Becker's Hospital Review

Executive Briefing: Community Hospital Affiliation pital Corporation owns, sults with hospitals through anizations — CHC Hospitals, and CHC ContinueCare, mmon purpose of preserving mmunity hospitals. 31 Sponsored by: HELP WHERE HOSPITALS NEED IT. CHC Community Hospital Corporation 972.943.6400 CommunityHospitalCorp.com Community Hospitals: Why Their Futures Are More Flexible Than You Think By Bob Herman D avid Parmer is what he and many others would call an experienced U.S. hospital system executive. He has been with Baptist Hospitals of Southeast Texas for 22 years, and he currently serves as CEO of the health system's Beaumont campus, a 508-bed community hospital. Over those 22 years, Mr. Parmer has seen almost every type of community hospital affiliation possible. BHSET used to be a freestanding system, then tried an integrated delivery system model with Dallas-based Tenet Healthcare and eventually merged, and de-merged, with Houston-based Memorial Hermann Healthcare System. Today, BHSET is owned by Community Hospital Corp., which operates both of BHSET's hospitals. The spectrum of transactions Mike Williams, president and CEO of Community Hospital Corp., has been in the healthcare industry just as long as Mr. Parmer. Previously, he served as president of the former Baptist Hospital in Knoxville, Tenn., COO of Children's Medical Center of Dallas and vice president of Baylor University Medical Center, also in Dallas. He agrees there is no silver bullet for every hospital's management situation. Before hospitals consider a transaction of some sort, Mr. Williams says the entire spectrum of options must be fleshed out. The following gives a general overview of the basic types of affiliations hospitals are pursuing today. 5 Considers Before Affiliation It's been a long journey for BHST to reach its current position, and many community hospitals might find themselves in similar positions — unsure of their local situation and somewhat apprehensive as to how healthcare reform will play out. The current hospital merger and acquisition market has indicated that consolidation is here to stay. Although hospital M&A was somewhat down in the first quarter of 2013, the number of smaller hospitals becoming part of larger systems over the past four years has signaled a major shift in industry mindset. This M&A activity has been driven by several forces — declines in reimbursement, high amounts of uninsured patients and charity care, an increase in the cost of care delivery and general healthcare inefficiencies. • ission – Would the affiliation support and/ M or enhance the hospital's mission? • nderstanding from the board – U Would the process be transparent? • hysician alignment – Would the P affiliation improve integration? • perational assessment – Would O financial and operational performance improve as a result of the affiliation? • eadiness for healthcare reform – R Would the affiliation help the hospital provide higher quality care at a lower cost? However, Mr. Parmer says community hospitals of all geographies and sizes will play a role in healthcare reform over the next five to 10 years, and those organizations must look at all of their options carefully before moving to make a deal. "Hospitals should be looking at all types of arrangements," Mr. Parmer says. "There is not one size that fits everyone. We're not certain that all the bricks-and-mortar mergers make much sense." Total independence. Sometimes the best transaction is one not made at all, as full independence represents the left extreme of this affiliation spectrum, Mr. Williams says. Despite the rise of healthcare consolidation, there are many hospitals and academic medical centers that have the financial wherewithal, volumes, resources, staff and support to forge ahead on their own. "Community hospitals have a greater opportunity for success based upon three factors," Mr. Williams says. "One, if they are geographically essential. Two, if they are clinically strong. And three, if they are operationally efficient." "Healthcare is local," Mr. Parmer of Baptist Hospitals of Southeast Texas adds. "Those individuals who make those decisions know what is best for their organizations, and I don't necessarily agree that [consolidation] is something everyone has to do." Clinical affiliation. Just to the right of total independence is some type of clinical affiliation. For example, Jamestown (N.D.) Regional Medical Center, a 25-bed critical access hospital, decided in April to pursue a clinical and technology-based affiliation with Fargo, N.D.-based Sanford Health. The deal allows JRMC's local board to retain governing powers, but JRMC

• Cover