As Haywood Regional Medical Center ponders the best way out of its crisis, other hospitals are already making overtures.

The motives are mixed. Some are circling like sharks. Others are more charitable, genuinely concerned that the hospital remain viable.

Attitudes among doctors are equally mixed. On one hand, doctors fear the loss of specialized medical fields. A larger hospital might siphon off those high-dollar specialties and send the business to its flagship, leaving Haywood with more run-of-the-mill medical care. Another fear is the loss of autonomy, followed by an outflow of dollars.

But a merger or partnership might be the hospital’s only way out of its current bind. For starters, it might need the cash infusion a buyout or merger could offer.

The loss of Haywood Regional’s Medicare and Medicaid status — followed by an exodus of private health insurance companies — has left the hospital with less than 75 percent of its normal patient load. Meanwhile, the hospital is bleeding more than $100,000 a day in payroll, not to mention the free medical care being doled out to patients who show up in the ER and can’t immediately be transferred to a neighboring hospital.

If the hospital runs out of money, or bumps into cash flow problems, merging could be the only way to stay viable. A merger or partnership might provide a quick route to a new reputation. A partnership with a larger hospital could also let Haywood doctors tap experts they otherwise wouldn’t have access to.

A committee of 26 doctors will begin exploring the pros and cons of the myriad merger options this week. At the same time, the hospital board and hospital administration will research the options as they see them — including the proposals to date.

The county commissioners instructed hospital leaders to get started immediately. To make sure it’s being done, Commissioner Kirk Kirkpatrick told hospital leaders he wanted a report within the week.

“I know there are some hospitals out there that are interested in some role,” Kirkpatrick told hospital leaders at a meeting last Friday. “That role has not yet been determined, or they might not be needed, but those options need to be looked at.”

Commissioner Skeeter Curtis summed up the county’s fear.

“If we run out of money what are we going to do?” asked Curtis. “That is one of the worst scenarios, but I think we need to look at that and be ready for it if it does happen.”

“We need a plan A and plan B and plan C,” agreed Commissioner Bill Upton. “We can’t wait until down the road when we find out we didn’t make it.”

“We did specify there should be a parallel path,” Commissioner Mary Ann Enloe added. “Every option has to be addressed.”

Commissioners will hear the report Friday at 1:45 p.m. in the commissioners meeting room in the justice center.

Options on the table

As a stand-alone hospital, Haywood Regional Medical Center is in the minority. Roughly 70 percent of hospitals in North and South Carolina are part of a larger hospital system.

A merger could take several forms. The most extreme is a buyout. The hospital would simply be sold, losing all semblance of local control forever. Or it could also be leased — turning over control and management for a limited period of time.

At the other end of the spectrum is a management agreement. The hospital board contracts with a larger hospital to run Haywood Regional for a fee. The local hospital board makes final decisions, however. Under that scenario, the hospital retains local control but won’t get a cash infusion. The more Haywood needs bailing out financially, the more control it will lose.

“If one organization makes a financial investment in another organization, the degree of involvement and control by the organization that made the investment is going to be greater — the greater the investment, the greater the control,” said Bill Moore, vice president of development for Carolinas Medical System, which operates 22 hospitals.

Yet another option is a merger, such as joining forces with WestCare, which operates the hospitals in Sylva and Bryson City. A merger would make Haywood more of a partner, rather than being absorbed in a buyout.

Yet another option is an affiliation or cooperative agreement, as two small hospitals in the region have done with Mission. They got cash and management help from Mission, but retained controlling interest through the local hospital board.

Fear of an outside regime

Partnering with Mission Hospital in Asheville is the first thought for most when contemplating a merger. But it’s the option that elicits the most fear among doctors.

“I am afraid if we were bought out or merged with a nearby hospital like Mission, we would be stripped to the bare bones due to a desire not to duplicate any services,” said Dr. Daniel Fox, an internist with Mountain Medical Associates. “It’s not that I am anti-Mission. It is a fine hospital. I am just worried they would put pressure on us to send our patients to Asheville.”

Some fear that would happen if absorbed by any larger hospital.

“I think lots of rural hospitals that get bought out or absorbed into bigger systems end up getting the short end of the stick,” said Dr. Stephen Wall with Haywood Pediatrics. “They get a lot of services drained away to their flagship — but not always. It might be a good thing.”

Wall said the committee will weigh the benefits against the drawbacks before forming an opinion, but until then, his first choice is staying independent. Dr. John Stringfield with Waynesville Family Practice has similar reservations.

