Hospital weighs options

Faced with a magnitude of challenges that federal healthcare reform is bringing to independent hospitals, Twin County Regional Hospital is using a national consultant to determine how the hospital can best serve the community — either by remaining independent or aligning with a hospital system.

Twin County Regional Hospital's board of directors will spend a year gathering information and hearing ideas from consultants and the community before deciding what the facility's future holds.

Buy this photo

TCRH board members are concerned that the independent hospital won’t have the resources and assets to keep up with the new legislation’s requirements.

“With the changes in healthcare coverage and others adopted by the federal government, this came up on the radar for independent hospitals,” said Doug Vaught, chairman of the hospital’s board of directors. “We take this seriously, and it will be a long, organized process.”

Vaught said members of a community advisory board and hospital administration are not sitting back and waiting to see what happens. Instead, TCRH is being proactive.

“The trustees are committed to providing the best healthcare possible, and we’re doing everything in our power to provide that,” Vaught said. “It will take a few months, and we hope to have a good roadmap of where we are going and how to get there. We don’t know the end result yet.”

Rumors that the hospital is being sold or has realigned with another system are not true, Vaught said. If it is decided that the hospital should merge with a system, it will not happen overnight.

“We will not make a decision until we get all the information together and figure out our strengths and weaknesses, and we will make our strengths stronger and our weaknesses fewer.

“If we align, we want to find a system that has the same corporate culture — excellent patient care, excellent safety scores and excellent patient satisfactory scores. We want to make our hospital better.”

During the next six to nine months, Stroudwater Associates, a national consulting firm, will research what the community wants from a healthcare system and how the hospital can provide it, Vaught said. The consulting firm will review the hospital’s financials and determine what services best meet the community’s needs.

If Stroudwater determines the hospital should merge, it will recommend what system or company would best fit the community’s needs. If consultants find that TCRH should remain independent, they will recommend how it should position itself.

Stroudwater Associates will begin its research and set up interviews with hospital board members and community representatives in November to determine what kind of services the hospital should provide. Then public hearings will be held to gather input from citizens.

(A hospital community advisory board was set up two years ago. The committee has members representing Grayson and Carroll counties and Galax, and is made up of industry representatives, physicians, nurses, government representatives and citizens to determine community health needs. The hospital’s use of the consultant was discussed in recent advisory board meetings).

“We need to make this something other than a knee-jerk reaction, and instead make it an informed decision,” Vaught said. “We will have to do something, because the landscape is changing. Whether we are on our own or in a system, we can’t continue to do the same thing we’ve done for 25 years in this new environment.”

Healthcare reform is changing how services are delivered and paid for. Vaught noted that, with national federally-mandated health insurance reform and cuts to Medicare and Medicaid, the hospital will receive only 70 percent reimbursement for every dollar of cost.

As part of the hospital’s strategic plan, a merger has been discussed for three or four years, “because it is one of the things we have to keep looking at and evaluating,” Vaught said.

Hospital Chief Executive Jon Applebaum said the changes in healthcare make it a good time to thoroughly evaluate whether to stay independent or merge.

Becoming part of a larger system would allow the hospital to reduce operational costs, receive reduced interest rates on borrowing money for facility upgrades and equipment and allow for greater purchasing power.

For example, when the hospital looked at buying a CT scanner, the cost was at $1.7 million. Had it been part of a system with several hospitals purchasing CT scanners in volume, the hospital would have been able to save around $500,000. 

“We didn’t feel like we could take a shot in the dark. We needed a consulting firm that had expertise to guide us along this track,” Vaught said. “As things develop, as community meetings take place, we will determine what kind of healthcare system the community wants, and then go about this the proper way.”

Staying independent, however, would require eliminating services that are not profitable. As a last resort, TCRH may have to become a critical access hospital, which would mean using the hospital to stabilize patients and then shipping them to larger-scale hospitals. Vaught said the hospital does not want to resort to that option. 

Vaught noted several accomplishments by TCRH, including high patient satisfactory scores and improved patient wait times through a “fast track” emergency department.

The Galax hospital has added various clinics, including one with a urologist, one for outpatient wound care and one for a rheumatologist. Plans are to add a cardiologist and pulmonary specialist.

“If we should align [with another healthcare provider], we want to build on existing services and expand our services,” Applebaum said. “This may lead to future job creation locally and the ability to bring new physicians to the community and would also add office jobs.”

Also, the hospital’s use of information technology allows it to receive extra reimbursement for Medicaid and Medicare.

“There are only a few that meet that, and our hospital is one of them,” said Vaught, noting its use of broadband and telemedicine.

The 25-year-old hospital has not incurred a large debt load, he said.

“People have trusted us for 25 years, and we hope people can trust us for another 25 years. We want to make sure we address all the needs.” 

Only 10 percent of U.S. hospitals are independent, Vaught noted. About 15 years ago, it was 80 percent.

Several independent hospitals in Virginia have merged with healthcare systems in the past two years. Joining the Sentara Health group were Martha Jefferson Hospital of Charlottesville in 2008; Potomac Hospital of Woodbridge in 2009; and Rockingham Memorial Hospital of Harrisonburg, pending for 2011. The Bluefield, W.Va., Regional Medical Center was acquired last month by Franklin, Tenn.-based Community Health Systems.

Vaught said TCRH officials haven’t looked at any particular system. The consulting firm will look at several and determine how the hospital would fit. “If we do merge, we will do it because there is a good reason to do it, and we will pick the best system that best fits.”

“We need to make sure we stay viable and serve the community,” said Galax Mayor C.M. Mitchell, director of the pharmacy at the hospital and member of the advisory board. “We want to make the best decision we can, and with the game changing dramatically, I think we are doing this correctly.”