Last summer, struggling Mission Community Hospital in Panorama City, Calif., entered into a three-stage agreement with newly formed, Beverly Hills, Calif.-based Deanco Healthcare to manage and eventually assume ownership of the 145-bed hospital. Deanco began by providing consulting services to the hospital and currently manages the facility with plans to take full ownership and convert the non-profit hospital to a for-profit, while preserving charitable care. Here Jack Lahidjani, president of the hospital and Deanco Healthcare, discusses plans for Mission Community as well as the hospital operator's expansion plans.
Question: What was the state of Mission Community that led it to seek out a partner?
Jack Lahigjani: Mission Community Hospital was not doing well financially and was right on the verge of being in the red. On a cash basis, [the hospital] was in distress. There were times when [the leaders] thought they were not going to be able to make payroll. That never happened luckily, but that level of distress pushed them into looking for partners that could help them come up to today's standards in terms of technology and quality of care and resuscitate their marketing and business development activities.
Q: What led the board to choose Deanco over other potential partners, and what does your agreement look like?
JL: A couple of other buyers were interested, but the governing board and CEO at the time felt we were a better match. In June 2010, Deanco and Mission entered into a three-stage agreement. In the initial stage, Deanco functioned in the capacity as a consultant. In that role, we helped the system hit some pre-determined financial and performance benchmarks, which led to the board approving the second stage of the agreement. At that time we were designated us as the “manager” of the facility. All of the officers of the hospital became employees of Deanco and we've be running the hospital since that time.
Q: A three-stage agreement seems fairly unique. What led to the development of that type of agreement?
JL: A few years back another hospital in the area in a similar predicament went out and hired a turnaround consultant, who I've heard was not able to help the hospital create momentum. While [Mission Community's] board understood our business model, ultimately the proof is in the pudding. The goal for the board was and continues to be to keep the hospital open and continue to serve the community. So, it began by designating us as a consultant subject to hitting some financial and operational benchmarks before becoming the manager of the facility. That took place in the December of last year and as of the present time, we've been pretty successful. The hospital is in no danger of shutting down by any stretch of the imagination.
If we continue operate the facility successfully, under the agreement, Deanco will take over ownership of the hospital in 2013. Currently, the non-profit entity that owns Mission Community owns the facility and all of its assets and all profits if any go back to the non-profit. By, 2013, we hope to pay off some bonds, pay off the mortgage on the property, and then transfer ownership of the hospital's assets from the non-profit to a for-profit. But, we will continue to conduct non-profit activities under a foundation business model. The agreement with the Attorney General’s office is very specific. We're not going to discontinue anything. The transaction was approved by the AG’s office, and we are bound by our agreement to continue providing the same level of charity care that the hospital has provided for many, many years. We haven't turned anyone away and we don't intend to turn anyone away.
Q: Since managing Mission Community, you've helped move the facility from on the brink of the red to safely in the black. What were some of the ways that was accomplished?
JL: We began by training the staff on the importance of providing care with the same level of care, passion and dignity that we would want for our own loved ones. In the day and age where patients can be treated poorly for having Medicaid or Medicare, we made it our mantra to provide the best, most compassionate and dignified care possible. Ninety percent of our patients are covered by Medicare, Medicaid or are indigent. Providers should provide care with a smile, talking with people instead of at people, regardless of how their care is reimbursed. When Deanco first started working with Mission Community, our patient satisfaction rates were pretty low. They've gotten materially better, but they're no where near where they need to be. So, we continue our efforts to educate every level of employee — from the security guard all the way up to the nurse and physician — on our theory and business model of compassionate, dignified care.
We also reintroduced Mission Community back to the community in north San Fernando Valley. In our area, there are close to 4,000 beds being operated by skilled nursing facilities, rehab facilities, board & care and residential living facilities, including the Jewish Home for the Aged. First and foremost we wanted to cater to these places. On average, five percent of these patients get sick to the point that they need a higher level of care and are transferred to acute-care hospitals. We reached out to them, and discovered there were a dozen or so reasons why we were not the acute-care destination of choice for these facilities. We then took some drastic measures to correct those inadvertent oversights. If we are able to provide a high-level of quality care to just one patient, he or she can go back and boast to his or her circle of friends in these facilities about how nice the experience was, and if they are ever in need of hospitalization, they'll come to us. If a patient has an experience that is less than pleasant, he or she will go back and 'poison' the entire population. So, we've remedied that and our employees now understand that there is no better advertisement than the word of mouth. Success is a byproduct of being or thriving to be the best.
Q: Mission Community & Deanco recently invested nearly $5M on upgrades and technological improvements for the hospital. Can you tell me about these upgrades and what you hope they will do for the hospital?
