Community Hospital CEO Panel: 3 Leaders Share Insights on the State of Community Hospitals

Community hospitals are the lifeblood of most of the communities they serve. They usually are a major employer, if not the largest employer, and people generally look to them as a source of stability — knowing that if something bad happened, the hospital would have its doors open.

That is no longer a given in today's healthcare economic environment. Hospital layoffs are rampant, and a supreme dependency on sufficient reimbursements has some community hospitals shaking in their boots. In fact, some smaller hospitals — like Scott County Hospital in Oneida, Tenn. — are being forced into closure due to a lack of capital, squeezed payments or an inability to find a strategic partner or buyer.

Three community hospital CEOs — Mike Patterson of 50-bed Colorado Plains Medical Center in Fort Morgan, John Sernulka of 189-bed Carroll Hospital Center in Westminster, Md., and Phil Wright of 90-bed Southampton Memorial Hospital in Franklin, Va. — impart their thoughts and guidance on what small and rural hospitals are going through right now and what they can do to stay alive while maintaining their community-based roots. There is plenty of hope; it just takes the right strategic planning.

Question: What are some of the biggest challenges your community hospital, and community hospitals in general, face today?

Mike Patterson is CEO of Colorado Plains Medical Center.Mike Patterson: Something that all hospitals are facing is cuts to Medicare and Medicaid reimbursement. Our state instituted around a 5 percent reduction in Medicaid rates over the last couple years. That puts pressure on everybody.

The Colorado provider fee was implemented here a couple years ago, and it has really helped us, as a rural hospital, in getting a little more reimbursement. It also has helped because it has allowed Colorado to add about 50,000 Medicaid recipients to the rolls. That is in jeopardy right now in Washington, so keeping the provider fee is a big issue for us.

We're a 50-bed, rural hospital, and our volume fluctuates every day. The low-volume Medicare adjustment also really helps us to keep the staff we need here. Again, that is something that is in jeopardy in Washington. It seems we continually face cuts in payments while at the same time are expected to increase quality.

Another challenge is the recruitment of physicians. We're combating that by getting out there with many different recruiters. LifePoint Hospitals, who is our parent company, has a recruitment division and is helping us find physicians, as well. Those are our biggest issues right now.

John Sernulka: The biggest challenge facing community hospitals is that we are the safety net for the entire health delivery system in our community. We are the largest employer in the community, outside of the public school system, and we are often seen as the organization with the means to be able to help out with a wide range of challenges — this includes supporting the indigent populations, such as the under- and uninsured. The community hospital is the last bastion of resources to hold a system together.

The other big issue is the current healthcare delivery system is so fragmented. Many organizations operate independently — nursing homes, hospitals, radiology, physical therapy — and there's no linkage of data between any of these entities. This fragmented system has created a big waste of healthcare dollars, and the economic incentives aren't aligned with efficiency. The burden of re-engineering the health system is eliminating this fragmentation and creating a seamless, integrated, coordinated system of care. And it is falling on hospitals to take the lead in that role.

Phil Wright: I think one of the biggest challenges for my community hospital is the physician recruitment of specialists. Typically in the past, we've done a good job recruiting in some of the primary care areas, but when you talk about specialties and subspecialties, it gets more complicated. Finding qualified, well-skilled physicians in areas like general surgery, cardiology, gastroenterology, urology and orthopedics can be challenging. Most small communities do not have the volume to support these specialists — especially if they are sole providers. Today's medical students seem to be more interested in their quality of life rather than working long hours and constantly being on-call.

Q: How is your hospital bracing for the Patient Protection and Affordable Care Act, and what specific measures are you taking to reform the community delivery system?

MP: The biggest struggle for us is the uncertainty of what is gong to happen with the Affordable Care Act. We know as an industry we need to change the delivery model, and all hospitals are working on trying to implement the information technology infrastructure that is required to build a better delivery system down the road. We're also working to position ourselves in the community as a wellness provider, not just a provider that fixes you when you're sick.

We started a service line that focuses on outreach to businesses. We help them by bringing physicians or dieticians in to talk to their employees about becoming healthier. We also have implemented a phone number their employees can call if they need to see a physician or need a service at the hospital. We try to make it easier for them to navigate through the health system. That's a huge part of positioning ourselves for affordable care, and that's driving us to keep people healthy. But the reimbursement isn't looking at the model yet. Accountable care is pushing us toward the wellness side, and the payment model has to be changed so it's something that we can actually do.

