Thursday, November 30, 2006

Shouldering On at Shannon Medical Center

A visit to my primary care physician for a shoulder injury ended up being most educational. People seemed ready to talk about the challenges facing the hospital after the failed merger with Triad Hospitals. Shannon Managing Trustee Len Mertz implied the Shannon Health System would “disintegrate” when he discussed then system CEO Dr. Dan Stultz’s leaving earlier this fall. My visit indicated he is working hard on that strategy.

In a move worthy of the machinations of any HCA leveraged buy out or later public offering, the Shannon Health System plans to spin off unwanted components. Many say the dire financial predicament of the hospital is driving the unit sell offs. Mr. Mertz clearly shared the level of bad debts and charity care in previous news articles. This could lead one to believe the hospital has a negative bottom line and is cash poor. However, that would be in error as a “little birdie” told me. The just closed fiscal year’s EBDITA and Net Income do not indicate an immediate financial crisis.

So what’s happened to Shannon? From my view, it appears to be a crisis of leadership. Administrators, doctors and Trustees don’t want to work together anymore to serve the health care needs of West Texans. So they will take their separate pieces of the pie and go off on their own.

Doctors on the hospital Board of Directors found out about the merger when the deal was announced. One administrator had a new job before the news broke of the merger’s termination.

When I shared the news of the merger with an old friend who worked closely with the man that integrated the system in the mid 90’s he replied, “Margaret Shannon must be rolling over in her grave. The Shannon Trustees must be giggling in the back room knowing they won't have to mess with the hospital any more.”

As for now it appears the Trustees will have to mess with the hospital for a bit longer. The question is how well it can work to meet the needs of one its big customer groups, the doctors. And who will soon own the Shannon Clinic? Many investment houses have increased their exposure to healthcare. Will the Carlyle Group soon have a San Angelo affiliate? As they like to buy and sell organizations for a profit, what might they need to do to grow revenue? Will they need to offer more services in competition with the hospital?

What happens when Shannon Medical Center’s customers are also their biggest competitor? Bush’s free market solutions for health care are playing out in a sinister way in my hometown. Everyone competes like heck for the insured patients, leaving the 28% of our population without health insurance with significantly less access. I see few stepping up to serve this “market”, especially for their elective hospital needs.

My doctor said a new layer of undesirable patients would soon be added to the legions of the uninsured given the President’s Pay for Performance plans. He predicts physicians will allow healthy patients without complications into their practices while shedding those with chronic conditions. After all it’s easier to show a stellar outcome with a healthy patient.

Let’s see... the Bush health care agenda encourages

1) Healthier patients to migrate to high deductible health plans
2) Pay for performance encourages doctors to see healthier patients with less complications
3) 80-90% of Non-profit community hospitals are in some form of financial distress
4) Republicans want to tax those same non-profit community hospitals

It appears Bush wants insurers and doctors to serve the healthy while many nonprofit community hospitals are at risk of shuttering their doors. Might we need a program titled No Patient Left Behind (that has no actual resemblance to its education counterpart)? Actually we needed it back in 2001, before the ranks of the uninsured grew by 6 million on Bush’s watch…

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