How ailing community hospitals can improve performance
Awareness, analysis and action seen as key steps in restoring financial health
More than 800 U.S. hospitals are at risk of closure, with rural hospitals accounting for 40 percent of that total, according to one published report. The pandemic heightened the financial challenges facing community and rural hospitals. The good news? Troubled community hospitals have options beyond closing or putting up a “for sale” sign. Jim Kendrick, CEO and President of Community Hospital Corporation, offers guidance to help community hospitals regain their financial footing.
What do you say to a hospital executive or board member concerned their hospital may be forced to close?
JK: In certain cases, closing a financially strapped hospital may be the only option. In many instances, however, community hospitals facing serious challenges can employ performance-improvement strategies that will make them financially viable, and allow them to continue providing quality healthcare to their community.
For this to happen, hospital leaders must recognize the problems facing their facilities and promptly take corrective measures. This may require outside assistance from external organizations that can provide a roadmap for stabilization and continued success.
What steps should hospitals follow to improve their performance?
JK: Regardless of the challenges faced, hospital leaders must carefully assess the situation before deciding on an action plan.
A comprehensive operational assessment includes a thorough review of operations that identifies strengths, areas for improvement, and a step-by-step performance enhancement plan. The assessment begins with an extensive review of data and documents, along with one-on-one interviews with those whose perceptions and historical knowledge of the hospital are essential in creating long-term financial sustainability.
The assessment should focus on key areas of hospital operations including finance, physician relationships, clinical services and information technology. The final step in the assessment is to produce a report that analyzes vulnerabilities and opportunities in each focus area along with benchmark comparisons with similar hospitals. Next, a corresponding action plan can provide leaders with a roadmap for organizational improvement.
How does a hospital return to a sustainable path?
JK: Because of the challenging environment, community hospitals must look for every opportunity to improve their financial position. Key areas include improving reimbursement structure, recruiting the right mix of physicians, and reducing supply chain expenses.
What difficult decisions challenge leaders most?
JK: Community hospital leaders will be forced to make several tough decisions. One strategy they may need to consider for a turnaround is bankruptcy. More and more hospitals have averted permanently closing their doors by declaring bankruptcy to bring financial relief. Another strategy is to explore mergers and other partnership options. Discontinuing certain clinical services is another strategy that can help strengthen a hospital’s balance sheet.
To succeed in today’s challenging healthcare climate, community hospitals must avoid a “business-as-usual” attitude and continually strive toward embracing bold innovative ideas to maintain a high level of performance.
Is there hope for a community hospital after it enters bankruptcy?
JK: Absolutely. For instance, CHC played an active role in helping two Texas community hospitals, Huntsville Memorial Hospital in Huntsville, and North Texas Medical Center in Gainesville, which are now thriving after emerging from bankruptcy.
In the case of Huntsville Memorial Hospital, the facility successfully emerged from bankruptcy. The hospital was on the brink of closure, but today, the 123-bed, not-for-profit acute care community hospital has demonstrated considerable financial, operational and clinical performance improvement. This success story has been critically important because over the last 12 months this hospital successfully treated hundreds of area residents infected with the COVID-19 virus.
CHC also helped North Texas Medical Center, a rural 60-bed acute care hospital, get back on track after the Gainesville Hospital District leveraged bankruptcy to develop a plan to restructure debt, pay creditors and keep NTMC open. Today that hospital has been restored to financial and operational health.
What are the tools and other resources that community hospitals need to be successful?
JK: The key elements of a successful turnaround include leveraging economies of scale, disciplined monitoring, strong leadership and partnering with organizations like CHC that provide critical information, resources and expertise. Underperforming hospitals require a comprehensive set of tools that increase awareness of their situation, analyze their problems, and take the appropriate corrective actions needed to provide the highest quality of care to their communities.