OCH Response to GSDP Questions

  1. What is your plan for enhancing healthcare in Starkville going forward?

OCH:  OCH completed the 2016 Community Health Needs Assessment (CHNA) Report. This process involved targeting 81 key participants from the OCH service area and statewide for the community advisory committee. Of these, 54 participated in answering the survey questionnaire regarding community health needs. Committee members prioritized the community health issues that needed to be addressed. The primary health concerns were identified as follows:

  • Adult Obesity
  • Child and Adolescent Obesity
  • Hypertension
  • Physical Inactivity
  • Diabetes
  • Heart Disease
  • Stroke
  • Behavioral/Mental Health
  • Elder Care
  • Access to Affordable Insurance
  • Access to Primary Care Providers
  • Access to Preventive Care and Screenings

After completing the CHNA Report, the steering committee completed the 2016 CHNA Implementation Plan to address the above items. To review the Report and Implementation Plan, visit och.org.

OCH will use the CHNA Report and Implementation Plan process every three years to ensure that the most current community health needs are being identified. This is just one of many efforts the hospital is making to ensure healthcare services continue to grow to meet the community’s needs. Strategic planning is obviously the cornerstone of our efforts for the future. To address more of the community’s immediate concern, see question 7.

  1. When does a “Certificate of Need” come in to play and does it affect all hospital services or just selected areas?

OCH:  Health care providers are required to receive “certificate of need” before expanding services in selected areas.  According to the Mississippi State Board of Health Certificate of Need (CON) manual, “The intention of health planning and health regulatory activities is to prevent unnecessary duplication of health resources; provide cost containment, improve the health of Mississippi residents; and increase the accessibility, acceptability, continuity and quality of health services. The regulatory mechanism to achieve these results is the Certificate of Need (CON).”

“A CON must be obtained from the Department before undertaking any of the activities described in Section 41-7-191 (1) without obtaining a Certificate of Need (CON) from the Department. No final arrangement or commitment for financing such activity may be made by any person unless a CON for such arrangement or commitment has been issued by the Department. The Department will only issue a CON for new institutional health services and other proposals which are determined to be needed pursuant to statutory requirements. Only those proposals granted a CON may be developed or offered within the State of Mississippi.”

“No CON shall be issued unless the action proposed in the application for such Certificate has been reviewed for consistency with the specifications and criteria established by the Department and substantially complies with the projection of need as reported in the State Health Plan which is in effect at the time the application is received by the Department.”

The State Board of Health requires health care providers to receive a certificate of need to provide the following services:

  • Acute Hospital Beds*
  • Ambulatory Surgical Services*
  • Cardiac Catheterization Services
  • Comprehensive Inpatient Rehabilitation Services
  • Diagnostic Imaging Services of an Invasive Nature, i.e Invasive Digital Angiography
  • Home Health Services
  • Intermediate Care Facilities for Individuals with Disability
  • Licensed Chemical Dependency Services
  • Licensed Psychiatric Services
  • Long-Term Care Hospital Services
  • Magnetic Resonance Imaging (MRI) Services*
  • Mobile Medical Imaging
  • Nursing Home Beds/Long-Term Care Beds
  1. Skilled Nursing Facility
  2. Intermediate Care Facility
  3. Intermediate Care Facility for Mentally Retarded
  • Open-Heart Surgery Services
  • Positron Emission Tomography Services
  • Radiation Therapy Services
  • Renal Failure/Dialysis
  • Swing Bed Services*

*OCH has this service.

  1. What do you see as the future outlook for local healthcare in relation to national trends of merging healthcare entities?

OCH:  The destiny of all hospitals, no matter whether local or not, is directly impacted by federal and state policies.  The financial payor mix of hospitals can have a financial impact, especially those hospitals with high Medicare and Medicaid participation.  Some local hospitals may desire the opportunity to seek a merger with a larger system.  On the other side, larger systems may actually prefer to offer affiliation arrangements that do not involve a buyout or long term lease with option to buy.

Supervisor Miller made a reference to the summit she attended on April 11, 2016, hosted by Governor Phil Bryant, and stated, “The hand out materials were filled with a great deal of factual data, including a forecast that 90% of hospitals would merge in the next two years and why.”  OCH Administrator/CEO Richard Hilton agrees there have been some mergers since April 2016, but it looks like the consultant projections are not going to reach the 90% in the two year timeline projection.  Since the summit some of the major for-profit hospital systems have started divesting ownership of solo hospitals as listed below:

  • Hospital Corporation of America
  • Community Health System
  • Quorum
  • Tenet Healthcare

Another factor affecting hospital acquisitions/mergers are location of hospitals in Medicaid expansion vs non-expansion states.  Non-expansion states since the passage of Obama Care receive an average of 17.2% lower reimbursement.  Mississippi is one of the 19 non-expansion states.  With past and current efforts to repeal Obama Care, there have been no discussions of scaling back the 17.2% higher reimbursement for the Medicaid expansion states or raising by 17.2% reimbursement to the non-expansion states.  Larger systems will be looking critically at hospitals with a higher Medicaid payor mix in the non-expansion states before merger consideration.

