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fr gorbyFor someone who has spent most of her life in Ohio, moving to the mountains of Western North Carolina has been a dream come true for Karen Gorby.

Angel Medical Center in Franklin may soon come under the wing of Mission Hospital in Asheville.

Smaller, rural hospitals are increasingly forging partnerships with larger hospitals as it becomes tougher financially to go it alone. Angel’s 15-member hospital board unanimously voted to explore an affiliation with Mission for both financial reasons and in hopes of improving health care in the community.

“There is no question there are some financial advantages,” said Angel CEO Tim Hubbs. Particularly when it comes to economies of scale when ordering supplies and negotiating purchase contracts.

“They have more negotiating power than us. We are one-twentieth of their size,” Hubbs said.

Mission brings in more than $1 billion in net patient revenue a year and has 800 doctors that practice there. Angel has 41 physicians and averages about 15 patients staying each night in the hospital

Medical care for people in Macon County could also benefit, Hubbs said. Doctors would have the benefit of consulting with specialists over cases and diagnosis. Ideally, doctors from Mission in more specialized fields would be willing to hold office hours in Franklin certain days of the month, helping patients who now have to travel out of the county. Hubbs said Mission won’t try to compete with established practices in Franklin, and would only make forays into specialties that Macon County doesn’t have the patient base to support.

Last year, Haywood Regional Medical Center joined forces with WestCare hospitals in Sylva and Bryson City. The trio then entered a management contract with Carolinas HealthCare System, a massive conglomerate based in Charlotte with 32 hospitals under its umbrella.

Two years ago, that number was just 22 — showing just how rapidly rural hospitals are affiliating with bigger institutions.

Mission, meanwhile, has partnerships with the hospitals in Spruce Pine and McDowell County. The hospital in Brevard is exploring an affiliation with Mission as well.

Hubbs said the Angel hospital board feels Mission is a better fit than jumping on board with WestCare and Haywood. Hubbs said Angel has a long-standing relationship with Mission already, and Mission has continually broached the subject of an affiliation with Angel over the years.

Mission vied for an affiliation with WestCare and Haywood but was beat out by Carolinas. That makes Angel all the more important strategically for Mission as it aims to transition from its reputation as the go-to regional hospital for advanced procedures to a flagship institution at the head of a regional network.

“I know they would love to see other hospitals in the region join them as well,” Hubbs said. “I think they have to figure out what they can bring to the table.”

Mission was too close for comfort for many Haywood physicians, who felt the proximity makes Mission more of a competitor than potential partner. Franklin physicians could feel the same way toward WestCare. Several medical practices in Sylva have satellite offices in Franklin, capturing patients who are then seen at Harris instead of Angel.

Hubbs said the presence of Sylva-base physicians in Franklin has been mutually beneficial in ways, however.

“WestCare over the years has provided office space over here to give their physicians fuller practices, and we also had some weak spots in terms of physicians in our own community,” Hubbs said.

An affiliation with Mission could take many forms, from an outright sale of the hospital at one end of the spectrum to a management contract on the other. Hubbs envisions something in the middle, with some level of shared ownership yet a measure of local autonomy.

“We wouldn’t want Mission to be able to control all things,” Hubbs said.

Hubbs said Angel Medical Center has lost money the past two years, though he would not share hard numbers. The hospital’s financial statements are private.

The loss is largely due to upfront costs of new equipment and recruiting new doctors, both of which will reap benefits down the road.

“We have been making heavy investments in the future,” Hubbs said.

One of three hospitals courting Haywood Regional Medical Center and WestCare for a partnership has dropped out of the running.

That leaves Mission Hospital of Asheville and Carolinas HealthCare System, a 23-hospital conglomerate based in Charlotte, still in contention. Both have submitted formal proposals, kicking off the next round in the lengthy affiliation process.

WestCare and Haywood Regional have each appointed blue-ribbon committees to steer the process. They will hold a joint meeting Monday (Feb. 16) to review the proposals and kick off discussions of which one is best. The formal proposals are a follow-up to talks held with the entities last summer.

While there’s only two left at the table, others would likely be interested in a partnership with Haywood Regional and WestCare. But invitations were only extended to the three. A fourth was ruled out following the discussions last summer, and others were ruled out earlier in the process.

It could be another six months before WestCare and Haywood Regional have made their decision. They have to weigh what each brings to the table, from medical expertise to a cash infusion, said Mike Poore, CEO of Haywood Regional.

An affiliation could follow a tier of options: an outright merger, a long-term lease, a year-to-year contract or some sort of loose partnership.

