Turning Community Hospitals Into "Focus Factories"

Stand-alone community hospitals face a number of threats to their sustainability, namely the lack of a big health system to increase economies of scale. However, just because these organizations will be tested in the next few years doesn't mean their only option is to merge or perish. Raji Kumar, president and CEO of Dallas Medical Center, an independent acute-care hospital located in the North Dallas suburb of Farmers Branch, Texas, believes stand-alone hospitals can flourish, but they must fundamentally alter their business model. Instead of "being everything to everyone" they must instead transition into what she calls "focus factories" — facilities that concentrate on a few key specialties and offer services unique to the community.

Dallas Medical Center

Ms. Kumar was recruited to Dallas Medical Center in April 2010 from physician-owned Oakland Regional Hospital in Southfield, Mich., where she served as CEO. Ms. Kumar was brought on by Physician Synergy Group, which had been selected to manage the hospital, to help turnaround the ailing facility. The 155-bed hospital, which was previously named RHD Memorial Medical Center and was once operated by Tenet under a long-term lease, was later operated by Hospital Partners of America, which had planned to enlist physician partners in ownership. However, the syndication deal fell apart and the hospital's owner — a local hospital authority — decided to operate the facility, with the help of a management company. Nine months into this relationship, the hospital authority was at the verge of bankruptcy when a few of the physicians on staff asked PSG to keep the hospital open. PSG and Dallas SV Health, a privately held company stepped forward to purchase the hospital.

The turnaround of the facility, which had been losing roughly $2 million a month, began with reducing operating expenses through cost cutting measures and strategically assessing the organization's potential strengths that could be played upon to attract additional physicians and patients.

"Everything was in chaos," says Ms. Kumar. "In order to do a turnaround, there is no sequential methodology. Everything happens parallel."

How improvements were achieved

Initial operational changes included cutting several middle management positions and changing vendors and purchasing organizations — moves typical in improving a hospital's operations.

Ms. Kumar also knew it was important to reassure the employees, physicians and the community about the hospital's sustainability. "I was very visible," she says. "People are not used to seeing the CEO. At first when I started doing rounds, employees thought something was wrong. But, they eventually started warming up. The presence of leadership is very important when people are losing faith."

More strategic changes also made a big impact on the turn around, according to Ms. Kumar, including focusing on specific service lines, recruiting new physicians and implementing a new health information system.

In order to gain a competitive edge, hospital leaders assessed the hospital's services lines, determining which to close and which to focus on. "We had to figure out who we were and who we were not," she says. "We're not trying to do cardiac surgery or deliv babies, which are all service lines the hospital once had. Instead, we've focused on occupational medicine, vascular diseases and orthopedics — service line strategies that are unique to us."

The hospital's occupational medical program was one of the first to attract attention. The hospital contracted with all workers' compensation networks in the area and began letting physicians know virtually all workers' comp cases could be performed in-network at the hospital. Because in-network facilities can be challenging to find in Texas, the hospital's status was a huge draw for physicians, many of whom began to send nearly all of their workers' comp patients to the facility.

The hospital also sought to recruit new physicians, and it succeeded in spades, attracting 74 new physicians to the hospital since April 2010. This feat was achieved through establishing a physician-oriented culture and investing in new equipment and upgrades. "We are very flexible with the surgeons," says Ms. Kumar. "We treat our surgical suites with a surgical-center mentality. The whole culture changed to one that is physician friendly."

The hospital's location, right off the Lyndon B. Johnson freeway, was also attractive to physicians — a characteristic the hospital took advantage of by offering physicians the opportunity to open satellite offices on its campus.

Additionally, the hospital implanted a new health information management system, which is expected to produce a savings of $1.2 million per year by increasing efficiencies in admissions, billing and record keeping functions.

These aggregate changes helped the hospital move from the red to the black, but there is still work to be done, says Ms. Kumar. In 2012, leadership will focus on improving inpatient service lines — it focused primarily on outpatient enhancements during the first two years — and hopes to receive stroke and chest pain program accreditation. The move is intended to increase the hospital's inpatient census, which currently sits below capacity.

"Our biggest challenge is we are a standalone [facility] so we have to think out of box and have our own specialties," she says. "The future goal of DMC is to be able to exist as a standalone but join with other standalones in the community to form a stronger network." Ms. Kumar says she is particularly prioritizing relationships with independent primary care providers and standalone ERs and urgent care centers.

In addition to expanding relationships with other providers, Dallas Medical Center has thought outside the box by developing relationships directly with employers. Currently, the hospital works a company that providers add-on health coverage to employers for bundled-payment elective procedures, which can save the employers 30-50 percent per procedure, says Ms. Kumar. Dallas Medical Center provides bundled packages for elective procedures including the facility, physician and anesthesiology fees at a significantly lower cost.
While Ms. Kumar admits the road ahead for independent hospitals like Dallas Medical Center will be challenging, she contends that they can be successful. "What we've done with DMC can help other small community hospitals facing the same issue," she says. "In my opinion, these hospitals have to focus. We can no longer be everything to everybody. Develop on strengths, run efficiently and live within your means."

More Articles on Community Hospitals:

Two Sides of the Coin: The Good and the Bad of Community Hospital Finances
8 Success Factors for Independent Community Hospitals

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