Successful independent hospitals have these 3 characteristics, says Marin General Hospital CEO

The total number of healthcare mergers and acquisitions hit a record high in 2018, and dozens of deals have been announced in the first half of this year. Although many hospitals are joining larger systems to navigate the headwinds in today's healthcare environment, remaining independent is the right choice for some hospitals.

Marin General Hospital CEO Lee Domanico knows all about the challenges facing independent hospitals. He led the transfer of Marin General Hospital in Greenbrae, Calif., from a large health system to a freestanding hospital and had to overcome several hurdles along the way. Through his experience, Mr. Domanico has identified three characteristics of successful independent hospitals, and he recently shared them with Becker's Hospital Review.

1. Prime geographic and market location. Mr. Domanico said geographic barriers to competition have been helpful for Marin General.

"In our case, we have the San Francisco Bay to the east, mountains to the west, Golden Gate Bridge to the south, and north is rural and wine country," he said. "It's not easy for competition to enter the market."

He emphasized that "market location," or having market relevance, is equally as important as geographic location. He said being relevant within the healthcare marketplace means that payers need you to be part of their network because you have a base of patients you serve that they want to have as members. "If you're not relevant, then your challenges are pretty steep," Mr. Domanico said.

2. Alternative source of capital and revenue. To be successful in today's healthcare environment, freestanding hospitals need an alternative source of revenue and capital, according to Mr. Domanico. Marin General is a district hospital, giving it a tax base to rely on. That alternative source of capital is helping Marin General build a new hospital, which is slated to open next year. Voters in the Marin Healthcare District approved a $394 million general obligation bond in November 2013 to help rebuild Marin General Hospital, which needed to be reconstructed due to the age of the facility and to meet California's new seismic standards.

As for an alternative revenue stream, Mr. Domanico said freestanding hospitals should focus on philanthropy.

"You need to make yourself indispensable to the local community. Through that relationship you can develop another source of revenue, which is philanthropy and is very important."

3. Partnership oriented. Independent hospitals should seek out partnerships with physicians and other healthcare organizations to gain some of the benefits they may get from joining a larger health system, Mr. Domanico said.

"When you're part of a large health system, you compete with just about everyone because you have a large footprint," he said. "When we came out of that system, the other systems in the area became potential partners with us."

In recent years, Marin General has entered into several partnerships with local healthcare organizations, including clinical partnerships with Stanford (Calif.) Health Care and University of California San Francisco Health.

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