History has shown that once a hospital is sold, there is a tendency for those hospitals to be sold time and time again. At least three hospitals within 100 miles of OCH have been sold more than one time.

  1. What are the advantages of keeping our hospital local?

 

OCH:  Final decisions for healthcare are made here in Oktibbeha County, and maintaining local ownership and control will assure that the needs of our community and the population served are being met. OCH’s culture is community-oriented while providing quality care. The Medical Staff will continue to have direct access to OCH Board of Trustees and Administration for input regarding patient care management and other areas of concern.

OCH is Oktibbeha County’s second largest employer. Keeping the hospital local will give employees comfort knowing that every effort will be made for keeping jobs. Historically, mergers have resulted in loss of jobs within 1 to 2 years, of a sale. Loss of jobs to corporate central locations usually result from economy of scale goals. Sometimes, layoffs are avoided by reducing employees’ hours or giving employees the option of relocating to one of their other hospitals.

Currently, OCH has an annual economic impact of $127 million, according to the Kaiser Foundation, and spends approximately $7 million locally each year on goods and services.  Over the past 10 years, OCH has had a progressive annual increase in its economic impact and can look forward to continuing this increase.

  1. When would it make sense to sell or partner with a larger hospital group?

 

OCH:  Selling implies one approach.  Partnering implies either a sell or perhaps another type of alignment strategy.

Selling should be done before an entity is in a bankruptcy position. If the Board of Trustees, Administration and Medical Staff felt that it was in the best interest of OCH to sell, then a joint recommendation would be forthcoming to the Board of Supervisors for following the statutory process.

Partnering can come by a sell or through a less abrupt way of giving up local control and management.  Affiliation is a partnering option for smaller hospitals to align with a larger hospital or system.  This approach could take place at any time when the Board of Trustees and Medical Staff feels that it would be advantageous. Affiliation can provide the benefits of sharing resources while avoiding the pitfalls of mergers.

H&HN Daily, April 15, 2014, reported, “The Future of the Merger Model.  The shift to network models may reflect a growing recognition that mergers often fail to deliver their promised benefits.  The rationales for mergers are frequently spurious and the obstacles understated.  Chief among the benefits touted is the promise of economies of scale.  Economies of scale derive from a fall in unit costs as volumes grow.  But such efficiencies are invariably proximity-based.  In other words, production, be it of a tangible product or an intangible service, must be concentrated in locations that are sufficiently proximate to one another for the economies to take effect.”  The closer the entities are makes it more possible for economy of scale to be beneficial.

Affiliation allows an opportunity for both the local community hospital and larger hospital/system to test the cooperative arrangement.  The advantage here will allow both entities to measure the short term results as a benchmark for projecting potentially the longer term results before making a final merger decision.   A final merger decision should be one where all major stakeholders are in agreement that a merger is the best decision to make.

  1. How does OCH plan on addressing the income shortfall of this past year and insure long-term financial stability?

OCH:  Supervisor Miller and Consultant Woodrell want the public to believe that OCH has not experienced revenue growth.

Fiscal Year Audited (Million)             Unaudited

2011    2012    2013    2014    2015    2016        2017

IP Revenue      48.8    49.3    47.2    44.8    52.0    48.8         46.7

OP Revenue     103.6   114.8     124.8    136.1    144.5    145.7        157.6

Total Pat Rev  152.4   164.1     172.0   180.9     196.5    194.5        204.2

Deductions         94.1    103.9     110.9   116.6     125.6    125.5        137.5

Net Pat Rev      58.3      60.2       61.1     64.3       70.9      69.0          66.7

OCH has experienced annual increase in Total Patient Revenues.  Insurance payors have continued shifting coverage to outpatient care while reducing insurance payments which has caused an increase in deductions, impacting the bottom line.  Hospitals throughout the state and the country are currently experiencing what OCH has with variable impact on their bottom line.

OCH has already initiated efforts with department managers and supervisors to:

  • Look at ways to reduce service line costs through better inventory control.
  • Evaluate new services that could be added that would positively impact our bottom line.
  • Review reimbursement for highest volume procedures.
  • Complete a cost versus reimbursement analysis for highest volume/highest cost procedures.
  • Evaluate particular services that can be accomplished with less resources through attrition.

Cost reductions have already been implemented in the new fiscal year related to the following areas:

  • Contracted services such as billing and waste disposal
  • Reprocessed sterile supplies
  • Travel related to continuing education

These are short term initiatives with longer term results to come through the question below on OCH’s plan to expand healthcare in Oktibbeha County.

  1. What plans exist for OCH to expand healthcare in Oktibbeha County?

OCH:  The key to the future success is physician recruitment and retention.  The first step is to get past the November 7th referendum and show potential physician recruits that sale/lease of OCH is no longer an issue.  For the past three years recruiters have indicated that potential physicians who expressed concern about OCH selling were either reluctant to give consideration or just said not interested because of ongoing talks about a possible sale.

