By Steve Heatherly

At the April 16 Jackson County Commissioners’ meeting, a physician stated his concerns about the future of MedWest-Harris and MedWest-Swain. While some of the observations are correct, we disagree with the assertion that MedWest-Harris and MedWest-Swain have only two options in its future, failure or joining Mission Health in Asheville. 

Since the summer of 2010, members of MedWest management, CHS and some members of the MedWest-Harris and MedWest-Swain medical staff have participated in a dialogue that has resulted in changes that address concerns raised by physicians.  Specifically, a management team dedicated to operations at MedWest-Harris and MedWest-Swain was appointed in February 2012.  While no change in management structure can magically fix the challenges faced by most rural hospitals in America, and those specific challenges at MedWest-Harris and MedWest-Swain, our recent change has generated a favorable reaction by the vast majority of staff and physicians.  

As a bit of history, by 2010 Harris and Swain had experienced a four-year trend of losing market share, driven by the natural the ebb and flow of physician departures, resulting in constrained access to care within the communities we serve.  Patients increasingly began to seek care outside their local medical community. In 2008 and 2009, WestCare made a significant investment in the recruitment of more than 10 additional physicians which is likely responsible for arresting the descent of market share loss from 2010 to present. 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.

Our hospitals must confront the fundamental business reality that expenses cannot continue to be greater than revenue.  In the short-term, there has been rigorous evaluation of cost with a focus on ensuring that our labor expenses match our volumes.  Most position eliminations have come through attrition with the remainder coming through upward and downward flexing of staff to better match the number of patients in the hospital on any given day.  These adjustments are being made in close consultation with the Medical Staff and with our Departmental Leadership, with patient care as the centerpiece of every decision.

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. It will happen when patients experience processes that are easy to understand and utilize. It will happen when it’s evident that our commitment to customer service can only be described as fanatical.

At least seven new physicians are joining MedWest-Harris and MedWest-Swain in 2012. Even in this less-than-optimal economic environment, we have expanded services to our communities through newly-constructed medical office buildings in Sylva and Bryson City. MedWest-Harris opened a wide-bore MRI and the area’s first urgent care center in August 2011. In addition, we have expanded upon our partnership with Western Carolina University with a presence in its new allied health facility which will open later this year.  

We continue to seek physician input with respect to our future. Within the past two weeks, we embarked on a process with Medical Staff leaders to focus on a shared vision and strategy for Harris and Swain going forward.  I am proud to report that there was unanimity around the idea that, whatever organizational structure within which our hospitals exist, our primary focus has been and must be to take great care of patients.  That focus has created the enduring legacies of Harris and Swain and is critical to our success.

In an organization of the size and complexity of MedWest, there will be diversity of opinion regarding most any topic.  This is no doubt the case in the present circumstance.  I believe it is the intention of the more than 1,000 employees at MedWest-Harris and Swain, its Medical Staff and management to use this moment as an opportunity to synthesize our diverse perspectives into an action plan aimed at preserving our hospitals as assets for the communities they serve for generations to come.  We look forward to an ongoing dialogue with the community, through a variety of forums, as we strive to accomplish the mission of our organization to provide high quality, compassionate, local access to health care.    

(Steve Heatherly is the president of MedWest-Jackson and MedWest-Swain.)

Steve Heatherly made sure there were plenty of Diet Cokes queued up in the office mini-fridge before work Monday morning — he would need at least a dozen, probably more, to get through the next 24 hours.

Heatherly faced hundreds of nurses, doctors, lab techs, billing clerks, cafeteria workers  — anyone and everyone who works at MedWest-Harris hospital in Sylva — for a full day and night this week. Every hour on the hour, he repeated a short spiel laying bare the challenges and issues facing the hospital before turning the floor over to questions from a steady stream of hospital workers rotating through for the interactive marathon.

“In our current environment we felt like as quickly as possible I have the opportunity to interact with as many of our employees as possible in a very rapid succession,” said Heatherly, the newly promoted CEO of the two WestCare hospitals, MedWest-Harris and MedWest-Swain.

Heatherly likely touched on the challenge of competing for market share against Mission Hospital in Asheville. He allayed concerns that the hospital was struggling financially — at least not hopelessly so — but also charted a course for a better bottom-line.

