CLAXTON — The reasons given for 49-bed Evans Memorial Hospital in Claxton entering a “strategic partnership” with much larger Memorial Health in Savannah mirror the struggles of small, rural hospitals nationally.
“We knew that we were going to have to align ourselves with someone to help us make sure that we had a good niche in the market and who could help us try to strategize and figure out what to do when the rules come out,” said Evans Memorial Hospital CEO Martha Tatum.
The rules, yet unknown, are those that will affect hospitals under the Affordable Care Act, popularly known as Obamacare, as it is implemented. The new national health insurance law adds to uncertainty created by changes in Medicare and Medicaid, Tatum said in an interview. Dealing with this uncertainty, reducing costs through Memorial Health’s purchasing power, and getting help from the Savannah teaching hospital in recruiting physicians were reasons officials noted for the agreement announced Thursday.
Similarly, difficulty recruiting doctors to rural areas and limited resources for adjusting to the Affordable Care Act, as well as high costs relative to revenue, were identified in an April 2011 American Hospital Association report on challenges facing rural hospitals.
“Some rural hospitals have formed strategic alliances with metropolitan or other rural hospitals across a region,” said the report, online at www.aha.org/research/policy/2011.shtml.
In 2013, various kinds of affiliations are becoming more common for Georgia’s small rural hospitals, Georgia Hospital Association spokesman Kevin Bloye said.
For some small rural hospitals, teaming up becomes a matter of survival. About one-third of Georgia’s hospitals reported financial losses last year, including nearly half of rural hospitals, Bloye noted. Georgia has lost two rural hospitals already in 2013. Calhoun Memorial Hospital in Arlington closed Feb. 1, and Stewart-Webster Hospital in Richland followed in March, according to the association.
“Rural hospitals are having a more difficult time keeping their doors open,” Bloye said. “And so we are seeing these kinds of arrangements, partnerships, happening throughout the state.”
He listed two recent purchases of small hospitals by larger ones, and also cited the partnership begun a year ago between St. Joseph’s/Candler in Savannah and Wayne Memorial Hospital in Jesup.
Like that agreement, the one announced in Claxton this week is neither a purchase nor a management takeover.
“This partnership is not about control or management,” Memorial Health CEO Maggie Gill said. “We respect the autonomy and the strong reputation that Evans Memorial Hospital has in this community, but there are things that we can do together that will make this community stronger and, in turn, our region stronger.”
Memorial Health, a not-for-profit corporation created on behalf of Chatham County, owns 610-bed Memorial University Medical Center and a number of clinics in Savannah. With about 4,500 employees, Memorial Health is Chatham County’s second-largest employer, Gill said.
But Evans Memorial Hospital, employing about 200 people, is an important employer for Evans County and has a $50 million annual budget.
Founded in 1968, it is publicly owned by the Hospital Authority of Evans County and run as a nonprofit corporation. Although licensed for 49 beds, the acute-care hospital maintains just 27, more closely matching its patient numbers. Carroll Anderson, who chairs both the Hospital Authority and the EMH Inc. board, also emphasized the hospital’s continuing independence.
“Most importantly, this agreement ensures that Evans Memorial Hospital will remain locally owned and operated,” Anderson said. “Memorial will not manage us or buy us. The two organizations will work together in a mutually beneficial relationship.”
It’s part of a long-range survival strategy for Evans Memorial, which has gone through financial ups and downs.
“Well, honestly I think it’s both,” Tatum answered when asked whether the affiliation is an effort to keep the hospital open or to improve health services for Evans County.
Shoring up revenue
After previous years’ staffing cuts and experiments with outsourcing, EMH Inc. posted a $1.5 million loss two fiscal years ago. Then, in April 2012, Evans Memorial’s boards requested proposals from health-care organizations to partner with, lease or buy the hospital. Meanwhile, EMH was also looking for a buyer for its largest off-campus asset, a 160-bed nursing home in Glennville in Tattnall County.
AdCare Health Systems bought Glenvue Health and Rehabilitation last summer for $8.24 million. After paying off debt on the nursing home and other expenses, the hospital cleared $4.6 million on the sale, the Claxton Enterprise reported.
For the hospital’s 2011-12 fiscal year, which ended Sept. 30, the sale proceeds boosted revenue above expenses from an operating gain of about $250,000 to $4.86 million.
The hospital also used some of the cash to set up a second year’s reserve for payment on its long-term bonds, Tatum said. By banking the rest, the hospital will also able to buy some new equipment without taking on more debt.
In this bolstered condition, Evans Memorial’s boards then received proposals for the hospital itself from four organizations: Memorial Health, St. Joseph’s/Candler, Community Hospital Corp. and Health Management Associates, or HMA.
Only HMA, which operates East Georgia Regional Medical Center in Statesboro, made a proposal to buy the Claxton hospital. But HMA soon suspended its offer, and by then, Evans Memorial’s boards had decided they were not interested in selling, Tatum said.
They also were not especially interested in a complex affiliation proposed by out-of-state Community Hospital Corp., but talked further with both Memorial Health and St. Joseph’s/Candler.
“It was very hard to decide because they’re both good organizations,” Tatum said.
But her hospital’s boards in January unanimously approved the agreement with Memorial Health. As of Thursday’s announcement, officials still had few specifics about how it will work.
Tatum said there is no intent for any job reductions. No other changes affecting employees have been announced at this time, although she mentioned benefits as one area where the two hospitals may work together.
Gill suggested that the Claxton hospital’s employees could be offered training opportunities at Memorial Health.
New services might be developed, said officials of both hospitals, but they had none to announce.
Physician recruitment is one area in which Evans Memorial has an immediate interest. Memorial University Medical Center is a teaching hospital where new physicians complete their residencies.
“With Memorial’s residency programs and the fact that we graduate approximately 40 residents each June in internal medicine, family practice, general surgery and pediatrics, we have the ability to help Evans recruit physicians to this area that will strengthen this community,” Gill said.
Doctor turnover has been a challenge for Evans Memorial. Dr. T.J. Miller, who grew up in Claxton, is scheduled to open a family practice there in August, Tatum noted. But this follows the departure of one doctor in March and another’s reducing his time at an EMH-owned clinic to one day a week.
For buying supplies, the agreement will put Evans Memorial in league not only with Memorial Health, but with Memorial’s existing purchasing agreement with Novant Health, a North Carolina-based nonprofit hospital group.
“We’re very excited about this collaborative process that we think will be mutually beneficial to both hospitals, creating efficiencies, and we’re confident we’ll deliver better health care for all of our constituents in the region,” Memorial Health Chairman J. Curtis Lewis III said.
Memorial Health hopes to gain referrals to its hospital and specialty doctors for services that cannot be performed in Claxton, Lewis added.
The Claxton hospital’s leaders acknowledged a desire to work with Memorial Health in this way, but noted that doctors and patients ultimately decide which hospitals to use. Evans Memorial can still transfer patients to St. Joseph’s/Candler, East Georgia Regional Medical Center and hospitals in Augusta, as well as Memorial Health.
“If they want to go to another hospital, that’s where they’d go, because the patient tells you where they want to go. You can’t force someone to go to a hospital,” Anderson said.