Time of Change and Crisis in the Hospital World
Monday, August 4th, 2014
The financial turmoil rocking Georgia’s hospitals shows no signs of fading.
Just this past week, Emory-Adventist Hospital announced it would close by the end of October. By doing so, the Smyrna hospital would become the fifth Georgia hospital to close within the past two years. And unlike the previous four, it is in the affluent Atlanta suburbs, not a struggling rural area.
Emory-Adventist officials said Wednesday that the hospital “is no longer sustainable in today’s dramatically changed health care environment.’’
Other hospitals in better financial shape are seeking to position themselves for tough times ahead. Some are partnering with other health systems, seeking to broaden their services and increase their scale.
Why all the activity?
Hospitals across the state and nation are being squeezed by several major factors, including lower reimbursements from insurers, fewer inpatient visits, and more pressure to update their technology, including information technology, said Tom Sims, a health care consultant with Stroudwater Associates.
“For health care executives, it is a perfect storm of margin pressures, additional regulatory oversight and reductions in inpatient demand,’’ added Chris Kane, an Atlanta-based health care consultant.
The affiliation trend among hospitals has accelerated this summer. Southeast Georgia Health System in Brunswick, for example, is considering an affiliation agreement with two Florida systems, Flagler Hospital of St. Augustine and Baptist Health.
“In the current health care environment, it is important for all health organizations to look for opportunities to enhance the quality of patient care, position for population health and strengthen financial stability,’’ said Southeast Georgia President and CEO Gary Colberg in an email Thursday to GHN. “By sharing best practices and exploring the efficiencies of scale, we believe we can achieve those goals while preserving our local community focus.”
Colberg added that Southeast Georgia Health System has cut costs and implemented other measures that have boosted its financial performance.
It’s also reorganizing as a private nonprofit to operate its hospitals in Brunswick and St. Marys and other health facilities. That would pave the way for a possible affiliation or joint venture.
Kane said that as such hospital partnerships evolve, the organizations can explore joint marketing of existing clinical programs, physician recruitment, or the creation of new medical services.
Recently, Central Georgia Health System, based in Macon, announced an intent to form partnerships with two hospital organizations that are struggling, Putnam General Hospital in Eatonton and Milledgeville-based Oconee Regional Health Systems.
Alan Horton, CEO of the Eatonton hospital, told GHN, “Small independent rural hospitals are going to have difficulty surviving on their own.”
Rural hospitals’ financial dilemma “is much worse than it’s ever been,’’ Jimmy Lewis, CEO of HomeTown Health, told GHN recently. “The general cash position in most rural hospitals is extremely dire.’’
While some hospitals have closed, several others are struggling just to stay open, said Kevin Bloye of the Georgia Hospital Association.
“If this disturbing trend continues, we’ll have major access-to-care issues for hundreds of thousands of Georgians throughout the state,” Bloye said. “It will also have devastating financial consequences to areas that lose their local hospital which serves as a major economic engine.
He noted that the Elberton-Elbert County Hospital Authority has asked the county Board of Commissioners for $667,000 in annual funding to support the charity care provided by Elbert Memorial Hospital to local citizens. “This financial relief is needed to keep our hospital from closing, which would result in a devastating economic loss to the community and leave Elbert County residents without local access to health care services,” the hospital said on its website.
Reflecting the current financial challenges, Habersham County in the northeast Georgia mountains has agreed in a deal with the local hospital authority to make monthly bond payments on Habersham Medical Center’s $37 million debt. The county will eventually take over the assets of the facility.
It’s not just rural hospital systems that are moving fast. The powerhouse Piedmont Healthcare, based in Atlanta, recently announced that it has joined the MD Anderson Cancer Network, and also has aligned with WellStreet and its seven urgent care centers in metro Atlanta.
Sims of Stroudwater Associates said hospital systems are having to navigate two worlds in reimbursement. One is the traditional fee-for-service system, and the other a “value-based” model, where payments are geared to quality of care, not quantity of services.
The “value-based” system, Sims said, “may take five years before it goes widespread.” For now, he said, hospitals “have got to live in both universes.”
One revenue stream that Georgia hospitals aren’t receiving is that associated with Medicaid expansion. Having more uninsured Georgians on Medicaid would mean more revenue for hospitals that currently treat such people at a big financial loss.
But Gov. Nathan Deal and other Republican leaders in Georgia have decided against expansion, saying it would be too costly to the state.
Hospital companies nationally have seen a difference in states that have expanded Medicaid.
Hospital chain HCA on Tuesday reported a 6.6 percent drop in uninsured patients at its 165 hospitals — a reduction that grows to 48 percent in the four states that have expanded Medicaid.
Another hospital company, Tenet Healthcare, said in May that its hospitals are spending less on charity care for uninsured patients in states that have expanded Medicaid.
In states that have not expanded Medicaid, such as Georgia, Texas and Florida, Tenet hospital admissions for the uninsured have increased 2 percent while ER visits have decreased 6 percent, the company said.
Andy Miller is the founder of Georgia Health News.