Billed as a “frank and open dialogue,” Heatherly was bound to get questions about why he was suddenly put at the helm two weeks ago — giving Harris its own leader rather than sharing a single CEO with MedWest-Haywood as it has for the past two years.

The move signaled a retrenching of sorts following a pseudo-merger of the neighboring hospitals two years ago after they both signed a management agreement with Carolinas HealthCare System out of Charlotte. It is also a reflection of discomfort among some in the Jackson medical community about whether their hospital was getting the attention it deserved from a CEO based in neighboring Haywood County.

“Any time those type of administration changes come about, obviously people have lots of questions,” Heatherly said. “They are interested not only in the present but also the future.”

The epic, uber-long format was an effort to hit all hospital employees on every shift, bringing the whole staff up to speed at once but in the comfort of small group sessions — all the while keeping the round-the-clock operations of the hospital humming.

“He is a straight shooter,” Bunny Johns, the chair of the WestCare board, said of Heatherly. “What you see is what you get, and he will lay it on the line for you. I think it is a real talent to do that in a way people can hear it.”

For the record, Heatherly isn’t a big coffee drinker — thus the arsenal of Diet Cokes.

More ‘boots on the ground’

Meanwhile, Mike Poore has returned to being the CEO of MedWest-Haywood only. When the MedWest partnership was formed two years ago, Poore went from being the CEO at Haywood to being CEO of all three hospitals. But, that changed somewhat suddenly two weeks ago.

The stated reason: to give each hospital their own in-house leader that could singularly focus on the issues each location face.

“It makes sense for both of us to put more time into our individual organizations,” Johns said.

Things haven’t exactly been rosy for the Jackson medical community since the affiliation. Patients have been lost to Asheville. Revenues are down. The downward trend was already in play before the merger, an unfortunate combination of a doctor shortage in Jackson and the economy. But some doctors wonder whether the merger with Haywood has helped matters.

“It hasn’t gone down any more, but it hasn’t come back up,” said John Young, vice president for Carolinas HealthCare’s western region.

Several doctors apparently came to the WestCare board of directors with their concerns, thus the CEO shuffle that Young calls “more leadership boots on the ground.”

“I wanted to make sure the folks on the WestCare side of the system knew that Steve (Heatherly) had the authority to work with them to solve issues and win back market share,” Young said.

Working well with doctors

Heatherly isn’t a stranger to the staff at Harris. He has held various top positions at WestCare during the past 15 years. He spent a good part of his childhood in Sylva, went to UNC-Asheville, then got his MBA at Western Carolina University and a second masters in health administration from UNC-Chapel Hill.

He started out at WestCare in 1997 over a subsidiary company that handled physician management and billing and spent nearly a decade on the frontline of doctor-hospital relations.

Heatherly had worked his way up to second in command at Harris, serving as both the chief financial officer and chief operation office, when the merger happened. He was given a new title of chief strategy officer.

Meanwhile, however, the ranks of doctors employed directly by the hospital was swelling. MedWest now has more than 80 doctors on its payroll, a major change from the days not too long ago when doctors all worked in their own private practices.

Heatherly’s skills working with the physician community were tapped for a new position of CEO of MedWest’s physician network. He is continuing to serve in that role as well as his new role of CEO of the MedWest-Harris and Swain.

Heatherly has learned a thing or two about working with doctors over the years, and has occasionally been asked to share his insight.

The relationship between any hospital and its doctors — whether in private practice or employed by the hospital — can take many forms. Some are outright adversarial, and even the rosiest relationships have their share of tension.

“I think the pitfall for a lot of hospitals is if you aren’t fully engaged,” Heatherly said. “You really don’t even have to have active discord, but if a hospital and medical staff aren’t fully engaged then you run the risk of not walking in lockstep. Through no ill will, not being actively engaged can lead to a disconnect. You don’t always have to be in agreement, but the process of going through the dialogue is very, very important.”

That attitude could make Heatherly just the man to iron out concerns of Jackson County’s medical community.

“He is highly motivated. He is highly intelligent. He is well versed in medical systems,” Johns said. “He will bring a level of energy that is impossible to put down on paper.”

