novant said the hospital was honored to be a top contender, but could not over extend itself at the moment.
“After careful evaluation, we concluded that we needed to focus on our current commitments to capital projects,” said Freda Springs, media spokesperson for Novant.
Novant is building brand-new hospitals in Kernersville and Brunswick County, both in the ballpark of $100 million. Springs said the hospital would not comment further.
Neither Poore nor Mark Leonard, WestCare’s CEO, had additional insight as to why Novant dropped out.
“That is for them to explain if they choose to explain it,” Leonard said.
The letter from Novant announcing its withdrawal was only two paragraphs. Poore speculated, however, that is was likely the economy.
“They are like everybody else, trying to look at the economy and trying to decide what the future is going to be and none of us really know that,” Poore said.
If hospitals are reining in their resources, the deals on the table today might not be as good as they would have been two years ago, or two years from now. But Poore said there is no way of knowing that.
Poore’s bottom line: “This hospital is going to survive and thrive no matter what the affiliation is.”
For now, the public is largely in the dark about the nature of the proposals, or even what type of affiliation WestCare and Haywood are willing to entertain. WestCare and Haywood won’t release the letters sent to Mission, Carolinas and Novant inviting them to make a pitch — which would likely shed light on exactly what the home hospitals hope to get out of the deal.
They also won’t make public the proposals that came back from Mission and Carolinas. Carolinas and Mission don’t want their private business information shared, and might not have sent proposals if they thought they would be made public, Poore and Leonard said.
“Although we are bound by confidentiality agreements to not give out details of the proposals, we will continue to let the community know about the evaluation process and where we are in it,” Leonard said.
The process is fraught with complexity, with each entity forced to share inside details of their operations to accurately size each other up, but wishing they didn’t have to. While Haywood and WestCare shared information with Carolinas and Mission so they could craft their pitches, it’s not being swapped with each other. For now, the two are still technically competitors.
Another factor in play is anti-trust laws. If Haywood and WestCare joined, especially with Mission, they could be subject to anti-trust regulations.
“We are trying to deal with a pretty complicated situation. There are a lot of moving parts,” Poore said. “We have been very forthright — as much as we can — during the whole process.”
Many in the medical community have expressed concern over an affiliation with Mission, fearing it would steal local specialists and siphon the most profitable operations away to the flagship in Asheville. Mission has insisted it wouldn’t do that, and they are still considered in the running.
“It will be premature to say one organization has a lead over the other at this point,” Leonard said. Besides, the decision rests in the hands of WestCare’s and Haywood’s hospital boards, he said. They likely have a long way to go before reaching a final decision.
Depending on the arrangement, Haywood Regional Medical Center could face an added layer of scrutiny, and a significant one at that. If the arrangement takes the form of merger or long-term lease, final approval rests with county commissioners.
Haywood Regional is a public hospital, and state statute gives final authority to the county’s elected leaders rather than the appointed hospital board. The statute also requires all proposals for an affiliation — not just the one the hospital says it wants — to be made public so county residents can see for themselves the options on the table. It also requires two formal public hearings to provide for public input.
Poore said once the hospital gets further along with its own decision, it will begin following the state statute requiring public involvement.
Health care conglomerates, often organized under one flagship hospital, are increasingly common. On the other hand, rural hospitals flying solo are increasingly rare.
“The growing demands of providing healthcare have jeopardized the mission of small rural hospitals,” said WestCare CEO Mark Leonard.
Smaller hospitals are struggling to stay relevant in the rapidly changing world of health care. Doctors are more specialized, while equipment is more sophisticated and expensive. Theoretically, a larger patient base — achieved by pooling patients from more than one county — can justify the cost of providing the service. Those who don’t band together but opt to compete can end up unable to provide an advanced level of health care.
The economy has exacerbated the challenges, as more patients fail to pay their medical bills or turn to the emergency room for basic treatment, Leonard said.