St. Mark’s: More Strategies for the Future

This is a recurring column sharing public information and insight on St Mark’s Medical Center, the needs for health care in Fayette County, and a path forward researched by local resident Sam Wilson.

Reorganization and improved debt management will unquestionably be part of any future hospital strategic plan. Will the community ever trust the CHC-owned SMMC to operate a hospital in Fayette County? That question is yet to be determined, but the patient trends in at least a stable if not slightly growing population provide at least one indicator. Regardless, debt restructuring may be prudent, given current and future reorganization strategies. And better utilizing the 65-bed facility footprint combined with the professional building will be an important aspect of how to restructure debt. If seven years of patient and financial trends suggest anything, it is that judicial (bankruptcy) or non-judicial (debt restructuring) debt management is inevitable, and may lead to the final option for debt management, merger or sale. SMMC is a marketable asset, and while an acquisition is not without challenges, since the larger systems in Austin will absorb the patient flow regardless of acquisition at little or no direct expense, there are benefits to acquisition of the SMMC hospital’s operating assets. The value of the seller’s asset diminishes with each passing day of REH operations, while the corresponding willingness for a “system” to scoop up the asset at a lower cost to value price ratio increases.

Another strategy is implementing telehealth services. One reason for lower utilization of rural hospitals is the lack of specialists to meet every patient need. And patients may be reluctant to trust inpatient, or outpatient surgeries for that matter, where there is a lack of “backup” specialists. Telehealth specialist access is being used by a growing number of small rural hospitals to address the specialist need. Telemedicine eliminates the need for patients to travel to Austin or Houston. Telepharmacy is one of the areas within telehealth that provides convenience with drug therapy monitoring and prescription authorization. Tele-psychiatry can also address the need for behavioral medicine in areas where mental health access is limited.

Yet another strategy is adopting innovative payor models. There are four basic hospital models in the world; the Beveridge model (1946 – UK, New Zealand, Finland, Spain and US Veterans Affairs and Federal Bureau of Prisons); the Bismarck model (1883 – Germany, Japan, France and US through employer insurance programs); the national insurance model (Canada and US Medicare and Medicaid), and the outof- pocket model (US – the under or uninsured). While the term “socialized medicine” is often used to describe the health systems in the UK and Canada, these are not accurate descriptions. All four of these models face challenges and have strengths and weaknesses. All four of these models are in use in the US today. One challenge small rural hospitals face is typically healthcare is a fee-for-service model where the hospital provides the service, and then bills the patient, oftentimes through their insurance, with extended receivables time. Rural hospitals have tighter margins, and the cash flow from third-party payers creates uncertainty and cash flow problems. An unpredictable income stream is part of the problem. The US Centers for Medicare and Medicaid Innovation (CMMI) established a system in Pennsylvania, using a program called the “global budget.” Under this program insurers, including Medicare and Medicaid pay in monthly installments based on average historical revenue. Patients “still pay their co-pay, but insurance won’t pay extra if there are more claims, nor will it pay less if fewer services are needed.” According to Karen Murphy, former secretary of health for Pennsylvania and one of the model’s architects, “The purpose of this is not just to provide a continuous cash flow but also it is designed to give a path for hospitals to transform into services that are much more community focused, and really are based off of what the community needs are.” Like the UK’s Beveridge model, this shifts from treating sick patients, to preventive care that encourages the hospital to provide early care and education, with access to healthcare, perhaps through innovative technologies like telemedicine and telepharmacy, in turn reducing dependency on inpatient surgical care, and access to physicians through the emergency room.

Any entity that is managing a small rural hospital will inevitably face financial challenges. A Fayette Countybased rural hospital will be no exception. The answer is leadership, strategic analysis and planning, astute management, innovative medical service lines that increase revenue, and cost control through better data acquisition and standardized patient protocols. It is likely that at the end of the day, Fayette County will have a facility asset in need of strategic vision, and an innovative operator that brings physicians and patients to a leading-edge affordable hospital. It is possible. It will, however, take leadership and vision from healthcare as well as community leaders, and a willingness to bring the hospital perhaps thirty years forward to truly a 21st century health care provider.

Understanding hospital types, the RH hospital designation, and the Community Health Needs Assessment, and the advantages of a notfor- profit hospital, a review of historical financial operations, potential strategies for the future, the next article will provide insight into St. Mark’s Medical Center’s mortgage and building assets.