John Sernulka is CEO of Carroll Hospital Center.JS: What we're seeing is healthcare will be driven by provider accountability. Physicians, hospitals, allied health professionals — all providers are accepting the accountability of treating patients more efficiently, focusing on disease management, coordinating and sharing data so we can identify the top 20 percent of patients that are spending 80 percent of the healthcare dollars, and finding a more coordinated way to manage those patients so they stay well.

Another big step is in population health — we will be paid to manage a certain region, and we're at risk to manage that population with a set amount of dollars, or a capitated payment, no matter where that patient goes for care. We have to be able to monitor those patients even when they are out of state. We call our "accountable care organization" the physician-hospital organization.

PW: A lot still remains to be seen. Like many across the country, we're in a community where we were hit hard by unemployment. We had a major employer, International Paper (that has been the centerpiece of the economy in this area for well over 100 years), shut down in 2010, and that left a huge void — not only for that mill but also a lot of support jobs in the area that supported that mill. It's made for some tough economic times.

As a result, many people have lost jobs and health insurance. The Affordable Care Act could be good. Theoretically, if there's a mandate, all of those people could be insured, and that would at least help my hospital gain partial reimbursement for patients we already care for. On the flip side, we can all agree that the present system for healthcare delivery is hugely expensive, and it remains to be seen where the resources will come from. Ultimately we have to be cost-conscious and more creative in how we deliver care. Looking at things like ACOs and some of the other initiatives focused on quality, safety and efficiency are the things every healthcare organization should be trying to do. We want to give the best possible care but do it as efficiently as we can.

Q: What must community hospitals do to maintain profitability? And what positive trends have you seen in community hospital service lines, payor mixes and other financial metrics?

MP: We are affiliated with LifePoint Hospitals, and LifePoint is a great resource for us to navigate the political, quality and legal issues and getting better pricing on supplies. They are there to help, but they still allow us, as a hospital, to determine what our strategies are because there are different needs in every community.

LifePoint has what we call the "High Five Guiding Principles": delivering high-quality patient care is the top priority, along with supporting physicians, creating an excellent workplace for employees, strengthening the hospital's role in the community and ensuring fiscal responsibility. If we continue to follow these principles and use them to guide our strategy, we can remain profitable.

I mentioned quality, and that's always our number one priority. We've focused on our fall rate, hospital-acquired infections and the percentage of patients who are returning with the same admitting diagnosis within 30 days. We've been able to reduce fall rates by 40 percent by creating committees, meeting weekly and hearing ideas from different people. Another priority is customer service. We've had a significant focus on customer service and have conducted customer service training with our employees. We've seen our HCAHPS scores go up to the 94th percentile nationally on the inpatient side.

We're also always looking to see what the community needs are in the healthcare arena. An example of that was an assessment we did on the need for psychiatric care in our community. We found that there really was no other kind of psychiatric care in northeast Colorado, so we decided to start a geriatric psychiatric unit to meet the needs of the people here and the nursing homes that were begging to have somewhere for patients to go for a short inpatient stay. We opened that unit in 2008, and right now — because of the great need there was, and we are the only one in the area — we pull patients from Nebraska, Kansas and Wyoming. We're expanding that unit from 10 beds to 14 beds to meet the demand we are seeing. It's about always analyzing the needs of the community and finding out what we can do to meet those needs so [patients] don't have to travel long distances for their healthcare.

JS: Some hospitals may be profitable where they don't have a lot of debt or are not building the infrastructure toward accountable care. Here in Maryland where our [reimbursement] rates are tightly regulated, we have to operate within the rates that are set. In Maryland, they actually gave us a 0.3 percent net increase in our rates last year, but we're finding our costs are going up 10 percent. Obviously, over a period of several years, we're going to reach a point where it will be difficult to remain a standalone, independent hospital.

