Thanks to Steve from Ringgold, I've been doing some interesting reading about Palo Verde Hospital in California.
Take a moment to do some reading about their transition from Lifepoint back to a community-based hospital. I would recommend visiting this page on their site:
http://www.mypvh.org/Archive.asp
Scroll down to "PVHD Board Minutes" and then select 05/05/2005 (page 2, section III).
When Lifepoint exited the picture in January of 2006, a new management team took over. From other sources I have read, the new management had to deal with quite a few issues just to survive...a 25% reduction in staff (including key managers), litigation with their medical staff and the physical plant was in disrepair. And, they were paying exorbitant contract pay rates to keep nurses....sound familiar?
Not knowing the full story of Palo Verde, I am certainly not saying that it is an apples-to-apples comparison (they are a much smaller hospital, for one), but it is worth reading just the May 5, 2005 board minutes to hear familiar refrains.
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As a for-profit entity LP is obligated to increase shareholder wealth. This means at some point they have to make a profit and turn over these profits to shareholders. From this standpoint LP has to pay shareholders as well as take care of patients and staff. How can this compare to a non-profit that does not have to pay shareholders. The non-prift can focus on patient care and staff. Take a look at how progressive a non-profit hospital such as Moses Cone can be because everything goes into improving and growing the hospital. If DRMC ever starts making profits, some of it will go away nver to return. People do not buy stock as a charity, they want to make money and that money comes out of the profits of the corporation and in this case that is DRMC.
ie: The old DRMC vs. the new LifePoint DRMC. Profits used to go to expand services, attract staff, and improve the facilites. Should this have been considered and discussed openly with the community PRIOR to the decision to sell? Well boys did you and should it?
Everyone here should call and encourage the members of the citizens commission (Jim Houser, Annette Crane, and Linda Green among others) to spend some time on this blog and it's related links. The insight they would gleen from spending some time on here would be invaluable and save them a lot of time.
Homework review points:
- Early 2007, Lifepoint lowered expectations for their investors:
http://tinyurl.com/2j3jjq
- The article also refers back to a year earlier, when the Lifepoint investor news was quite bleak:
http://tinyurl.com/2ug8ma
- Investor discontent over "problematic acquisitions" cost Lifepoint CEO his job last summer:
http://tinyurl.com/355omt
Take a look at how progressive a non-profit hospital such as Moses Cone can be because everything goes into improving and growing the hospital...........
Has anyone ever considered what the difference is in the payor base for Moses Cone's service area vs the payor base for DRMC ? Apparently not, as DRMC has @ 70% + Medicare / Medicaid payor base d/t the economics in the area. Cone's service area is consderably larger and populated by a large 3rd party payor base composed of private insurance companies.
I don't think anyone is living in denial of the payor mix at DRMC...it's always been that way....or of the demographic differences of Danville and Greensboro.
The payor mix fact is one reason it is such a challenging question as to why LPNT wouldn't do everything they could to secure the percentage of the payor mix that is commercially-insured...and to grow it if possible.
Interesting points, but doesn't late evidence suggest that LPNT sees DRMC as a "fatigued property," to use the old term from the hotel industry? Sure, they kept their financial commitment to dump in the bucks they agreed to, but now????? With the payor base fleeing in all directions, Lifepoint seems to be hanging on until it finds a way to get out.
While that's hell on patients and employees, it could well be in the best interest of shareholders. I think they want out, and it's up to the community to come up with some way to help them get out.
I believe they want out also. Once they've met their contractual committment by mid summer, we may begin to see a slow movement of the "O's" going out the door. My guess is they will remove Bill Keith (current COO) first and Arthur will follow with the final exodus of LPNT leaving the hospital up for grabs to any entity.
What will happen to patients during this transition? What happens to staff? I dare say LPNT will be concerned about either!!!
"Has anyone ever considered what the difference is in the payor base" ......
We are not talking about where the money comes from. The issue is where is it going. The point being a for-profit has to pay shareholders and extra corporate personnel while non-profits do not
Said the hapless fool standing at a craps table in Vegas, having said adios to his last dollar: "Well, there's more where that went!"
For what it's worth, a close friend of mine told me that since he was afraid to go to DRMC for a simple but pretty expensive procedure, he went to Centra Health in Lynchburg. He claimed it was best hospital he had ever seen or heard of--clean, efficient, perfectly organized, on time, etc. Above all, he said it was wonderful to behold the cheerfulness of every person he dealt with--from check-in to check-out.
It is a tragedy that DRMC was heading in that direction....and then it's legs were cut off.
"'Has anyone ever considered what the difference is in the payor base" ......
We are not talking about where the money comes from."
Actually, we are talking about where the money comes from....as commercially-insured patients start voting with their money and choose other hospitals for their care, the DRMC payor mix will become even more slanted towards Medicare/Medicaid. Those, by the way, don't reimburse anywhere near where commercial insurance does...so, LPNT is left to find profit to send back to corporate from a diminishing income from its patients...this can only be done by jettisoning ballast...in other words, more non-essential services and staff.
It's an ugly cycle that will only continue to get uglier.
Exactly! As the payor base decreases so do profits, resulting in less profits for investors, resulting in less staff, less services, less building /equipment maintenance. That in turn results in less patient confidence and the payor base shrinks further, hence the viscious cycle.
The first poster above stated, "As a for-profit entity LP is obligated to increase shareholder wealth. This means at some point they have to make a profit and turn over these profits to shareholders."
I'm not a finance whiz-bang, but it seems to me the first sentence is correct, but the second sentence not necessarily. Some companies' strategy is to jazz the perception and thus the stock value, but not to pay dividends. It appears that LifePoint is one of those. Check:
http://finance.yahoo.com/q?s=LPNT
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