Strategic Partnerships Mergers and Acquisitions

An Independent Hospital Can Succeed—We Are Proving It

December 12, 2017 4:02 pm

It has become conventional wisdom that stand-alone hospitals cannot succeed in today’s challenging healthcare environment. While that wisdom holds for many hospitals, our experience at Marin General Hospital (MGH) shows that remaining independent can be the right choice, depending on certain variables.

MGH was managed by a major health system through a long-term contract for many years before returning to operating as an independent hospital in 2010. After the transition, several hurdles lay ahead:

  • Achieving financial stability, especially without the efficiencies and economies of scale that come from being part of a system
  • Affording and acquiring the technology needed to provide state-of-the-art care
  • Establishing a strong position within the local healthcare landscape
  • Raising $500 million in funding that was needed to rebuild an aging facility and meet California’s strict earthquake-safety building standards by the 2030 deadline

However difficult the challenges seemed, we recognized that we had several advantages, and we used those as the basis of both our short- and long-term strategic planning.

Our first advantage is our location in Marin County, north of San Francisco. Because we are surrounded by mountains, the Napa Valley, San Francisco Bay, and the Pacific Ocean, we are a fairly defined community—and Marin General is one of only two major hospitals serving the community. Residents have access to nearby academic medical centers, including UCSF Medical Center and Stanford Health Care, but seeking services at those facilities on a regular basis is challenging because it requires a trip across the Golden Gate Bridge or down the San Francisco Peninsula.

Our second advantage is our status as a district hospital, owned by the Marin Healthcare District. (Healthcare districts in California are public entities that fill distinct gaps in local health care services—from wellness and prevention to emergency rooms and long-term care—while remaining accountable to their communities.) This status enabled us to use general obligation (GO) bonds to secure part of the funding that we need to meet earthquake-safety building standards required by SB 1953.

A third advantage came into sharper focus once we decided to operate as a stand-alone hospital. Our community, our physicians, and other area healthcare providers were strongly motivated to help the hospital succeed. Independence and local control were seen as positives that allowed the hospital to deliver the best health care possible. 

The faith in our independence was borne out when the community solidly approved (by a vote of 68 percent) $394 million in GO bonds. Today we are on track to open a fully modern, earthquake-safe hospital in 2020.

In addition to community support, partnerships are proving crucial to our success. Those include:

  • Professional partnerships with physicians in several specialties and ancillary services
  • Collaborations with UCSF Health and Stanford Health Care to extend our specialty care services so that our community has access to the sophisticated care that is typically only available at academic medical centers
  • A $90 million, 15-year partnership with Netherlands-based Royal Philips, which will provide the technology and the IT expertise we need as we prepare to move into the new hospital

With seven years of successful operation under our belt, we are feeling more and more confident that the decision to be an independent hospital was a good one. Recent news collaborates that impression. Fitch Ratings assigned an AAA/stable rating to the GO bonds that voters approved in 2013. And the hospital itself was given an A-/stable rating, reflecting what Fitch called “solid financial performance, good market position, fundraising ability, strong community support and low debt burden.”

Becoming or staying independent may not be the best solution in all cases. The hurdles are unique to each hospital and each community. But partnerships and collaboration are supporting Marin General Hospital’s success in remaining independent—and the approach is worth a serious look when a hospital plans for its future.

Lee Domanico is CEO, Marin General Hospital, Greenbrae, Calif.

Read more posts from leaders of providers and health plans on the Leadership Blog.


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