Phil Wright is CEO of Southampton Memorial Hospital.PW: From a hospital standpoint, it's tough when you have to look at service lines and figure out if it's something you can sustain. With decreased reimbursements in certain areas, you are forced into closely monitoring the value of services offered. Honestly, it appears there are very few positive trends in reimbursement for many service lines. Like the saying goes, "volume cures all," and many of them can be successful if managed well. If you can manage Medicare and Medicaid population, and the entire population for that matter, and keep within the confines with some of those guidelines the different payors have for you, then you can still do well as a community hospital. Obviously, if volumes are not trending favorably for the hospital, then expense management is paramount. Flexing staff, payroll management and supply costs are all indicators that cannot be ignored. It's not impossible if these things are managed well.

Additionally, much of it does come down, again, to recruiting and keeping your patients at home instead of choosing a competing hospital down the road. You have to get creative with how you bring some of these physicians to the area and into certain service lines such that it allows them to practice [independently] but still gives them a lifestyle they're looking for.

Q: Can a community hospital stay independent in the future?

MP: I don't think it's impossible, but I think many hospitals are aligning themselves —either actually going out and selling or entering into a management agreement — with a parent company. I'm seeing a lot of hospitals doing that because they need the support.

For example, hospitals around us are struggling with IT implementation. The state of Colorado has tried to help out some of those hospitals. For us, LifePoint has helped us get these systems in place. It's made it one less headache. Other hospitals in our community are aligning with larger entities to get support. I think it's going to be tough for small community hospitals to be out there doing it on their own.

JS: I do think there is going be the opportunity for a number of hospitals to stay independent. For example, sole community hospitals in a rural county where you don't have a lot of hospitals trying to compete for patients in that market — there may be enough volume there to support the costs of running a hospital.

In our case, we're in a suburban/rural community, but we are also a bedroom community for Washington, D.C., and Baltimore, so many of the more urban, larger health systems are placing outposts in our market to take patients out of our community and into their systems to generate more revenue. For organizations like Carroll Hospital Center, each passing year gets more difficult on those independent issues.

Many hospitals have to look at consolidating with health systems. Some benefits include centralizing departments like IT, billing and human resources — you can see 5 to 7 percent in savings fall to the bottom line by joining a system. Other hospitals are going to just operate basically at a 0 percent margin. Some of them may have to make tough decisions. An example may be a service line like obstetrics. For most hospitals, that is a service that loses money, and some hospitals may have to decide to close a service line. There isn't one universal answer to how hospitals are going to keep afloat, but if you're in a highly competitive area, I don't see how an independent hospital can make it.

PW: That's a good question. There's a lot of activity right now within our own parent company, Community Health Systems. There is a lot of acquisition activity out there. These community hospitals are struggling. If you don't have the capital resources and technology aligned with a bigger system, it's easy to get behind, especially in this day of consumerism where the patient has a choice of where they can go. They have easy access to things on Internet — core measures, clinical indicators, patient satisfaction — all of that is at their fingertips now. If you're not at the leading edge in those areas, you'll get left behind.

Q: What should a community hospital executive team focus on if the hospital is to attain the trust of its patients and general community members?

MP: We've focused on customer service. We've done that through formal training, quarterly updates with employees and a focus on certain areas. We're starting to see good customer service become a part of the culture. Employees smile, look patients in the eye and ask if they need help with something. Word of mouth in a small community is the best advertisement in the world.

JS: The number one focus is the quality and experience of the care, beginning all the way from the point they enter your hospital. For example, most patients enter a hospital through the emergency room, so they have to be greeted immediately. The patient has to have a sense when they are going to be taken back to the treatment rooms. If [the rooms] are busy, they will be told when they will be served. An absolute sense of caring and communication is critical. From the time that patient becomes a part of the treatment process, they have to be told who is providing care to them, the skill set of that person — there has to be a hand-holding experience for that patient from the time they enter the system until the time they are discharged.

We are also very transparent with all of our quality outcomes. We participate in every collaborative so that our processes in the hospital are evidence-based. We try to take the art of medicine and make it the science of medicine. If you have 400 physicians, we don't want to have 400 ways of treating a heart attack. We want to have one way of treating that heart attack so the outcomes are consistently high-quality. We also look at how patients score us on Press Ganey and other types of patient satisfaction surveys to improve the patient experience environment. We have a hospital-wide commitment to making things better.

