‘No plans to close MSHA hospitals’ says CEO

Nathan Baker • Sep 12, 2013 at 4:12 PM

In the wake of an announcement by competitor Wellmont Health System of plans to close a 70-bed rural hospital in southwest Virginia by the end of the month, Mountain States Health Alliance CEO Dennis Vonderfecht stayed relatively quiet, responding only that none of the Johnson City-based health care provider’s hospitals are slated for closure.

“While the pressures of declining reimbursement and lack of Medicaid expansion make the challenging job of running rural hospitals even more difficult, there are no plans to close any MSHA hospitals,” Vonderfecht stated in a brief email sent by a spokesperson.

Vonderfecht declined to comment further Wednesday regarding the health of the facilities in the Mountain States system, but for months, health care industry officials in Tennessee and Virginia have urged state and federal representatives to strike deals to expand Medicaid coverage to hundreds of thousands of uninsured residents, warning that failure to do so could lead to employee layoffs, service cuts or hospital closures.

“Revenues are going down, which means expenses have to go down — we’re having to shrink our organization,” Vonderfecht said last month after disclosing 200 positions set to be cut from the company by attrition. “If this loss of funding isn’t corrected, it could eventually mean loss of services or the closure of hospitals. It’s a very serious situation.”

A ruling by the U.S. Supreme Court allowing states to choose whether they take the offered federal funding to expand Medicaid coverage under the Affordable Care Act split the country into states willing to participate and those worried that the costs may be too great when the funding level for the program drops to 90 percent.

Twice this year, first in February and again in August, representatives of both Mountain States and Wellmont joined together for a push to find a way to secure the hundreds of millions of dollars that are up in the air while legislatures in both Tennessee and Virginia debate the merits of expanding.

But Dr. Brian Martin, an associate professor in East Tennessee State University’s Department of Public Health, said it was likely a combination of several factors that led to the end of Lee Regional Medical Center, expected by the end of the month.

In addition to the pending loss of federal funding, Wellmont officials pointed to the refusal of doctors in the community to provide on-call coverage and a dwindling number of patients at the 70-bed facility.

“These are a couple of things that would affect any hospital, no matter how large or small it is,” Martin said during a telephone interview. “Here we have a case where the patient population of the community is not using the hospital and the physicians are not willing to provide coverage. The question should be ‘Why is this happening?’”

One plausible cause for the loss of patients could be doctors who direct patients to preferred hospitals.

“If there’s only one facility in the market, then everybody goes there for treatment, but if there are multiple competitive choices, they could send all of their patients to one hospital or the other,” Martin said. “When physicians are looking at one hospital versus another, one may have a fuller range of services, and it just may be easier to send all of their patients to that hospital instead of having them in different places.”

Martin said it’s difficult for an outside analyst to predict if any other nearby hospitals will close without having inside knowledge of their finances.

“If you look at a hospital and ask what would happen if it had significant declines in patients, fewer physicians willing to take call coverage and a decline in reimbursements, with just those variables in play, it would likely lead to closure,” he said. “But how many hospitals in the area fit that? You’d have to go to each one and be granted access to all of their records and staff members.”

One trend that has helped keep small, community hospitals open is being incorporated into larger systems, which provide better financial security and additional resources, Martin said.

“We saw that play out in Unicoi County, where there is strength in a larger system, there are additional resources to draw on, more capital, lower debt and more experience at efficient management,” he said. “But is it the silver bullet? Does it insulate against threat? We now have one case in our market that disproves that.

“I wouldn’t want you to apply that to all of our hospitals and say they should all be worried, but we are in a different era,” he said. “We are in the midst of dynamic changes to health care, and we just have to plan for it the best we can.”

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