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Management company gives advice but no proposal to hospital

Wednesday, October 5, 2011

If the Fulton County Hospital cannot find a partner or decides to remain an independent hospital, a hospital management company, experienced in running financially distressed hospitals, is an alternative the hospital board has considered.

"You say, 'We need to hire a physician.' Well, its difficult for you to be in a position, right now, to hire a physician, expand services or improve the infrastructure...because you don't have the access to capital," Tom McCall of Quorum Health Resources (QHR) told the board on Sept. 20.

McCall and colleague Cindy Wise came to Salem to assess Fulton County Hospital operations and financial records, in hopes of making a proposal to manage the hospital, and offer solutions to its problems.

"There's some things to change (to cut costs), but there's not enough volume of revenue to put the hospital on the right track in the long run," said Wise.
After discussing their observations on the hospital's situation, the QHR executives reluctantly concluded they could not make a proposal to manage the local hospital, because its fees would only add to the financial problems.

McCall noted the hospital's net assets have dropped dramatically the past few years, and the current $280,000 in estimated net assets cannot begin to address $2 million in debts and hospital needs.

"When you look at the unaudited year (2011), you are kind of upside down on your assets and liabilities. It's not what you want to see," said McCall.

One big problem - financial losses at the ill fated Family Medical Clinic - ended with its closing. But, according to McCall, the hospital-run ambulance service remains a big loser.

"I don't think it's fair to say you ought to sell the ambulance service, you ought to close the ambulance service, you ought to give it away, but you definitely need to revisit that. That was one of the glaring areas of financial loss for you."

McCall also suggested the hospital could cut spending or increase its bottom line by creating a central purchasing office, reviewing staffing needs and current wage programs -QHR noted the hospital currently has 141 full time employees - and renegotiate unfavorable reimbursement contracts with private insurance companies.

QHR found the hospital's biggest problem is an alarming drop in the number of patients over the past four years.

"We were told that the community wants a full service hospital, but it's pretty evident that a lot of primary care that should be staying here, it's going to other communities," said McCall, who added the hospital is no where near the 50 to 65 percent share of area patients it should be receiving.

The company suggested hiring a Medicaid eligibility worker, an employee who would work with patients while they were in the hospital, to get certified for Medicaid or other insurance reimbursement. Medicaid will pay half of the salary cost.

"I heard over and over you have a high uninsured population and, by not having a worker on site, you are probably losing a lot of potential revenue," said McCall.

Dr. Daniel Valach of Mountain Home, who has opened a primary care practice in Salem, and Dr. Adam Gray of Melbourne, who has been working in the emergency room, were seen as two possible revenue generators, because they have specialized skills which could lead to more admissions.

McCall said he was "stepping on toes," as he discussed another problem - a lack of agreement over short term and long term hospital operations.

"You've got this issue that you're dealing with right now on what your future is going to be, and what we've seen and heard is, you've got individuals and factions with differing opinions. The board is not united," said McCall, adding the medical staff "feels a little excluded" from the process, as do managers.

McCall said the board makes final decisions, but needs to invite the input of other stakeholders in the hospital.

He also called on the board to work harder to develop a strategic plan for the future, which will be needed, whether it remains independent or takes on a partner.

As it considers lease proposals from other hospitals, QHR suggested it needed to hire an experienced health care attorney to help it negotiate.

In addition, the management company said the board needs to know exactly what services it expects a partner to continue, what new services it would like to see added, a guarantee to keep the hospital open for a certain period of time and a commitment from a partner to make financial contributions to stabilize the hospital.

McCall said the board should keep working and not panic.

"Even though I've given you some bad news, you're not in a position that you need to hand your keys over to somebody," said McCall.

Board members asked numerous questions of the QHR executives and thanked them for spending so much time and giving so much advice, since the company was not charging the hospital for the assessment it received.

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