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To Go it Alone: Should Hospitals Strive to Remain Independent?

At the Becker's Hospital Review Annual Meeting in Chicago on May 10, Sally Nelson, former CEO of Huntsville (Texas) Memorial Hospital, Alan Channing, president and CEO of Sinai Health System in Chicago, and W. Terry Howell, EdD., senior vice president of MedAssets, discussed strategies to succeed as an independent hospital. The session was moderated by David Jarrard, president and CEO of Jarrard Phillips Cate & Hancock in Brentwood, Tenn.

Mr. Channing leads Sinai Health System, which is located in Chicago's West Side and has a 60 percent Medicaid payor mix. The 421-bed Mount Sinai Hospital in Chicago was independent up until its recent acquisition of Holy Cross Hospital, also in Chicago, in September 2012. Ms. Nelson's former hospital is located approximately 30 miles north of Houston. It is a non-profit community hospital with 86 beds.

Mr. Jarrard: Can a hospital remain independent?

Ms. Nelson:
I really think I want to say no, after seeing what we're [went] through, but I still cling to yes, you can — but it depends on your market. We were in such a great market for such a good time, but then management went to sleep at the wheel. When the state changed their contract to UnitedHealthcare, I think everybody was surprised. Eventually, it'll get harder and harder to [remain independent].

Mr. Channing: I heard one of my friends and colleagues say — and he's from New York so he's more cynical [laughter] — but I would argue that even if we're a freestanding entity today, we're not independent. All the talks we've heard over last day and a half [have been] about how to come together with — our medical staffs and communities. So that "independent" label is probably a misnomer in this conversation. The question is, "Can we do it by ourselves without another partner?" I would venture to say every one of us is partnering with a payor, maybe not as comfortably as we'd like, and certainly having talks with other providers.

Dr. Howell:
I don't know the answer to the question, and I think there are different answers for different organizations across the country. What I do know is that we need to wake up, and I think the payment situation — this is not the first industry that's happened to. I think we're well-served to look at other industries and disruptive business models. The problem used to have to go to the solution. So when they made the first phonograph, they had to go to a music lab somewhere and listen. It used to be we all had to go to a hospital, but in the past few years, we've seen outward migration of that, [with care going] into the homes and elsewhere. The other thing is — I think because so many of us are in the business, it's hard for us to see — but we have to change. One thing to think about is that we have several businesses all piled together in one house. One is the business of prevention — nobody has ever paid us for that and I wish they would.

Mr. Jarrard:
How do you know it's time to partner?

Ms. Nelson: We saw the capital requirements of IT, managed care contracts and facility capital needs. Those are big things. And the community was pushing for capital improvements, too.

Mr. Channing: Our circumstance was a little bit different. The hospital we acquired is about five miles south of us. We have faith-based roots at Sinai, and Holy Cross is faith-based, too. It is significant alignment and a big cultural mix — one is at the staff employee level, and the other is at the physician and medical staff level. We have to think about both of those. But Holy Cross went through a failed sale to an investor-owned company and decided to release an RFP years later. Because of geography, we said maybe we should take a serious look at this. We weren't very aggressive in our bid, so I was shocked when the nuns called and said, "We want to talk." The nuns said we love your mission, and every conversation kept coming back to that.

More Articles on Hospital Partnerships:

4 Features to Flaunt to Attract an Acquirer
How to Choose Partnership Options, Involvement Levels
10 Necessary Points for a Due Diligence Checklist

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