“My first take is I would be really hesitant about having the county or local community giving up ownership of the hospital,” Stringfield said. “You just have a sense or fear if you have an outside authority coming in, they might gut the hospital of those more high revenue services lines like orthopedic surgery.”

Doctors also question whether profits would be re-invested into the hospital or flow out of the county.

“Anyone who takes it over would want some of those profits moving outside the county, so you would have a drain,” Wall said.

Fox said he doesn’t mind answering to an outside entity as long as they do a good job running the hospital.

“I am more concerned about having a functional hospital that everyone is happy with. It doesn’t bother me if Carolinas Medical Center or UNC Hospital is running it. I would much rather that than a county-run hospital that is failing inspections and losing its Medicare number,” Fox said.

Fox said some of the larger teaching hospitals might have a lot to offer.

“A larger hospital with a host of support people and financial backing could send some people in who really know how to run a hospital,” Fox said.

But for most doctors, the only reason to back a merger is financial necessity.

“If all this did not happen, would there be a discussion about partnering? I don’t think so,” Stringfield said. “I would imagine these mergers are all financially driven. I don’t know that there would be any benefit unless there was a financial incentive for that.”

County commissioners agree with the doctors: staying independent would be preferable.

“But because of the hole that’s been dug, you might need to look at other options,” Commissioner Kirk Kirkpatrick said.

Fox said time is of essence. Nurses and doctors could start to leave if solutions don’t appear fast. And as the hospital’s reserves dwindle, it will become less and less desirable.

“They need to be exploring these proposals from other hospitals,” Fox said.

Stringfield isn’t so concerned about the loss of doctors, however.

“Physicians are really very committed to staying here,” Stringfield said.

Doctors on the merger committee say they will put preconceived notions aside in their discussion.

“Our only interest is what is going to be best for the community, the hospital and the employees,” said Dr. Luis Munoz. “Being open minded is the only way we can solve this thing.”

Prospering under Mission

For now, at least publicly, Mission is downplaying any interest it might have.

“We have no plan to pursue a purchase right now, and more important we have not been approached by Haywood on this,” said Merrell Gregory, spokesperson for Mission. “Of course, people are looking at all the possibilities, but we have no plans to pursue anything like a purchase at present. Certainly we are not going to speculate.”

Despite doctor’s fears that Mission would siphon off high-end medical practices, two hospitals in the region that have partnered with Mission found the opposite to be true. The McDowell County Hospital in Marion and Blue Ridge Hospital in Spruce Pine both flourished under their partnership with Mission, according to their CEOs.

“Us tying up with Mission has been one of the better things we have done for our community,” said Keith Holtsclaw, CEO of Blue Ridge Hospital.

Since joining Mission, both hospitals saw their revenue grow, their physician numbers increase, and their specialties grow. In the four years since McDowell partnered with Mission, its revenue has grown by $3 million to $56.5 million a year. Doctors on active staff have grown by 14. In the 10 years since Blue Ridge partnered with Mission, its revenue has grown by $21 million to $34.5 million a year. Doctors on the active staff have grown by 12 to a total of 35.

Holtsclaw said Mission has not tried to funnel business away from their local hospital.

“Their philosophy is if it can be done appropriately in the local community they want it done there,” Holtsclaw said. Holtsclaw said physicians in Spruce Pine had the same concerns 10 years ago when the partnership was broached.

“Those have all been allayed,” Holtscalw said. “Haywood is a little bit larger, so I won’t speak for Mission, but that is not their track record. They have been very supportive and done everything possible, including putting money on the table.”

Ed Hannon, the CEO of McDowell Hospital, understands the fear that Mission would siphon off specialized services and pressure the smaller hospitals to refer patients to the flagship. He’s seen it happen other places — but not here.

“Mission’s philosophy is exactly the opposite,” Hannon said.

But a partnership with Haywood could turn out much differently. Both these hospitals are much smaller than Haywood. McDowell County Hospital is licensed for 64 beds, Blue Ridge for 46 beds — compared to Haywood’s 170.

They also don’t have the specialties that Haywood has. Haywood has 75 doctors on active staff compared to McDowell’s 35.

McDowell doesn’t have its own a spine surgeon, for example. A spine surgeon from Asheville comes there once a week to see patients. He does some surgeries in McDowell, but takes the more complex ones back to Asheville.

Haywood, meanwhile, not only has its own spine surgeon, but its own neurosurgeon.

McDowell doesn’t even have a local doctor who performs colonoscopies, but again relies on doctors from Asheville who keep office hours in Marion. Haywood, on the other hand, has two local doctors who perform colonoscopies.

Haywood certainly has more to cherry pick from. With the other hospitals, Mission couldn’t siphon away specialties that didn’t exist.

