In a Jan. 30 webinar hosted by Becker's Hospital Review, Mike Williams, president and CEO of Community Hospital Corporation, gave tips and best practices for community hospitals looking for a partner. Glenn Robinson, CEO of Hillcrest Health System in Waco, Texas, then shared his first-hand experience of partnering his facility with Scott & White in Temple, Texas.
According to Mr. Williams, 2012 experienced the most merger and acquisition activity in two decades. There are various reasons for this trend, including the implementation of healthcare reform and decreasing reimbursements, and many community hospitals may soon find themselves in a situation of needing some type of partner.
With all of that in mind, many community hospital executives and boards are considering a partnership for future success. Mr. Williams said there are seven key conversation points to discuss when considering what the community hospital needs from a possible partner:
• Community need
• Clinical service breadth
• Physician alignment
• Revenue
• Managed care leverage
• Compatibility of purpose or mission
• Reputation
After the discussion, the fist step to creating a partnership is what Mr. Williams called "getting the house in order."
"It makes common sense that if you're going to sell something, you want it to be in its best condition when…it goes on the market, or if in fact you want to create some type of other relationship that's not a sales relationship," he explained.
According to Mr. Wilson, for community hospitals, getting the "house" in order involves three steps:
• Assessing market position. Community hospitals should determine what the level of patient migration is from their communities to other institutions and why that is occurring. They should conduct a professional market assessment in order to understand where their strengths are and what type of partner to look for.
• Assessing finances and profits. Hospitals should then conduct an operational assessment of the organization to understand where profit comes from and where improvement opportunities lie. They should specifically look at revenue cycle, supply chain, information systems and productivity.
• Involving the board from onset of the relationship. Educate the board on why the change needs to happen based on healthcare industry changes. The hospital's medical staff and physicians should also be involved in the discussion.
Finally, before moving forward with a partnership, community hospitals need to understand their strategy. "You have to understand what it is you're asking for as well as what it is you're willing to give up to achieve the partnership you're getting ready to enter into," Mr. Williams said. Then, community hospitals can begin evaluating possible partners.
Hillcrest Health System case study
Mr. Robinson then shared the story of how Hillcrest Baptist Medical Center in Waco, Texas, survived and thrived after being guided by CHC to a partnership with Scott & White.
HBMC had been losing market share and physician confidence and found itself needing guidance. The board brought in CHC in March 2007 to guide the facility, and Mr. Robinson joined in September 2007.
Before considering a partnership, HBMC began cutting costs, building physician trust in the marketplace and focusing on operational excellence. However, even with all of the improvements Hillcrest made, the future of the system was still uncertain. HHS faced a continued decline in reimbursements and, as a safety-net hospital, a growth in the number underinsured and uninsured patients in the community.
Mr. Robinson said the next logical step was to look for a partner. So, guided by CHC, HBMC executives and board members laid out the partnership's "must-haves":
• Protect their name and brand
• Have a fair and balanced board
• Protect their faith-based heritage
• Allow aligned physicians to remain a separate entity
From those must-haves, they laid out traits of their ideal partner. The partner they were looking for would have a similar culture, be financially strong and have an existing presence in the marketplace. Also, HBMC's partner had to be physician-oriented. "That's really the future, and that's a personal belief of mine and the administrative team and also CHC," Mr. Robinson explained.
After laying this information out, HHS began considering a partnership with Scott & White. However, before entering into a formal relationship, HBMC's administrators evaluated the potential downsides and upsides of the relationship.
The downsides, according to Mr. Robinson, included losing full independence, the risk of jeopardizing relationships with the medical staff and primary care group and risking the relationships with some community stakeholders.
The upsides included mitigating financial threats, access to the Scott & White health plan, the "halo effect" received from Scott & White's stellar reputation, expansion of training programs and synergies in key service lines. "As we began to evaluate the possible upsides, they far outweighed the downsides," Mr. Robinson said. "So our board moved forward." The agreement was effective April 1, 2009.
In the first three years of the partnership, HHS has seen many improvements. According to Mr. Robinson, fiscal year 2012 was the strongest financial year in Hillcrest's history. Hillcrest has also made strides in physician and community relationships and continues to grow its market share. HHS has also added new services, including rehabilitative medicine and a surgery center.
"This is an excellent example of an organization that was poised for a sale or closure…but whose board members sought expertise [for] alternatives [in order] …to move forward and sustain [its] mission and legacy," said Mr. Williams, wrapping up the webinar.
View or download the Webinar by clicking here (wmv). We suggest you download the video to your computer before viewing to ensure better quality. If you have problems viewing the video, which is in Windows Media Video format, you can use a program like VLC media player, free for download by clicking here.
Download a copy of the presentation by clicking here (pdf).