Some within the Jackson County medical community are wondering whether their hospital has gotten a fair shake in the partnership forged with neighbor Haywood County under the MedWest umbrella two years ago.

When the hospitals in Haywood, Jackson and Swain counties partnered, they were careful to avoid the word “merger.” Technically, it was an affiliation, according to hospital leaders.

But at the end of the day, it looks an awful lot like what most people would call a merger. The hospitals share each others’ financial gain — or pain — as it may be.

“At the end of the year, we take the bottom line and split it 50-50,” said Mike Poore, the CEO of MedWest-Haywood.

The hospitals keep their own books from day to day, but come year’s end, the profits and losses of each are averaged out.

Steve Heatherly, the CEO of MedWest-Harris, calls it “financially integrated.” In slightly more layman’s terms, Bunny Johns, chairman of the WestCare board, likened it to a “financial truing up.”

That’s likely why some in Jackson’s medical community may be resentful of big bucks seeming to fly out the door of MedWest-Haywood during the past year.

MedWest-Haywood has seemingly been on a building and spending spree during the past year — from the very necessary replacement of a broken down generator to the very optional construction of a new surgery center. Meanwhile, however, the medical community in Jackson has watched as its plans for a new emergency room and major hospital renovation has been sidelined.

“Any individual who is prone to analyze that very critically, sure someone could be upset by that,” Heatherly said of the spending disparities between Haywood and Harris.

But a partnership like this one can’t be sized up from a one-year snapshot, he said.

“When you put together in essence a capital plan with multiple facilities, in any one year it might be perceived that one of those facilities benefits more,” Heatherly said. “But over the long haul, the goal is to make sure the needs of all facilities are met.”

One day, the tables may be turned and likely will. Harris has jumpstarted plans once more for a new emergency room, which will likely carry a $7 million price tag.

Poore said the spending in Haywood has been necessary. In many cases, the hospital’s hand was forced. A generator broke down. A lawsuit was settled. Computer systems needed updating.

But, what about the surgery center, new hospice center or urgent care in Canton?

Johns said the picture isn’t as skewed as it may seem on the surface.

“Most of those were in place and moving before the merger,” Johns said.

But more so, what appears to be spending by the hospital was in fact paid for by outside sources. Doctors put up most of the money to build a new surgery center in Haywood, while the nonprofit MedWest-Haywood Foundation raised money for the hospice center. The hospital, for its part, contributed $2 million combined to those projects.

A new urgent care center coming on line in Canton is costing $150,000. But one was built in Sylva as well, evening the scales on that particular expense. Besides, an urgent care center is a case of spending money to make money. It helps capture patients.

Here’s the spending at Haywood in a nutshell:

• A hospice center, a new surgery center and a new urgent care are in various stages of construction, a total of $2.35 million.

• The back-up generator broke and a new one cost $1.3 million.

• Money has been put on the table to buy physician practices, bringing more than two dozen doctors on the hospital’s payroll in Haywood County.

• The biggest ticket item is an $8 million medical records system. While the biggest need for the new system stemmed from Haywood, the cost also includes upgrades for the hospitals in Jackson and Swain, as well as computer systems to tie in to the burgeoning number of in-house doctors practices across all three counties with the hospital system.

• Hardly the stuff of bragging rights — but expenses nonetheless — are payouts in two old lawsuits, roughly $1.75 million in all.

Bringing docs on the payroll

One expense weighted toward Haywood since the merger is the buyout of doctor practices.

Doctors nationally are cashing in the hassles of private practice for the steady paycheck of being a hospital employee. They no longer have the freedom of an entrepreneur, but they are free to simply practice medicine without worrying about the business side.

The transition has proven costly for hospitals, however.

“It is not an inexpensive proposition to employ physician practices,” Johns said.

The hospitals nor doctors will reveal exactly what it cost to buy the practice. But, the expense doesn’t stop there. The hospital has to assume payroll and overhead immediately, but there is a several month lag before billing catches up, putting a dent in the hospital’s cash flow.

Both WestCare and Haywood had fallen behind in the arena of employing doctors compared to the national trend, however. As doctors retired or moved away, the hospitals were struggling to attract new ones without being able to offer in-house employment.

“The traditional model of recruiting physicians into private practices was no longer working,” Heatherly said.