Haywood has worked hard to recruit doctors in specialized medical fields and invested in top-notch equipment. It was a source of pride for former CEO David Rice. Some accused Rice of putting too much energy into recruiting flashy specialties and buying fancy equipment while ignoring the hospital’s core function of nursing — in hindsight, a choice that many now say helped lead to the current crisis.

But Rice claimed the ventures raised the profile of Haywood and captured patients that would otherwise go to Mission, paying off in the long run. It’s a risky strategy, however, and many CEOs would rather not take those kinds of chances.

“We can’t all afford to have dukes in every corner,” Holtsclaw said.

“It doesn’t warrant me having hundreds of thousands of dollars of equipment for a couple cases a year,” Hannon said.

But now that Haywood has it, doctors and patients aren’t eager to give up the breadth of medical care built under Rice’s tenure. It also makes Haywood more of a competitor with Mission, complicating the analogy of McDowell and Spruce Pine.

A Mission of philanthropy

The arrangement between Mission and the two community hospitals is somewhat nebulous. Mission doesn’t own the other hospitals, but they aren’t exactly independent either.

Mission gets three out of 15 seats on McDowell’s hospital board and two out of 11 seats on Blue Ridge’s hospital board — hardly a controlling interest in either. But Mission holds a trump card. It can fire the CEOs of either hospital if the hospital fails to meet certain benchmarks, both financially or in patient care. Mission also has the final say in who gets hired as CEO.

Finances are kept separate, but Mission occasionally makes money off the two hospitals. Mission bills the hospitals when it provides staff or expertise, such as nurse training programs. Mission is currently billing Blue Ridge for assistance designing an expansion.

The motive for partnering with Mission was financial for both hospitals. Neither was losing money, but their profit margins were slim. Blue Ridge wanted to borrow money to renovate its circa 1954 operating rooms, but no bank would make them a loan. Under the partnership, Mission co-signed for a loan of $3.5 million. Ten years later, Mission has co-signed for another loan — this one for a $23 million expansion. Mission has not given away money to either hospital outright, however.

Another benefit to the partnership: doctors can lean on medical experts affiliated with Mission and have an easier time admitting patients to Mission.

“When we call and say we have a need, we don’t have to scramble,” Hannon said. “If they have the specialist on board, they will take our patient.”

Another big benefit is buying power. Supplies are much cheaper buying in bulk with Mission.

“Where as before the little guy like me didn’t have any clout to go get good pricing,” Hannon said.

Blue Ridge got a better deal on its employee health plan by partnering with Mission, for example.

There’s another service Mission provides that could have come in handy for Haywood, and possibly diverted the current crisis: oversight of patient care.

“I’ve got their quality people helping my quality people all the time,” Hannon said.

Mission says it’s not its style to play the role of an unsolicited suitor.

“In both cases the hospitals came to us and asked us to work with them to ensure their community hospital stayed strong and good,” said Gregory, the Mission spokesperson. Gregory said the hospitals have retained their community identity. That begs the question: what’s in it for Mission?

“I hope that when our physicians think about referring patients to another hospital, we will think of Mission first,” Hannon said.

It doesn’t seem like much of a deal. Mission is already the de facto hospital in the region to send patients who need specialized treatment and would have most likely gotten that business anyway.

According to Gregory, Mission was just happy to help out.

“An important way we benefit is to ensure these two community hospitals stay viable and strong,” Gregory said. “We don’t have the capacity to care for all the patients. Our region is growing. We have a high percentage of older people. We truly need our good community hospitals.”

By the same token, Mission does not want to see Haywood close.

“What happens to Haywood matters to all of us,” Gregory said.

Holtsclaw believes Mission’s motive in the partnership with his hospital was sincere.

“They are basically supporting the health care in the region,” Holtsclaw said.

Go West

Another option that could be on the table is a merger with WestCare, which operates Harris Regional in Sylva and Bryson City Hospital. WestCare could be an attractive route and should not be overlooked as an option, said Commissioner Kirk Kirkpatrick. Out of all the buyout scenarios, a merger with WestCare could allow for the most autonomy and the least fear of specialties being siphoned off.

Mark Leonard, the CEO of WestCare, couldn’t say whether WestCare is interested, however.

“Quite frankly it would be premature for us to say a whole lot until I can get some direction from our board,” Leonard said.

One factor that would weigh heavily in the decision is how much financial help Haywood will need.

“I think folks are focusing on getting Medicare back and starting back with operations, but there will still be a period of time, a year or more, before you get back into the black,” Leonard said. “Who is going to finance that? Anybody that would be wanting to talk is going to need those kind of answers.”

