July 1, 2011
As Colorado Springs ponders what it wants to do with the city-owned Memorial Health System, Memorial CEO Dr. Larry McEvoy has been relentless in pitching his vision for Memorial.
If the city agrees to turn the hospital into an independent nonprofit, McEvoy says, Memorial would build an integrated physician network where primary care doctors and specialists work closely with the hospital, develop joint partnerships to expand or create new services, and broaden Memorial’s service area to all of southern Colorado by partnering with rural hospitals and other providers.
Nearly lost amidst the furor over Memorial’s future is what’s going on at the city’s other hospital system, Penrose-St. Francis Health Services, which in recent years has developed joint partnerships to expand or create new services, signed agreements with rural hospitals and is developing an integrated physician network where primary care doctors and specialists will work closely with the hospital.
That doesn’t come as a surprise to McEvoy.
“When you hear about health care systems all trying to do the same things, there’s a reason for that: They are,” McEvoy said. “Everyone is trying to do the same thing.”
What’s telling is that Penrose-St. Francis, part of the faith-based, nonprofit Centura Health hospital network, has seen its admissions jump while Memorial’s have fallen: Penrose’s share of the Colorado Springs market has risen from 38 to 42 percent since 2008.
Under the leadership of McEvoy and Penrose-St. Francis president and CEO Margaret Sabin, relations between the rival hospital systems have been cordial and they have worked together on certain initiatives. But Memorial and Penrose are still competitors. Sabin said the 38 percent market share Penrose-St. Francis had when she arrived in 2008 was unacceptable and she plans to reach parity with Memorial in the near future.
“I told Larry McEvoy that we need to grow,” Sabin said. “We need to get to 50 percent and we will.”
For its part, Memorial has been consumed with the ownership and governance question, which a citizens committee spent most of 2010 studying before recommending the nonprofit option McEvoy favors and which a City Council task force is now re-examining. The hospital’s uncertain future has stymied its ability to move forward on strategic plans and is contributing to the decline in admissions, McEvoy said.
“If you’re a physician whose practice economics are unstable under your feet, you’re looking for long-term stability,” he said. “As docs look at the conditions their small practices are under, they’re not in a position to wait.”
As far as market share goes, however, McEvoy said he’s not worried about Penrose-St. Francis catching up.
“Our belief is that it’s healthy to have two roughly equivalent systems,” he said.
Health care reform pushing hospitals to broaden borders
The tricky thing, McEvoy and Sabin agree, is that all of the trends in health care are aimed at reducing the use of hospitals and getting patients treated in less acute, less expensive settings. And a half-empty hospital isn’t a resource, it’s a liability.
“Those kinds of changes are happening all over the country,” said Steven Summer, president and CEO of the Colorado Hospital Association. “If care is done the right way, there will be less beds filled.”
One way to keep beds filled, as well as boosting outpatient services and the bottom line, is to broaden the hospital’s reach. In addition to her duties at Penrose-St. Francis, Sabin oversees St. Mary Corwin Medical Center in Pueblo and St. Thomas More Hospital in Cañon City for Centura. One of her priorities is getting Centura’s southern Colorado hospitals to operate as a unit.
“We’re behaving more as one network,” Sabin said.
Centura is also branching out: It signed affiliation agreements with San Luis Valley Regional Medical Center in Alamosa last year and with Heart of the Rockies Regional Medical Center in Salida earlier this year.
For an urban hospital like Penrose-St. Francis or Memorial, along with beds and budget, expanding its patient base means bringing in more patients for specialized care, keeping surgeons and specialists sharp. For the rural hospitals, the partnership means access to resources. For instance, Centura sent a team to help San Luis through a trauma certification and is helping to bring a cardiology practice to the region.
“It really says that we will look to each other first to solve our clinical needs and to develop clinical programs,” San Luis Valley CEO Russ Johnson said of the affiliation agreement. “If (our doctors) need a specialist or a consult, they can call the Centura Connect number and talk to a specialist in their system within five minutes.”
Heart of the Rockies CEO Ken Leisher said the alliance isn’t an exclusive arrangement, but makes Centura the preferred partner.
“As we look at providing new services, we would look to Centura first to see if they could supply them,” he said.
Memorial hasn’t forged similar alliances yet. As a city-owned hospital, McEvoy said, signing agreements and sending resources outside of the city limits would require City Council approval and could run into legal and logistical snags. However, if the city makes Memorial an independent nonprofit, creating those ties would be a top priority, he said.
