Situation

Healthcare organizations today face unprecedented pressures. Economic uncertainty, regulatory changes, the growing number of uninsured individuals and other forces cause smaller, community-based hospitals, in particular, to evaluate forming relationships with other organizations.

In some cases, there is no choice because outside resources are necessary for sustainability. Community Hospital Corporation (CHC) provides help where hospitals need it. CHC through its management and consulting arm, CHC Consulting, works with hospital boards and leadership to assess whether a relationship with another institution makes sense, and if so, what level and type.

Solution

In some cases, hospitals aren’t in the best of health when they turn to CHC for guidance. But no matter the state of the hospital, CHC first checks vitals, so to speak, and then conducts a thorough examination of the organization’s cost structure and operations. Sometimes, revenue-enhancement and cost-reduction opportunities are identified that empower the hospital to adjust accordingly.

“Hospitals need to look at the reasons for their financial challenges, and how things might look years ahead.”

Jim Kendrick, President and Chief Executive Officer, Community Hospital Corporation

Even when partnering is the recommended path of pursuit, there are different types of options available, short of total acquisition. Generally speaking, “The more money you want the other organization to risk on your behalf, the less power and control you get to keep,” explains Kendrick.

Depending on a hospital’s needs, there are a variety of relationships that can foster growth. These help resource-constrained facilities tap into a wealth of information, technology and expertise that may be unavailable or too costly to obtain on their own. Some options include:

• Vendor partnerships for specialized services like telehealth, hospital-at-home, and wound care.
• A visiting specialist physician program to expand hospital services and create new revenue streams.
• Relationships with academic institutions to create a pipeline of qualified employees and reduce recruitment costs.
• Outsourced hospital management to a third party while the hospital board maintains governance and control over the hospital.
• A merger of equals, which occurs when the parties combine assets to form a new company. This type of partnership tends to work when both parties perceive that each will be made stronger by coming together. Mergers also take place that give a lesser ownership stake, such as 20 percent, to the party that brings less to the partnership.
• Sometimes acquisition is the only way for a community or rural hospital to remain open and serve its community with local healthcare services.

Regardless of the situation, CHC provides guidance to ensure the best possible outcome.

Process

When partnering is the wisest course of action, CHC guides hospital boards through the process of finding suitable prospects and preparing them to negotiate the relationship. CHC’s best practices for partnering are clear communication, due diligence, and regular evaluation of its effectiveness to ensure a fruitful strategic alliance.

CHC also helps hospitals determine which resources are needed to ensure long-term success. A debt-saddled hospital might need a partner to take on its debt, for example, or an aging hospital may need guaranteed capital for facility upgrades.

At the same time, a hospital should identify and address which factors will attract or repel prospective partners before approaching prospects or distributing a request for proposal (RFP).

Then, CHC assists the hospital in finding a partner that is not only willing and able to provide the needed resources but also has a shared mission and compatible culture. The goal is to achieve a proverbial win-win situation, or at the very least to make sure community-based hospitals stay in the game.

A Thoughtful Methodology

This process enables community-based hospitals to stay in the game and, at its best, brings about the proverbial win-win situation.

Step 1: Consider Partnership Options. When a partnership is the recommended path of pursuit, there are different types of partnership arrangement options available. Educate the hospital board members about the different types of relationships and arrangements that are available.

Step 2: Define Needs. If your hospital seeks a partner, it’s critical to ensure the agreement terms are as advantageous as possible. The hospital board needs to understand the process of finding suitable prospects and the preparation necessary to negotiate the relationship.

Step 3: Boost Appeal. Identify and address factors that will turn off prospective partners before approaching prospects or distributing RFPs. For this process, it’s helpful to look at areas such as staffing, supply chain and the revenue cycle to make the biggest impact.

Cases of Collaboration and Recovery

Huntsville Memorial Hospital, Huntsville, Texas, avoided closure after bankruptcy, survived the pandemic, and repositioned for greater success due to increased community and state cooperation, including partnerships with the prison population in its market. Like Huntsville, hospitals willing to collaborate with regional providers to share costs and resources will be better equipped to sustain local healthcare services.

Another good example is Southwest Health System, Cortez, CO, which is managed by CHC Consulting and utilizes expertise for critical but infrequent consulting projects like charge master reviews. This approach enables the hospital to avoid hiring full-time staff for these roles or outsourcing at high costs. The hospital also collaborates with CHC on financial reporting, allowing the hospital to maintain autonomy over its accounting system and electronic health records, while CHC compiles monthly financial reports.

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