Was hospital sale predestined?
Brad Hicks and Madison Mathews
Sep 29, 2012 at 10:51 PM
ERWIN — Not everyone considers Mountain States Health Alliance’s bid to acquire Unicoi County Memorial Hospital predestined, but many agree smaller community hospitals like UCMH find it difficult to operate without exploring partnerships with or acquisitions by health-care systems.
Unicoi County Mayor Greg Lynch said many in the county had “heard through the grapevine” for years that UCMH was experiencing significant financial losses. He thinks UCMH’s acquisition by a larger system must happen for Unicoi County to continue to have a health-care facility.
“It’s something that’s kind of inevitable,” Lynch said. “It’s hard for these small hospitals like this to maintain themselves unless they have some crackshot surgeon and some doctors that are specific to their hospital that people are attracted to ... I know we’ve had some excellent surgeons.
“A lot of people felt safer at thishospital because of the low occurrences of staph infections and things like that, so this hospital has done a good job with what they had. Of course, doing a good job, getting paid and paying the bills, sometimes, you get in trouble there because the better job you do, the more it costs.”
Last week, MSHA and UCMH officials announced that the UCMH Board of Control planned a public meeting this Thursday to discuss and vote on a letter of intent from the Johnson City-based health system to acquire the financially struggling community hospital.
“We considered it and had to make the best decision we could for the health benefits of the citizens of the county,” Erwin Vice-Mayor and UCMH Board of Control Chairman Glenn Tilson said last week.
Unicoi County resident George Yarber said the acquisition could be beneficial, and he believes UCMH’s merger with a health-care system had to happen to maintain the level of care a hospital brings in Unicoi County. But he would also like to see a plan from MSHA on how it intends to turn UCMH’s fortunes around.
“You have to wonder how are they going to turn it around,” Yarber said. “How are are they going to make it profitable and make it work?”
Yarber said the economic climate may have played a key role in UCMH’s decision to seek proposals. He said many in the community may not have utilized the hospital because they lack financial means or healthcare benefits. So he thinks Unicoi County officials need to take steps to bolster the local economy, which would help support a local healthcare facility.
“I think, economically, for the hospital to exist and even for Mountain States to make it, there’s going to have to be an economic boost in the county some way,” Yarber said. “You’re going to have to see more jobs, more revenue coming in, more benefits for people, more insurance coverage so people can afford the healthcare that they need.”
While perhaps not inevitable, the possible acquisition was not unexpected news, as more and more small hospitals are finding it difficult to stay afloat, according to Dr. Brian Martin, associate professor and MPH coordinator for the Department of Health Services Management & Policy at East Tennessee State University’s College of Public Health.
“I think Unicoi County Memorial Hospital has really tried to do the right thing for their community in maintaining their independence and keep their doors open. They thought they’d have better control in being independent and be able to respond a little better to their community’s needs,” he said.
Such mergers have increased since the 1980s, and hospital closings have had a dramatic impact on the communities affected, not only in access to care but also because those hospitals were often strong economic contributors and major sources of employment.
Martin said merging with a system like Mountain States is a better option than just closing the hospital.
“It’s not only the access to healthcare that would go away but also the potential negative consequences for layoffs and unemployment,” Martin said. “Those are two big impacts for a hospital in most county markets, and this one included.”
MSHA’s bid is not the first time a larger system has expressed interest in Unicoi County’s hospital. In April 2008, Wellmont Health System reached out to county leaders. But within a month, talks ended. In an Aug. 7, 2008, letter addressed to the mayors of Unicoi County and the towns of Unicoi and Erwin, Wellmont reported it had found insufficient support with the the county to continue discussions. The letter also stated Wellmont research had found “some resistance” from Unicoi County residents regarding the prospect of relocating the hospital to the county’s north end.
Of late, UCMH’s financial standing and its fate have been the subject of much community speculation. In May, the Erwin Board of Mayor and Aldermen voted to loan UCMH $800,000 toward operational expenses. At the time, former hospital CEO Jim Pate said the economic climate, ever-decreasing reimbursements from insurance providers, under-utilization of the hospital, and government-mandated equipment upgrades contributed to the hospital’s financial struggles.
In July, the UCMH Board of Control voted to hire Spectrum Health Partners to conduct an operational assessment at the hospital and hired Spectrum’s Jete Edmisson to serve as interim consultant CEO following Pate’s resignation earlier in the month. The consulting firm was a stipulation of the Erwin loan.
On Wednesday, Erwin Town Recorder Randy Trivette said the consultant’s assessment indicated that UCMH should look to partner with a larger healthcare system.
“Based on what our involvement’s been and seeing what the trends are across the country and seeing what health care reform is pushing our country toward, it was going to be nearly impossible for Unicoi County Memorial Hospital to stand on its own,” Trivette said Wednesday after MSHA’s bid was announced. “It needed a partner. It needed someone larger that could provide the needed services and provide those at good, quality, efficient cost.”
MSHA’s letter outlined commitments it would make to the hospital and the community should the UCMH Board of Control approve the letter of intent. MSHA’s pledges include assumption of UCMH’s more than $6 million in financial obligations and debt, the construction of a new acute care hospital in Erwin following a strategic planning effort to assess community needs, retention of current UCMH staff, a contribution of $1 million to be split between the town of Erwin and Unicoi County after the transaction’s closing, and the issuance of a $1.5 million line of credit for operational expenses between the execution of the letter of intent and the closing of the acquisition transaction.
Martin said those commitments are an indicators that UCMHs financial strain is pretty severe and that the healthcare system is dedicated to keeping a hospital in the community.
“To put that kind of capital investment into a new facility in the next five years is a significant contribution to that community as well,” he said.
Wellmont officials reported that the system also submitted a new proposal to the UCMH Board of Control. Lynch said while he would like to see what Wellmont offered, the MSHA acquisition could benefit the community.
“If Mountain States comes in here and they do everything they say they’re going to do and there’s something in writing that says if they don’t we can go back to the table, then I think this deal will be all right,” Lynch said.
Lynch also said while he understands negotiations can be sensitive, he would have liked to have seen more transparency in the proceedings leading up to the UCMH board’s consideration of the letter of intent. He said UCMH employees and many county officials were “in the dark.”
“People are just wanting to know how this deal came about — what was promised,” Lynch said. “And they want to know about Mountain States. How are they financially? Are they strong, because they’re building everywhere and, when you do that, you spread yourself thin.”
County resident Sheila Tilson said she opposes the acquisition. She voiced concern that the facility MSHA has committed to construct may consist only of an emergency room and nursing home area.
“If Mountain States takes it over and then you’ve got an emergency room, then it’s more of a band-aid station,” she said.
Lucas Jones, also a county resident, said UCMH does good work and he would not like to see it lose its community hospital status.
“I like it being locally owned,” he said. “It’s one of the last ones in Tennessee that’s locally owned.”
But Martin said some of the benefits of joining a larger system include having better access to capital, access to expertise, access to standards and protocols, a greater level of resources, maintaining managed care contracts, and reducing costs across the board. Given the tough environment hospitals of any size face and the level of uncertainty surrounding health care, Martin said, the possible merger is not all that surprising.
“Trying to plan for even a short-term one to two year future is dicey right now, so partnering with someone that’s strong is a good option, I think in this case,” Martin said.