Eighty-seven percent of Memorial’s patients come from El Paso and Teller counties. That’s a narrow base to draw from, McEvoy said.
“The secondary and tertiary service areas have a big population that we haven’t tapped into,” he said.
Last week, the City Council task force weighing Memorial’s future invited Rulon Stacey, CEO of Poudre Valley Health System in Fort Collins, to speak. Poudre Valley is a former county-owned hospital that became an independent nonprofit in 1994 and has since grown to one of the state’s largest independent health systems.
Stacey said an independent Memorial could forge partnerships with physicians and hospitals across southern Colorado and become an economic engine for Colorado Springs — a formula that he said has been the key to Poudre Valley’s success. Forty percent of Poudre Valley’s admissions come from outside its immediate service area. There’s no reason Memorial couldn’t do the same, he said.
“There are hundreds of millions of dollars and patients waiting to be served if you can figure this thing out,” Stacey said.
Hospitals and doctors sharing a tent
One area where Memorial may have a head start is in building a physician network. While hundreds of doctors have privileges at each of the hospitals, only a handful are directly employed by them. That’s likely to change in the coming years, as changes to reimbursement for both hospitals and doctors are pushing them into closer partnerships.
“The new wrinkle that’s happening right now is the changes in reimbursements that have tipped the balance in favor of employment,” said Dr. Jim Reinertsen, a health care consultant and former hospital CEO based in Wyoming. “Doctors are much more valuable inside the tent than outside the tent right now.”
Signing up doctors willy-nilly, Reinertsen warned, is likely to be counterproductive. What hospitals need is a shared vision and mission with their physicians.
“To me, the successful hospitals are going to think that one through very carefully,” he said. “They’re not going to chase every doctor in town.”
Memorial launched its Memorial Physician Network last year and plans to hire as many as 30 doctors this year. It signed its first large practice last month, hiring the eight physicians of Associates in General and Vascular Surgery. Those surgeons were already tightly aligned with Memorial — not even their name badges will change with the shift — but Dr. David Corry, who heads the practice, said it’s a sign of things to come. Coming inside the Memorial tent will improve patient care by creating a deeper team of caregivers that work more closely together, he said.
“We are not getting any kind of better financial deal” by being employed, Corry said. “What we’re getting is the ability to integrate the care that we provide.”
Memorial’s future was a concern, Corry said, but not a deal-breaker. That’s not the case for many local doctors, said Mike Scialdone, Memorial’s chief financial officer. There’s too many questions and too much uncertainty for Memorial to be an attractive partner, he said.
“Health care is in turbulent times,” Scialdone said. “Our message is, ‘We think we have a great life line for you, but we can’t throw it to you right now or tell you what it’s really going to look like.”
Centura has a doctors network in Denver that employs more than 300 physicians. At Penrose-St. Francis, an integrated physicians network is still in the planning stages, but Sabin expects to move forward aggressively in the coming months. They don’t all need to be hired by the hospital for integration to work, she said.
“There are four or five different ways we could partner with doctors and we’re going to pursue all of them,” Sabin said.
In addition to the physician networks, both hospitals hope to pursue joint ventures with doctors’ groups on everything from office buildings to new clinics. The high profile example here is the agreement Penrose-St. Francis and Rocky Mountain Cancer Centers signed in December. Before the agreement, Penrose-St. Francis and Rocky Mountain provided competing services, while now Penrose-St. Francis provides radiation oncology services while Rocky Mountain focuses on medical oncology such as chemotherapy. For its part, Memorial provides both kinds of treatments.
Memorial has tried such joint ventures in the past, although they required City Council’s approval. It ended a partnership for an outpatient surgical center earlier this year and brought the facility in-house. Memorial still has a joint venture with a group of gastroenterologists.
All of this talk of teamwork raises the question: Is this like choosing sides for a pick-up game?
If Penrose-St. Francis is doing all the things Memorial is planning, will all the best players be taken already if the city does decide to spin the hospital off?
That’s a concern, McEvoy acknowledges, but as a smaller, independent system, he hopes Memorial will be a more attractive partner for some hospitals and physicians than Centura is.
“It hurts Memorial if they’re so good at it so fast that there’s just no room for us,” McEvoy said. “One way you could look at it is, ‘first is best.’ Our goal is to do it better.”
However, he said, the clock is clearly ticking and the sooner Memorial moves, the better its long-term chances are.
Over at Penrose-St. Francis, Sabin said she is committed to making these changes first — and best.
“I think we have shown that we are going to be the preferred partner,” she said. “I have nothing but respect for Memorial (but) we are better positioned.”