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RBJ 75: Ontario County health systems chart own paths

Like all U.S. health care providers, Finger Lakes Health and Thompson Health face uncertainties and challenges as the nation’s health care reform rolls out. But the two health systems, respectively Ontario County’s largest and second-largest employers, are following different paths.
In a move officials said was needed to maintain and expand its services in a reform environment, Thompson Health last year became part of the University of Rochester Medical Center.
While Finger Lakes Health faces similar challenges, unlike many of its peers it has so far seen no need partner or merge with a larger, urban health system and believes it can steer clear of such a move indefinitely, CEO Jose Acevedo said.
Centered at Ontario County’s eastern edge in Geneva, Finger Lakes Health runs Geneva General, a 132-bed community hospital in Geneva, and Soldiers & Sailors Memorial, a 25-bed general acute-care hospital in Penn Yan. Its system spans four counties-Ontario, Wayne, Seneca and Yates-and includes four nursing homes and an outpatient surgery center. Finger Lakes Health employs roughly 1,750 people and had $159.3 million in revenues last year.
Based at the northern tip of Canandaigua Lake, Thompson Health operates the 113-bed F.F. Thompson Hospital in Canandaigua, as well as practice groups in Ontario and Livingston counties, a long-term care facility and two senior living communities. The system employs 1,320 and reported 2012 revenues of $112.9 million.
Thompson Health booked a $5.4 million loss last year. The red ink was largely due to costs associated with implementation of an electronic medical records system, CEO Michael Stapleton said. Through May of this year, the system was running in the black with a 1.2 percent operating margin, he added.
Many U.S. health systems running hospitals that fit the profile of Geneva General, Soldiers & Sailors or F.F. Thompson-small facilities in rural, semi-rural or suburban communities-face a common challenge: lack of demand. Their patient volumes typically do not generate revenues sufficient to maintain facilities adequately and make it hard to recruit and retain medical staff.
New reimbursement schemes arriving as part of health care reform often exacerbate the problem. Though they are still evolving, the new payment models favor large, well-staffed organizations able to deploy the sophisticated and expensive information technology needed to track and tightly coordinate care.
For many already-stressed community hospitals, the only way to meet such demands is to let themselves be taken over by or at least accept the help of a larger system. For many communities, a takeover of their locally run hospital is a bitter pill to swallow.
Still, a growing list of area hospitals have either merged or formed alliances with larger systems or are actively investigating alliances. They include Nicholas Noyes Memorial Hospital in Livingston County, Clifton Springs Hospital and Clinic in Ontario County and United Memorial Medical Center in Batavia.
Despite having allied with URMC, a financially strained Lakeside Health System shut its Brockport hospital in April. URMC is seeking permission to reopen the Brockport hospital as a freestanding emergency-care center under Strong Memorial Hospital’s license.
In years to come, URMC CEO Bradford Berk M.D. predicted in June, many outlying community hospitals will share a similar fate, converting to urgent- or emergency-care facilities under the wing of a larger system. Berk’s prediction echoed earlier, similar prognostications of Rochester General Health System CEO Mark Clement.
While loss of community control can be an issue in mergers, Stapleton conceded, as part of URMC his system is largely autonomous and for the most part locally controlled.
In the systems’ joining, Stapleton said, Thompson accepted several new URMC board members but retained its existing board of directors and added some non-URMC members. It now has 19 local directors, compared with five URMC-appointed members.
As Thompson’s CEO, Stapleton said, he is largely free to manage the system as he sees fit, as is Thompson’s chief financial officer to manage its finances.
"There’s a dotted line between me and Steve Goldstein (CEO of URMC’s Strong Memorial and Highland hospitals) and a dotted line between our CFO and (URMC CFO) Mike Goonan," Stapleton said.
As part of URMC, however, Thompson has been able to expand services, adding an in-patient dialysis unit, for example, and achieve savings in ways it could never have managed on its own, he added. Under URMC’s wing, Thompson has cut $250,000 a year from its liability insurance premiums and significantly reduced its equipment costs.
And by having its employed doctors and affiliated physicians join Affordable Health Partners IPA LLC, a physician organization URMC began forming in February, Thompson easily will be able to adapt to health care reform’s evolving hospital and physician reimbursement schemes.
The joining of URMC and Thompson so far is "meeting and exceeding expectations," Stapleton said.
While it would not completely eschew relationships with other health systems, Finger Lakes Health can easily adapt to the changing health care landscape on its own, Acevedo said.
"We’re a not-for-profit community organization, and we think we should maintain community control," he said.
To form Finger Lakes Health, Geneva General absorbed and closed two smaller Seneca County hospitals in the 1980s and early 1990s, before its 1998 merger with Soldiers & Sailors. Those consolidations created a system that still functions efficiently, Acevedo said.
"We had $159 million in revenues last year and a $23 million surplus," he said.
The system’s operating margins run somewhat below the 5 percent rate generally considered optimal in the U.S. hospital industry, typically in the 2 to 3 percent range, but provide enough of a cushion to adequately fund needed capital improvements, Acevedo said.
Amid an upgrade project, Geneva General recently completed an emergency department renovation that more than doubled the department’s space. The project added new observation, triage, trauma and resuscitation rooms.
Finger Lakes Health’s IT systems are up to date and capable of dealing with any demands reform puts on them, Acevedo said.
In April, Geneva General stopped delivering babies after the private OB-GYN group that had provided its maternity services switched to RGHS’ Newark-Wayne Community Hospital.
The OB-GYN group decamped "reluctantly," after one of its members retired and another left to join the RGHS staff, one of its doctors said at the time.
The shutdown has significantly increased deliveries at Thompson, Stapleton said.
Geneva General plans to resume deliveries as soon as it can.
"We’ve suspended maternity services; we haven’t ended them," Acevedo insisted.
If the Geneva hospital can find an obstetrician or two to augment the private group’s reduced staff, it can be wooed back, he believes.
"We have no trouble recruiting doctors," Acevedo said.
While the Ontario County health systems’ main hospitals sit minutes away from each other with some 17 miles between them, they don’t see themselves as rivals, Stapleton and Acevedo said.
"We each have our own communities that we serve," Acevedo said. "If we see anybody as competition, it’s Rochester."

7/26/13: RBJ 75 Special Supplement (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email [email protected].



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