PW: We've tried to really focus on being good at what we do. I stress "what we do" — because we realize we can't be all things to everybody as a small community hospital. But we try to make sure we do those things well. Being nice, having a clean facility and warm food — the things that patients without much clinical knowledge of their condition or illness will care about and understand. Did the physician come in and talk to me? Are the nurses rounding on me consistently? If you can perform those basic functions well and compile a quality medical staff, then patients will be loyal.

Q: How do you and your executive team embrace the physician staff, as well as nurses and other employees, to achieve satisfaction in the workplace?

MP: For physicians and employees, they want to know you'll listen to them. That just comes down to communication. They should feel they can come to the executive team with any issue, and we need to say, "We're here, and we're willing to listen to you." Communication is key.

One of the things I do every six weeks send emails to physicians, the board and employees to give an update of what's going on. There's hospital news as well as some perspective on national issues. These emails have been important in underscoring for staff, physicians and board members how vital they are to our hospital and that they can come talk to us about anything.

JS: [Employed] physicians are on the hospitals' team, so we have the same expectations of them as with our non-physician employees. It changes the relationship. That accountability now becomes aligned with hospitals, and it's more of a team process. It really has elevated the customer experience of that more coordinated team effort.

For our associates, you have to have really strong values hardwired into job performance expectations. Values of service, caring, compassion and increases in pay have to be based on performance. Most hospitals set both personal goals and departmental goals for all employees. Our theme here is, we're taking care of our friends, our neighbors and our family. We are the sole community hospital. We have an obligation, and we have instilled huge accountability, goals and expectations for ourselves.

PW: We have what most hospitals have in regards to satisfaction. We have employee satisfaction surveys and physician surveys that are completed on an annual basis. It's just about being engaged. Satisfaction is not always easy to accomplish, but it also isn't rocket science either.

Communication is the biggest thing. And for employees, it usually comes down to, "Does the organization care about me as a person? Does the hospital communicate with me?" The same goes with physicians. Physicians want to be communicated with, and if there are concerns, they want to feel like you are open to them and are approachable.

This hospital has always experience positive physician relationships and engagement, which keeps them involved with what's going on — and that ultimately leads to better care in the long run. We're in the Tidewater area of Virginia, which encompasses many of the larger, more populated communities like Norfolk, Virginia Beach and Hampton. We've outranked [hospitals in those areas] in patient satisfaction scores for two years now, and we're just a little hospital down the road. It can be done.

Q: What is most important for a community hospital to reach clinical and financial success simultaneously?

That really goes back to our High Five. The clinical side is an absolute must. If you're providing high-quality care, that's what physicians really care about when they treat their patients. Also, having a great working environment is important. It doesn't matter how many patients you have if you don't have a staff to take care of them. The community has to feel it is their hospital, so that's really what we focus on. The High Five are really our guiding principles that help us reach clinical and financial success.

JS: If you do it right the first time, you don't have to spend dollars to fix mistakes. A successful organization is one that is really committed to hardwiring, in all of its processes, an experience that is of the highest-caliber and care that is evidence-based. If all that is done right, you can really deliver the lowest-cost service and, therefore, increase your chance that savings will fall to the bottom line and have those dollars to reinvest. But that's what it's all about — doing it right the first time.

PW: Clinical and financial success comes down to what any other organization wants — and that's good people. If you have the right people in the right positions — managers and directors that view their respective departments as mini-companies of whom they are the CEO — then you should have a well-run organization. That includes case management cooperating and communicating with physicians to keep length of stay down, supply managers dedicated to purchasing quality items at a great price, nurses committed to patients' care as if it were their own family member, administrators that effectively communicate, develop and implement the strategic goals of the organization — it really takes a team approach to make sure all of those entities are being held accountable in order to run an efficient hospital. Every function and responsibility in the hospital is important and necessary. If all those functions come together, it will lead to a positive experience, patients will come back to you, and in most cases, the financial reward will be positive.

More Articles on Hospital Leadership:

Strategic Planning for 50 Years: Q&A With Scottsdale Healthcare CEO Tom Sadvary

From Kitchen to Corner Office: How UC Davis Medical Center CEO Ann Madden Rice Rose Through the Ranks

Turning Challenges Into Opportunities: Q&A With Brigham and Women's Hospital President Dr. Elizabeth Nabel

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