So starting five years ago, Heatherly led a campaign to bring doctor’s practices under employment of Harris.

“The potential loss of additional market share far outweighed the investment we needed to make,” Heatherly said. “The good news is we have been able to stabilize market share and now our focus has been to demonstrate to the community we are here and have an engaged group of physicians and employees who are very interested in meeting the health care needs in our community.”

Haywood, however, didn’t have that luxury.

While WestCare was on its aggressive campaign to employ doctors, Haywood was struggling to rebuild its image after failing federal inspections. The hospital was decertified and essentially closed its doors for five months in 2007.

It wasn’t exactly in a position to bring doctors onto its payroll. And doctors most likely weren’t going to sell their practices and go to work until they were sure the hospital was on solid ground.

And thus, it was catch up time.

“The pace of question activity certainly picked up over there,” Heatherly said of Haywood during the past 18 months.

Despite his WestCare roots, Heatherly is the first to admit it was worth the money to buy the doctors practices in Haywood County. The doctors were being courted by Mission Hospital, who was making forays to buy doctors practices in Haywood as part of a fight for market share. Heatherly said Haywood had to step in to protect its turf.

John Young, vice president for Carolinas HealthCare’s western region, also agrees with the move.

“If they hadn’t done it somebody else would have,” said Young, who works for the Charlotte-based hospital system that has a management contract over MedWest.

Perfect storm

Other things on the expense list simply couldn’t be helped — namely the lawsuits and blown generator.

“You have to have back-up generation for your hospital,” Young said.

The biggest financial hit by far was an $8 million system for electronic medical records. The expense was once again seen as spending on Haywood’s side of the ledger sheet, but it’s more complicated than that, Poore said.

When the hospitals partnered, each had a different computer system for electronic medical records.

WestCare’s was seen as the best system of the two, so Haywood had to ditch its system and start over. The cost includes some upgrades for WestCare’s portion of electronic medical records. The cost also includes bringing all the doctors employed by MedWest onto the system as well.

From Poore’s perspective, the expense was for all three hospitals.

Haywood also took a hit from two old lawsuits. Both date to the former hospital administration. One quite literally: the suit was filed by the former hospital administrator to pay out accrued vacation. The hospital settled for $150,000 in back pay.

The other was a $1.6 million judgment against the hospital in a suit filed by ER doctors wrongfully ousted at the hands of the former administration.

“It was before us, but in the end, you have to pay what you have to pay,” Young said.

But neither lawsuit was factored into the profits or losses split at year’s end. Those were backed out and kept on Haywood’s side, meaning Haywood took the whole hit of those rather than factoring them into the shared profits and losses.

Harris next in line

Harris’ turn is indeed next, hospital leaders promise.

Five years ago, Harris was in the throes of designing an ambitious $18 million expansion and renovation. Plans called for a new emergency room four times bigger than the current one, as well as major renovations and additions to various parts of the hospital.

But, the recession sidelined the plans.

“We found that health care is not recession proof,” Johns said.

Unfortunately, the project at Harris had to wait.

“We have been juggling a lot of priorities,” Johns said.

With those now out of the way, however, a new emergency room for Harris is now back on the table as the “top priority,” Johns said.

“The ED is at the very top of the list,” Heatherly agreed.

It won’t be as big as once hoped for — likely only doubling the size of the emergency room and minus the related hospital renovations, for a much smaller price tag of only $6 to $7 million.

Still, that’s a lot of money. It will take borrowing, and that can’t happen until Harris is able to improve its financial bottom line.

Heatherly said MedWest-Harris needs to show “some good, sustained financial results” before the project gets the final green light, so it is hard to say exactly when it will happen.

WestCare is already carrying $14 million in debt on its books dating to various expansions on both its Sylva and Swain a decade ago.

MedWest-Haywood, on the other hand, has only about $4 million in debt, recently assumed as a line of credit from Carolinas Health Systems, which has a management contract over MedWest.

The MedWest system had a profit margin of 0.8 percent last year. It is aiming for 1.1 percent this year.

While slim, it is only slightly below what most small or mid-sized hospitals are pulling in these days. The margins also include depreciation, which artificially deflate what the hospital actually made in hard cash at the end of the day.