The physician specialties below are needed in the community and can have the opportunity for establishing full-time sustainable practices:

  • 1 ER Physician
  • 2 Family Medicine Physicians
  • 1 Gastroenterologist
  • 3 Hospitalists
  • 2 Internal Medicine Physicians
  • 1 Neurologist
  • 1 OB/GYN
  • 1 Otolaryngologist

OCH has recently been engaged with the potential recruitment of 2 part-time (1 day a week) plastic surgeons to supplement follow-up services needed after initial breast disease surgery.  The plastic surgeons are willing to provide services in the areas of breast reconstruction, surgery related to hand conditions needing soft tissue coverage, and liposuction, services that do not require routine overnight stay in the hospital.

OCH has already secured physicians in the fields of family medicine with practice commencement in August 2018, and urology with practice commencement in August 2021.

 Another current strategy includes a successful affiliation with a health system that allows OCH to continue providing community oriented services. Affiliation is much different than a merger in that it allows for more local input. An affiliation to be considered will allow OCH to remain under local control while expanding its services derived through mutually beneficial arrangements.

Partnering by affiliation could potentially bring bulk purchasing power, shared IT resources & support, and other shared services.  OCH can have an opportunity by economies of connection through system affiliation.

During the summer and fall of 2016, before the Board of Supervisors hired Ted Woodrell and Stroudwater, OCH Administrator/CEO Richard Hilton was contacted by a CEO of a system regarding partnering through an affiliation process.  Hilton informed this CEO that more information would be needed for OCH Trustees and Administration on how the affiliation process would work and be mutually beneficial. Also, another system CEO reached out to Hilton and expressed interest in a possible affiliation arrangement. These discussions did not go any further with either CEO, nor was any formal presentation made to the Board of Trustees and Medical Staff as a result of three Supervisors hiring Woodrell and Stroudwater. From that point on, Hilton and staff were engulfed in production of data and information for the assessment. Once the three Supervisors approved the resolution and RFP for the sale/lease of OCH, the idea of affiliation was forced to be put on hold.

Almost a year later, a third CEO of another hospital system met with Hilton and informed him that his system is watching what happens with the November 7th referendum on OCH.  This CEO stated that his system has an interest in extending an affiliation arrangement, as well.  Hilton indicated that with consideration from the Board of Trustees and input from the Medical Staff, there could be discussion of an affiliation opportunity. One specific interest discussed was making available “super specialty physicians” on a part-time basis.  These are physicians who cannot have sustainable practices in Starkville, but can provide routine specialty related services not requiring an overnight hospital stay.

With three system CEOs expressing direct interest in affiliating with OCH, this brings a unique opportunity worth exploring that can help meet OCH’s needs for expanding its physician specialty services, that are not currently available, in order to help market share retention.

Affiliation probably begs the question from the public on what is the mutual benefit.  OCH could have a partner willing to help expand its services while the system affiliate receives referrals for services not immediately available at OCH.

 BY AFFILIATING WITH A HEALTH SYSTEM WHILE REMAINING UNDER LOCAL CONTROL, THE COMMUNITY CAN BE ASSURED THAT THE BEST HEALTHCARE POSSIBLE IS BEING MADE AVAILABLE TO THEM IN THE FUTURE.  OCH, THROUGH ITS TRUSTEES, MEDICAL STAFF AND EMPLOYEES, CAN WORK TOGETHER TO COME UP WITH THE BEST AFFILIATION SOLUTION—ONE THAT HAS THE MOST POSITIVE IMPACT ON OUR PATIENTS, MEDICAL STAFF, EMPLOYEES AND COMMUNITY.

  1. Does OCH plan for any layoffs of current physicians or staff?

OCH:  OCH has not developed an immediate plan for any layoffs of current physicians or staff.  Recruited physicians seeking a full-time practice opportunity after residency training routinely want to be employed.  Employing physicians will have to be an option provided.  Recruiting full-time physicians, employed or not employed, often requires subsidizing those clinic practices until established.

OCH is monitoring what other hospitals are doing.  Some larger systems and/or hospitals are reducing employees to 72 hours per pay period, as well cutting back or eliminating services provided. OCH is prepared to make similar changes—but only if absolutely necessary.

  1. How might ambulance service be affected with the sale of the hospital?

OCH:  The new system owner may operate the ambulance service for the County for a period of time. Later, the system owner may ask for annual subsidy support or take action to reduce the number of ambulances available with staffed personnel.  The system owner may, at some time in the future, put the Supervisors on notice that they no longer want to run the ambulance service.  Since EMS is a County responsibility, the Supervisors will have no choice but to seek another firm for ambulance operation. In any of these scenarios involving subsidy request, the amount requested could easily exceed the current .55 mil allotment.

 

 

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