JL: As I mentioned earlier, our area has a high level of indigent patients. By law and ethics, we are obligated to take care of them. But in order for our facility to be able to do that, we had to come up with some niches where we could attract a disproportionate share of commercially insured and specialty patients to cover the cost of the indigent care we provide on a day-to-day basis. We performed a market analysis and determined the area is in need of a robust, multilevel orthopedic and spine surgical program as well as other minimally invasive surgical procedures. We invested $2.3 million in a DaVinci robot with dual monitoring, which has helped us recruit a lot of physicians, as well as a $1.7 million Medtronic O-arm and navigational unit. In a nutshell, the cost of our charity care is offset by these high-end programs.
We also plan to reopen a floor of 25 beds that unfortunately haven't been used in quite a few years because the census never required the floor to be open. Now, we reach capacity quite regularly, and are spending close to $1 million and hope to bring those beds back on line by the end of the year.
Our biggest investment, however, is our employees. Good quality nursing is going to cost you; nurses are rock stars and there's a big demand for the best ones. We also invest in training our employees to provide compassionate care. I think it speaks loudly when your employees treat the patients kindly and compassionately. We are making a huge investment in our employees to have them understand that that patient you see in the hallway is somebody's mother or grandmother. If any patient is treated less kindly than you would want to treat your own family member to be, your blood should be boiling.
Q: What are your biggest goals for the hospital in the next year and few years?
JL: First and foremost, [Deanco] would like to get involved with more hospitals. So that's on the top of the list. We will also continue our efforts in creating a flagship hospital in San Fernando Valley. We want to make Mission Community the destination of choice for doctors and patients in the San Fernando Valley. When you drive over Interstate 405 and hit Los Angeles, Cedars Sinai is that destination of choice. Everyone wants to go to Cedars. In San Fernando Valley that gold standard hospital doesn't exist. There are a handful of hospitals in the area, some good in some disciplines and others good in others. We want to make Mission Community that gold standard in every discipline and line of service that we provide [for all disciplines].
Q: What will be the biggest challenge Mission Community faces in the near future?
JL: The biggest challenge right now for us is the unknown and the various agencies interpretation of these new [healthcare reform] regulations. We also have changing state Medicaid reimbursement methodology, which is expected to roll out soon. Currently the California Medical Assistance Commission negotiates Medicaid reimbursements with hospitals, based on cost reports, on a per diem basis. The new methodology will reimburse hospitals using a methodology similar to Medicare DRGs. For example, you'll be reimbursed for a case based on average costs and length of stay, regardless of how long the patient actually stays, with some exceptions for outliers. We're a bit eager to start this new process. If you can manage your expenses and your cycle of care to the point where they're no delay in service, you should do ok. If I run a more efficient operation than my competitor across the street, I could benefit since we're all included in determining the average. That's why were eager for the state program to be rolled out and to see what data elements they're going to utilize in this reimbursement method.
Learn more about Mission Community Hospital.
Question: What was the state of Mission Community that led it to seek out a partner?
Jack Lahigjani: Mission Community Hospital was not doing well financially and was right on the verge of being in the red. On a cash basis, [the hospital] was in distress. There were times when [the leaders] thought they were not going to be able to make payroll. That never happened luckily, but that level of distress pushed them into looking for partners that could help them come up to today's standards in terms of technology and quality of care and resuscitate their marketing and business development activities. Q: What led the board to choose Deanco over other potential partners, and what does your agreement look like?
JL: A couple of other buyers were interested, but the governing board and CEO at the time felt we were a better match. In June 2010, Deanco and Mission entered into a three-stage agreement. In the initial stage, Deanco functioned in the capacity as a consultant. In that role, we helped the system hit some pre-determined financial and performance benchmarks, which led to the board approving the second stage of the agreement. At that time we were designated us as the “manager” of the facility. All of the officers of the hospital became employees of Deanco and we've be running the hospital since that time.
Q: A three-stage agreement seems fairly unique. What led to the development of that type of agreement?
JL: A few years back another hospital in the area in a similar predicament went out and hired a turnaround consultant, who I've heard was not able to help the hospital create momentum. While [Mission Community's] board understood our business model, ultimately the proof is in the pudding. The goal for the board was and continues to be to keep the hospital open and continue to serve the community. So, it began by designating us as a consultant subject to hitting some financial and operational benchmarks before becoming the manager of the facility. That took place in the December of last year and as of the present time, we've been pretty successful. The hospital is in no danger of shutting down by any stretch of the imagination.
If we continue operate the facility successfully, under the agreement, Deanco will take over ownership of the hospital in 2013. Currently, the non-profit entity that owns Mission Community owns the facility and all of its assets and all profits if any go back to the non-profit. By, 2013, we hope to pay off some bonds, pay off the mortgage on the property, and then transfer ownership of the hospital's assets from the non-profit to a for-profit. But, we will continue to conduct non-profit activities under a foundation business model. The agreement with the Attorney General’s office is very specific. We're not going to discontinue anything. The transaction was approved by the AG’s office, and we are bound by our agreement to continue providing the same level of charity care that the hospital has provided for many, many years. We haven't turned anyone away and we don't intend to turn anyone away.
