Columbus Regional Health System’s Board of Directors has authorized the organization to explore the possibility of entering into a “strategic affiliation or partnership with another health-care organization,” President and Chief Executive Officer Scott Hill confirmed on Thursday.
The decision was made during a weekend board retreat and the nonprofit company’s nearly 3,000 employees have been notified, Hill said.
“There are organizations like ours and others that have been independent health systems for a long time are saying to themselves, ‘We probably need to be having conversations with a larger organization so you can get the scale you need to survive in the future of health care,” Hill said.
Columbus Regional has already been approached by other health care systems, Hill said. He did not name them.
After Columbus Regional settled a whistle-blower lawsuit against the John B. Amos Cancer Center last fall that could cost the organization as much as $35 million, Board Chairman Warren Steele said he asked Hill to work toward a long-range financial plan.
“We hired consultants Kaufman Hall & Associates and they came up with a thorough five-year plan,” Steele said. “We reviewed it in December and then again in January. Based on that, we made the decision to form a Strategic Planning Committee and see what the options are.”
It is vastly different than what happened on Manchester Expressway. We have the ability to say no.
The decision to have conversations comes in a rapidly changing health-care environment that makes bigger better as the Affordable Care Act begins to take hold. In the last 12 months, there have been eight hospital acquisitions or mergers, including the deal that closed in December where a Tennessee company acquired St. Francis Hospital, which had been in a deep financial crisis for more than a year.
The process that Columbus Regional will undertake is a “dramatically different situation” than the one at St. Francis, Hill said. St. Francis operated as a nonprofit before being acquired by LifePoint Health to avoid a potential bankruptcy filing.
“It is vastly different than what happened on Manchester Expressway,” Hill said. “We have the ability to say no.”
Columbus Regional’s current financial situation has improved significantly in the last year, Hill said. After three years of operating losses, including a $38 million deficit in fiscal year 2014, Columbus Regional is expected to post a modest surplus between $8 million and $10 million when the current fiscal year ends in two months.
“That is nearly a $50 million improvement,” Hill said. “We did a lot of work inside the organization to get expenses under control. We have done a lot of work on efficiency. We have done a lot of work on controlling length of stay. There is a lot that goes into a swing that big and expense management is a big part of it. … And we have also seen growth in surgical volumes at Midtown and Northside Medical Center. We have double digit growth at the John B. Amos Cancer Center this year.”
Columbus Regional, according to information it released Thursday, has 130 days of operating cash on hand, totaling more than $150 million. Given the relative financial strength, this is the right time to start the process of talking about alignments and mergers, Hill said.
“We are not in a position where we have to seek a partner,” Hill said. “It is about finding the right fit. If we can’t find an organization that believes in the same things we believe in and fits well in the Columbus community, then we will remain independent. If we can find a good fit and a partner out there who seems like a good fit, not just for Columbus Regional Health but for the community, then we will probably pursue a partnership.”
This is the right time to explore the possibilities, Steele said. Columbus Regional would like to expand the Amos Cancer Center and has been approved to add an emergency room at Northside Hospital.
“The fact that we are doing so well and beating the budget for this year makes the timing right,” Steele said. “If we want a partner, the best time to start looking is when we have the ability to dictate terms. We are profitable and we can tell them what our needs are. ... We are going to look for the best fit for the community first, then the best fit for the health system.”
This is happening throughout the industry and state, Hill said. Wellstar Health Systems, the largest health-care provider in Georgia, recently acquired West Georgia Health in LaGrange and five Tenet Health hospitals in metro Atlanta. Piedmont Health of Atlanta, like Wellstar a large nonprofit, recently acquired Athens Regional Health System.
“It is almost like a throwback to the days of the HMOs of the 1990s,” Hill said. “The insurance companies would like to say, here’s 5,000 people you manage them and here’s your check. If you provide savings, we will share the savings with you. ... It is about risk and managing risk.”
The board wants to evaluate whether a strategic partner or an affiliation would be something that would be good for this organization. These conversations are going on all over health care in the United States today.
And Columbus is no different. There were eight hospital mergers in Georgia last year and nationwide there were more than 100.
“The reason why is because of what has happened with health-care reform,” Hill said. “There is an intentional focus within the health system today for driving costs down, enhancing quality and patient experience and managing the health of large populations of patients. That is where the future of medicine is.”