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CloudView blog

Ideas and insights to help health care providers stay informed and profitable in today's challenging health care environment.

Community Hospitals: What It Will Take to Thrive

by Ed Park, COO

Community hospitals across the U.S. have been receiving a lot of press lately — and not all of it has been positive. Just this past summer there was the story from Belhaven, NC of Vidant Pungo Hospital closing its doors, leaving the community an hour or more from the nearest ER. In that case, as reported by The Advisory Board’s The Daily Briefing, Belhaven mayor Adam O’Neal blamed the forced closure for “the recent death of a 48-year-old woman suffering a heart attack who was unable to reach a hospital with emergency services in time for live-saving care.”

While that’s an extreme example, it’s common knowledge that these important providers of community care are facing some serious headwinds: Declining reimbursement, increasing levels of patient financial responsibility, higher costs of capital and lower operating margins than larger health systems. They’re also losing patient volume to low-priced retail clinics and larger health systems seeking to extend their influence into new geographies.

So what can be done to stem the tide and position community hospitals to thrive and serve their critical missions? To dig into this question, we partnered with Dell back in June to convene a number of community hospital CEOs. Here are some of the key areas of focus and opportunity that emerged:

  1. Get the financial house in order: Community hospitals are well positioned to thrive in the coming years, but they need to get their operational houses in order as soon as possible to avoid going out of business or losing their independence. As one attendee described their dire situation, “If anything, Commercial is lower and lower all the time. They are looking at just barely above the Medicare reimbursement. Thirty percent was several years ago. We’ve been the low-cost provider for years and they want to continue to squeeze us. They don’t want to give us extra margin, but it’s a tough gig to balance that.”

    Getting control over the revenue cycle and reducing operating costs is key and has to be step one–– before even considering moving into risk. Moving too fast into risk contracts, because other organizations are doing so, could easily backfire and lead to loss of revenue. Once the revenue cycle is in order, they can start to use that data to negotiate better rates with payers, become the preferred provider for certain employers, and then shop their complex cases to larger health systems outside of their geographic area.
  2. Get used to “coopetition”: Having the right strategic partners — whether from aligned physician groups, IT services, retail chains or even competing hospitals and health systems — will provide community hospitals the flexibility and agility required to thrive. Community hospitals will then be positioned to shop among the larger health systems for where to send their most complicated patients. Similar to Lowe’s sending all their employees needing heart surgery to Cleveland Clinic, a small hospital in the middle of Tennessee might shop their options and strike a deal to send all of their neurology patients to a hospital in Atlanta rather than to the local Academic Medical Center (AMC). But they’ll need to find ways to cooperate with traditional competitors in and outside the community. As one community hospital CEO described, “We’re trying to get other community hospitals that are like-minded together to collaborate on care. We might be able to enter into value-based commercial payer contracts, but we’re trying to work with larger AMCs that we compete with. The challenge is they provide primary, secondary, tertiary care. We focus on primary and secondary and the problem is they don’t want to wean themselves off primary and secondary care. There has to be way we can work together without having to own the entire pipeline from A-Z.”
  3. Coordinate Care: With care moving to new settings and fee-for-value reimbursements becoming more common, community hospitals are well positioned to succeed at managing population health in their communities. But success will take more than an analytics package; it will require an end-to-end service that activates and coordinates patient care to achieve program goals and capture the corresponding value. This includes seamless, digital sharing of patient and billing data, better patient access and activation services, as well as trends data among communities to better control chronic diseases. One of the community hospital executives at our leadership event spoke of successfully deploying an EMR to most of their affiliated physicians. They also had purchased a population health tool. However, he does not feel that the two are “clinically integrated” and the hospital is spending most of its time trying to get the right patient data rather than acting on the data.

    Other attendees struggled with the potential costs involved: “How do you do care coordination? Using all the different technologies to coordinate care just because the patient demands it, well, our challenge is how do you pay for it? We are strapped for capital resources to pay for the technology, to integrate it, and I don’t see us being able to afford all this technology.” To be successful in this department, community hospitals will need to partner with vendors who can help them scale their efforts in a cost-effective way.
  4. Improve Provider and Patient Engagement: Community hospitals already have strong brand recognition among patients, many of whom have gone to them for care across generations. But, particularly now, they should not take this brand loyalty for granted. Patients now have more choices than ever regarding where to seek care. And the same applies to providers. As one community hospital CEO said, “We were the second player in a competitive market, and we were trying to attract new talent. Young, smart doctors who have practiced at larger health systems are used to having the best technology. They want to be able to access info on their iPad or iPhone.” Community hospitals need to leverage their community heritage and brand, but they must also be able to compete on equal terms to retain and attract patients and providers alike.

During our event we asked community hospital executives the question, “If you could write The New York Times headline about your hospital in 5-10 years, what would it be?” Answers ranged from “In spite of all odds, a successful and financially thriving Community Hospital providing high quality care,” to “Community Hospital acquires large AMC in their region.” I truly believe that if community hospitals take action today and seize upon these strategic opportunities, then these, and other ambitious headlines, are well within reach.

Ed Park is the Chief Operating Officer at athenahealth. 

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