Becker's Hospital Review

10 Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 will be very market dependent. For example, according to G. Richard Olds, MD, dean of the new medical school at the University of California, Riverside (a school that was founded in part to address the region's physician shortage), "We have a shortage of every kind of doctor, except for plastic surgeons and dermatologists. . . . We'll have a 5,000 physician shortage in 10 years, no matter what anybody does."2 e. Physician referrals/leakage As reimbursement becomes tighter for many hospitals, we see many more health systems very closely examine what they refer to as "leakage." In essence, they examine statistics to see how many cases from employed and affiliated physicians are going to other systems. This is a very substantial issue from a financial perspective but also involves significant legal questions as to what can and cannot be required of physicians in connection with referral patterns. 2. Sustainability of independent hospitals Many hospitals are examining whether they will be able to survive as independent entities over the next several years. A couple of studies have looked at the key factors leading to hospital bankruptcies and the key factors that can be used to assess whether a hospital is in a position to survive independently or not. One study by Amy Yarbrough Landry and Robert J. Landry published in the Journal of Healthcare Management, for example, shows that the three biggest causes of financial instability for a hospital and which may potentially lead to bankruptcy are mismanagement, increased competition and significant reimbursement changes.3 The article also notes that "bankrupt hospitals are smaller than their competitors. They are also less likely to belong to a system and more likely to be investor-owned." Another study by Kurt Salmon and Associates explained six factors which can be used to help assess whether a hospital can survive independently. These include: 1. Does it have geographic barriers? 2. What does its payor mix look like — is it positive or negative? 3. Does it have a substantial physician alignment strategy, or is it highly dependent on free agent physicians? 4. What does its asset base look like? Does it need to make significant capital investments? Does it need to make significant renovations or build a replacement hospital? Does it have other significant obligations ahead that it can't fund? 5. What is its cost structure? Is it locked into long-term pension liabili ties? Long-term lease rates? Or other long-term fixed costs that are not changeable? 6. Does it have a high standard quality of care? Alternatively, is it the type of hospital that a board member would not take his or her family to? These are some of the core questions that one examines in trying to assess whether a hospital must look for a partner. 3. Accountable care organizations ACO formation is growing, but it is not yet clear how many beneficiaries ACOs will actually serve. The majority of ACO development has come from hospitals, as opposed to physician groups or payors. According to a study by Leavitt Partners, 60 percent of ACOs are sponsored by hospitals, 23 percent are sponsored by physician groups and 16 percent are sponsored by health plans (see graph on next page). HFAP 1039_Layout 1 10/4/11 4:05 PM Page 1 True Partnerships. " Our switch to HFAP was seamless. We began with a collegial and thorough survey process focused on quality and patient safety. Our relationship continues to be a cost-effective and educational partnership. " John M. Kosanovich, MD, MBA VPMA / Network Development Covenant HealthCare Saginaw, Michigan www.hfap.org info@hfap.org PUBLICATION: Becker's Hospital Review SIZE: Half Page 4/color APPEARANCE: 2011 Norcom Inc. 847-948-7762 theteam@norcomdesign.com

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