While playing Novant and Carolinas against each other would certainly give the home hospitals leverage in the negotiations, Haywood and WestCare still have plenty of bargaining power. If neither proposal meets the standard they want, they can simply choose none of the above, said Haywood County Commissioner Kirk Kirkpatrick, an integral player on the steering committee.

“If either is not beneficial to both Haywood and WestCare then we have to reconsider,” Kirkpatrick said. “It would be bad business not to.”

If neither of the large entities works out, Haywood and WestCare could still pursue a partnership of their own without hitching up to a larger entity.

“I feel like we have a qualified and competent CEO at Haywood and West Care. If they can put something together for the benefit of the entire community they will,” Kirkpatrick said.


Conservative times

Novant will not say exactly why it pulled out, although the economy is a likely culprit. Novant operates Forsyth Medical Center in Winston-Salem and a host of smaller hospitals across the state.

A spokesperson for Novant said the hospital was honored to be a top contender, but could not over extend itself at the moment.

“After careful evaluation, we concluded that we needed to focus on our current commitments to capital projects,” said Freda Springs, media spokesperson for Novant.

Novant is building brand-new hospitals in Kernersville and Brunswick County, both in the ballpark of $100 million. Springs said the hospital would not comment further.

Neither Poore nor Mark Leonard, WestCare’s CEO, had additional insight as to why Novant dropped out.

“That is for them to explain if they choose to explain it,” Leonard said.

The letter from Novant announcing its withdrawal was only two paragraphs. Poore speculated, however, that is was likely the economy.

“They are like everybody else, trying to look at the economy and trying to decide what the future is going to be and none of us really know that,” Poore said.

If hospitals are reining in their resources, the deals on the table today might not be as good as they would have been two years ago, or two years from now. But Poore said there is no way of knowing that.

Poore’s bottom line: “This hospital is going to survive and thrive no matter what the affiliation is.”


Secret for now

For now, the public is largely in the dark about the nature of the proposals, or even what type of affiliation WestCare and Haywood are willing to entertain. WestCare and Haywood won’t release the letters sent to Mission, Carolinas and Novant inviting them to make a pitch — which would likely shed light on exactly what the home hospitals hope to get out of the deal.

They also won’t make public the proposals that came back from Mission and Carolinas. Carolinas and Mission don’t want their private business information shared, and might not have sent proposals if they thought they would be made public, Poore and Leonard said.

“Although we are bound by confidentiality agreements to not give out details of the proposals, we will continue to let the community know about the evaluation process and where we are in it,” Leonard said.

The process is fraught with complexity, with each entity forced to share inside details of their operations to accurately size each other up, but wishing they didn’t have to. While Haywood and WestCare shared information with Carolinas and Mission so they could craft their pitches, it’s not being swapped with each other. For now, the two are still technically competitors.

Another factor in play is anti-trust laws. If Haywood and WestCare joined, especially with Mission, they could be subject to anti-trust regulations.

“We are trying to deal with a pretty complicated situation. There are a lot of moving parts,” Poore said. “We have been very forthright — as much as we can — during the whole process.”

Many in the medical community have expressed concern over an affiliation with Mission, fearing it would steal local specialists and siphon the most profitable operations away to the flagship in Asheville. Mission has insisted it wouldn’t do that, and they are still considered in the running.

“It will be premature to say one organization has a lead over the other at this point,” Leonard said. Besides, the decision rests in the hands of WestCare’s and Haywood’s hospital boards, he said. They likely have a long way to go before reaching a final decision.

Depending on the arrangement, Haywood Regional Medical Center could face an added layer of scrutiny, and a significant one at that. If the arrangement takes the form of merger or long-term lease, final approval rests with county commissioners.

Haywood Regional is a public hospital, and state statute gives final authority to the county’s elected leaders rather than the appointed hospital board. The statute also requires all proposals for an affiliation — not just the one the hospital says it wants — to be made public so county residents can see for themselves the options on the table. It also requires two formal public hearings to provide for public input.

Poore said once the hospital gets further along with its own decision, it will begin following the state statute requiring public involvement.


Why affiliate?

Health care conglomerates, often organized under one flagship hospital, are increasingly common. On the other hand, rural hospitals flying solo are increasingly rare.

“The growing demands of providing healthcare have jeopardized the mission of small rural hospitals,” said WestCare CEO Mark Leonard.

Smaller hospitals are struggling to stay relevant in the rapidly changing world of health care. Doctors are more specialized, while equipment is more sophisticated and expensive. Theoretically, a larger patient base — achieved by pooling patients from more than one county — can justify the cost of providing the service. Those who don’t band together but opt to compete can end up unable to provide an advanced level of health care.

The economy has exacerbated the challenges, as more patients fail to pay their medical bills or turn to the emergency room for basic treatment, Leonard said.

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