June 18—When asked about the role of stand-alone hospitals in today’s merger-hungry waters, Elmhurst Memorial Healthcare CFO James Doyle, FHFMA, CPA, drew laughs from a crowded ANI session hall with his tongue-in-cheek remark: “We are the chum [ground bait] for the big systems. We are the competition that remains.” 

Doyle was one of four CFOs of independent hospitals to share their experiences and perspectives during Monday’s moderated ANI discussion on, “To Merge or Not to Merge: Perspectives from HFMA’s Value Project Stand-Alone Hospitals.” The four hospitals all participated in the Value Project Phase 2

The other three CFOs were from Minnesota’s Winona Health, Colorado’s Platte Valley Medical Center, and northern California’s Enloe Medical Center. 

Benefits of Independence

Independent hospitals tend to offer patients two things that large health systems or academic medical centers do not, said Doyle: convenience and a warmer touch. “To the extent that you can get across that the medical capacity is equivalent, then local access is valued,” Doyle said. 

Winona’s CFO Michael Allen, FHFMA, CPA, adds agility and innovation to the qualities that allow stand-alone hospitals to compete. “We are able to do thing faster than most organizations. For example, we are involved in a health information exchange project, and we are ahead of others on that. Meaningful use, too, we are ahead. 

“We [Winona] are not are not innovative in a research kind of way, or in the Mayos-of-the-world kind of way,” he said. “But we are innovative in how we interact with our patients.” For example, Winona is piloting a population health approach that enlists students who are working toward nursing and other healthcare degrees on care teams who visit patients in their homes. “This is close to a zero-cost program,” Allen said. 

Evaluating Their Ability to Compete

The four CFOs pointed to a number of challenges that stand-alone hospitals face, including physician recruitment and value-based payer contracts. “I think it is possible for community hospitals to provide value and compete on the quality-cost equation,” said Platte Valley’s vice president, finance Harold Dupper, CHFP, vice president, finance, Platte Valley Medical Center, Brighton, Colo. “However, if you don’t have the size, it is a little difficult to translate and influence your participation in some of the commercial products. The challenge is having enough size and clout to influence the way that commercial payers structure their products to recognize a hospital that is on the fringe of the market.” 

Colorado is gearing up to launch its health insurance marketplace on Oct. 1, and payers are already putting together narrow network options, Dupper said. “We’re not sure how the small networks will develop yet or how we will fit into that.” 

Of the four hospitals represented at the ANI session, only Elmhurst Memorial is currently in merger mode. The suburban Chicago facility is two weeks away from finalizing a merger with another local health system, Edward Hospital and Health Services. 

The reasons why Elmhurst Memorial decided to merge include an increasingly consolidated Chicago area marketplace. However, competition for payer contracts was another key reason. “To solve the insurance company problem, we needed to get bigger,” Doyle said. 

Currently, Enloe Medical Center is “dabbling with affiliations” to ensure patients have access to needed clinical services, says Myron Machula, CFO. For instance, when Enloe’s cancer center can’t handle certain types of treatment, the patients are transported to an affiliated health system. 

“I don’t believe where we are, we can avoid looking at other kinds of associations short of full mergers,” said Machula. “So we’ve reached out tentatively. At some point, we may have to decide if these associations should become something larger. Having the experience over time can help us make a better decision if and when those decisions arise.” 

Remaining independent in today’s market requires “executing everything really well,” says Allen. “We have to do everything that larger organizations do—such as achieve high quality and good financial numbers—but we have be slightly quicker and slightly better.”

Publication Date: Tuesday, June 18, 2013