Q: Since managing Mission Community, you've helped move the facility from on the brink of the red to safely in the black. What were some of the ways that was accomplished?
JL: We began by training the staff on the importance of providing care with the same level of care, passion and dignity that we would want for our own loved ones. In the day and age where patients can be treated poorly for having Medicaid or Medicare, we made it our mantra to provide the best, most compassionate and dignified care possible. Ninety percent of our patients are covered by Medicare, Medicaid or are indigent. Providers should provide care with a smile, talking with people instead of at people, regardless of how their care is reimbursed. When Deanco first started working with Mission Community, our patient satisfaction rates were pretty low. They've gotten materially better, but they're no where near where they need to be. So, we continue our efforts to educate every level of employee — from the security guard all the way up to the nurse and physician — on our theory and business model of compassionate, dignified care.
We also reintroduced Mission Community back to the community in north San Fernando Valley. In our area, there are close to 4,000 beds being operated by skilled nursing facilities, rehab facilities, board & care and residential living facilities, including the Jewish Home for the Aged. First and foremost we wanted to cater to these places. On average, five percent of these patients get sick to the point that they need a higher level of care and are transferred to acute-care hospitals. We reached out to them, and discovered there were a dozen or so reasons why we were not the acute-care destination of choice for these facilities. We then took some drastic measures to correct those inadvertent oversights. If we are able to provide a high-level of quality care to just one patient, he or she can go back and boast to his or her circle of friends in these facilities about how nice the experience was, and if they are ever in need of hospitalization, they'll come to us. If a patient has an experience that is less than pleasant, he or she will go back and 'poison' the entire population. So, we've remedied that and our employees now understand that there is no better advertisement than the word of mouth. Success is a byproduct of being or thriving to be the best.
Q: Mission Community & Deanco recently invested nearly $5M on upgrades and technological improvements for the hospital. Can you tell me about these upgrades and what you hope they will do for the hospital?
JL: As I mentioned earlier, our area has a high level of indigent patients. By law and ethics, we are obligated to take care of them. But in order for our facility to be able to do that, we had to come up with some niches where we could attract a disproportionate share of commercially insured and specialty patients to cover the cost of the indigent care we provide on a day-to-day basis. We performed a market analysis and determined the area is in need of a robust, multilevel orthopedic and spine surgical program as well as other minimally invasive surgical procedures. We invested $2.3 million in a DaVinci robot with dual monitoring, which has helped us recruit a lot of physicians, as well as a $1.7 million Medtronic O-arm and navigational unit. In a nutshell, the cost of our charity care is offset by these high-end programs.
We also plan to reopen a floor of 25 beds that unfortunately haven't been used in quite a few years because the census never required the floor to be open. Now, we reach capacity quite regularly, and are spending close to $1 million and hope to bring those beds back on line by the end of the year.
Our biggest investment, however, is our employees. Good quality nursing is going to cost you; nurses are rock stars and there's a big demand for the best ones. We also invest in training our employees to provide compassionate care. I think it speaks loudly when your employees treat the patients kindly and compassionately. We are making a huge investment in our employees to have them understand that that patient you see in the hallway is somebody's mother or grandmother. If any patient is treated less kindly than you would want to treat your own family member to be, your blood should be boiling.
Q: What are your biggest goals for the hospital in the next year and few years?
JL: First and foremost, [Deanco] would like to get involved with more hospitals. So that's on the top of the list. We will also continue our efforts in creating a flagship hospital in San Fernando Valley. We want to make Mission Community the destination of choice for doctors and patients in the San Fernando Valley. When you drive over Interstate 405 and hit Los Angeles, Cedars Sinai is that destination of choice. Everyone wants to go to Cedars. In San Fernando Valley that gold standard hospital doesn't exist. There are a handful of hospitals in the area, some good in some disciplines and others good in others. We want to make Mission Community that gold standard in every discipline and line of service that we provide [for all disciplines].
Q: What will be the biggest challenge Mission Community faces in the near future?
JL: The biggest challenge right now for us is the unknown and the various agencies interpretation of these new [healthcare reform] regulations. We also have changing state Medicaid reimbursement methodology, which is expected to roll out soon. Currently the California Medical Assistance Commission negotiates Medicaid reimbursements with hospitals, based on cost reports, on a per diem basis. The new methodology will reimburse hospitals using a methodology similar to Medicare DRGs. For example, you'll be reimbursed for a case based on average costs and length of stay, regardless of how long the patient actually stays, with some exceptions for outliers. We're a bit eager to start this new process. If you can manage your expenses and your cycle of care to the point where they're no delay in service, you should do ok. If I run a more efficient operation than my competitor across the street, I could benefit since we're all included in determining the average. That's why were eager for the state program to be rolled out and to see what data elements they're going to utilize in this reimbursement method.
Learn more about Mission Community Hospital.