The challenges of remaining independent: 4 community hospital leaders weigh in

Despite the rapid rate at which hospitals and health systems are merging and community hospitals are closing, some community institutions have been able to remain independent and successful.

At the Becker's Hospital Review 4th Annual CEO Roundtable + CFO/CIO Roundtable, panelists from four provider organizations discussed their thoughts on the challenges of remaining independent on a long-term basis.

Highlighted below are some of the main takeaways from each panelist.

On the threats and challenges of staying independent

1. Paul Stewart, president and CEO of Klamath Falls, Ore.-based Sky Lakes Medical Center, said his 176-bed organization faces the challenge of provider recruitment, and maintaining the primary care base has been critical to his organization's stability.

2. Eric Barber is president and CEO of Hastings, Neb.-based Mary Lanning Healthcare, which includes 142-bed Mary Lanning Memorial Hospital. He echoed Mr. Stewart, saying, "There's a real challenge with retaining physician specialists, which makes it much more difficult to maintain a level of accountability that I think is absolutely required to provide great care."

3. Phil Kambic is president and CEO of Kankakee, Ill.-based Riverside Health Care, which is made up of five entities, including 325-bed Riverside Medical Center. He believes Riverside has been aggressive from a quality standpoint and in making itself relevant. The biggest challenge in the next five years, he said, is going to center on whether the system remains independent or looks for an affiliation partner. He also noted insurance mergers will be important because if Riverside lost a major contract, it would be "a big game changer."

On maintaining relationships with larger systems and competitors

4. Suzanne Richards, RN, CEO of Santa Ana, Calif.-based Integrated Healthcare Holdings, believes it's important to maintain relationships with other systems. "The independent hospitals [in California] are remaining independent. But they're forming associations or affiliations with bigger systems because — besides physicians, besides payers — I think the biggest cost to an independent hospital in my opinion is the supplies."

5. Mr. Stewart said his organization recently celebrated 50 years of independence, and he believes there would be community reaction to an affiliation with another system. "Still, we have a vision of creating healthier communities. If we can't do so with our assets and resources, we need to be ready to talk with other systems and should be prepared to do that," he added.

6. Although in need of more physicians, Mr. Barber doesn't believe the issue of physician recruiting alone would lead Mary Lanning Healthcare to seek partnership with a larger organization. Instead, he believes access to capital and the ability to invest in hospital infrastructure to provide a great patient care experience are the first things that make hospitals look around for partners.

7. Mr. Kambic said maintaining cordiality with other organizations is about keeping the door open. He said he would like to create partnerships with other organizations without going forward into an asset merger. "If there was a compelling business proposition to go into an asset merger, then by all means, I would look at it. I would be open to it. But I haven't found that," he added.

On contracting with payers

8. Mr. Barber estimated Mary Lanning Healthcare can fly under the radar with fee-for-service contracts for three to five more years. "The evolution will move toward fee schedules similar to now, but we will be looking at appropriate utilization more than changing our fee structure," he said.

9. Ms. Richards said her health system, which is in the process of acquiring three more hospitals, could sustain with its current five hospitals. She believes the size of a small community hospital won't help with payer contracts unless the organization is geographically isolated. Instead, she said, it's about the services the hospital offers.

On capital investments and HIT

10. Mr. Stewart's organization recently invested in an Epic EHR. Next, it will invest in social services transformation. It has purchased property and has a sponsor bringing in social service agencies.

11. Mr. Barber said Mary Lanning Healthcare is very mindful of investments and is in the process of transitioning to Epic. His system has also been invited to enter into a joint venture with the medical staff of a competitor. The competitor is looking for $3 million to $5 million to invest. Mr. Barber said the offer makes sense for the Mary Lanning Healthcare, but it is also looking at the potential financial impact. "We're very cautious about how we're going to invest our money," he said.

12. Mr. Kambic echoed Mr. Barber's sentiments, saying it's important for hospitals to be cautious and make the right investments. Riverside is also transitioning to Epic, and is slated to go live with the system Jan. 1.

13. Ms. Richards said IT is the most important investment for her organization and second is putting dollars into recruiting more physicians.

On where the organization will be in 10 years

14. Mr. Stewart believes his system will be involved in numerous collaborative relationships, but still be locally controlled.

15. Mr. Barber believes his organization "will be less independent than we are today."

16. "I don't see us being acquired, but I do see us affiliating. We do have good payers with cost-effective contracts," Ms. Richards said.

17. Mr. Kambic said he is certain Riverside will be part of a larger system.

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