WestCare has $22 million in cash reserves, but can only spend $6 million of that without dipping into a danger zone. Banks that hold outstanding bonds for WestCare require 75 days of operating cash on hand.

West Care has plans of its own for its reserves that don’t include bailing Haywood out. An $18.45 million renovation and expansion focused on the ER is slated for the coming year.

WestCare is slightly larger than Haywood from a revenue standpoint. WestCare brings in $90 million in net revenue a year, with a payroll of $45 million. Haywood brings in $75 million a year, with $41 million in payroll.

WestCare spends less of its budget on payroll thanks to a doubling up of duties between its two hospitals. The hospitals share a dietary manager, for example.

“That common management leads to economies of scale and efficiencies,” Leonard said.

Harris Regional and Bryson City hospitals joined under the WestCare flag 10 years ago. The impetus came from Bryson, which was struggling financially.

“Swain County Hospital was needing a partner and the trustees in Bryson City reached out to the trustees in Sylva and said ‘Can you help?’” Leonard said. “We have kind of built this as we went along.”

The merger was apparently just what Bryson City Hospital needed.

“When we merged in 1997, the parking lot over there was almost deserted. Now if you get there anytime after 9:30, you can’t find a place to park,” Leonard said. “The hospital has regained the community’s confidence and the community has been very receptive to the physicians that have chosen to live there.”

Angle Medical Center in Franklin broached the idea of a merger with WestCare two years ago, but nothing became of it.

“Angel has said they would like to go down the road of independent management,” Leonard said. “We have left the door open and told them if they want to talk in the future generally or specifically, just call us.

“It just has to be right for both organizations,” Leonard said. “It is really a cultural fit between trustees, management and medical staff.”

WestCare has been on the receiving end of Haywood’s nurse exodus. Traveling nurses accounted for as much as 10 percent of Haywood’s nursing staff in recent months, compared to zero at WestCare.

WestCare’s average nurse salary is about $1.50 more per hour than Haywood’s. WestCare also has a better reputation for the way it treats nurses — unlike the dictatorial, threatening and oppressive environment nurses described at Haywood.

Leonard holds quarterly staff meetings with his employees. During the most recent meeting, Leonard went over the hospital’s finances, including how much it holds in reserves — a level of inclusiveness that is foreign to the rank-and-file at Haywood.

The super big player

Haywood could land an overture from a super big player, like Carolinas Medical System. The hospital system owns 22 hospitals, most in the Charlotte area, but some scattered across the state.

Carolinas Medical System doesn’t siphon patients or services to its flagship, according to Bill Moore, vice president of development for Carolinas Medical System.

“For us management of other hospitals is a core business,” Moore said. “Many hospitals where we have become a partner we have extended services to that community that wouldn’t typically be available.”

That’s especially the case with its more far-flung hospitals — it has one four hours from Charlotte. It would certainly hold true with Haywood, as people simply wouldn’t commute that far for care even if Carolinas Medical System tried to siphon them away. Moore would expect Mission in Asheville to be the hospital of choice if patients needed care Haywood didn’t offer.

“We would not see this as a patient acquisition situation,” Moore said of Haywood. “Patients are not going to bypass Mission to come to Charlotte.”

Carolinas Medical System is not an aggressive suitor, Moore said.

“We don’t go into a situation and try to create an opportunity to manage a hospital,” Moore said. “Typically we are invited into the community to help assess what the situation is.”

Usually it’s when a hospital needs financial help.

“Hospitals today are continuing to face financial hardship,” Moore said. “That does cause them to look for a partner who can help them manage it in a more cost effective and cost efficient fashion. They also look at it as an opportunity to expand their clinical offerings.”

For example, after acquiring the hospital in Shelby, Carolinas Medical System set up a satellite branch of its Blumenthal Cancer Center.

Another big hospital player that will likely emerge in discussions is Novant, which is headquartered in Winston-Salem with Forsyth Medical Center as its flagship.

Another hospital’s story

Sue Lassiter, CEO of Roanoke-Chowan Hospital in Eastern North Carolina, said their hospital didn’t lose services and retained its community identity when it merged with a large neighboring hospital system.

“All those things out there that people worry about or anticipate the worst outcome for, none of that has happen for us,” Lassiter said. “It has been the best thing for the hospital. It has improved quality of care. We have grown our medical services.”

Roanoke-Chowan is slightly smaller than Haywood. It’s budget is $67 million compared to Haywood’s $75 million. Its average patient count a night is 56 compared to Haywood’s 90. It merged 10 years ago with University Health System of Eastern North Carolina, which owns half a dozen small hospitals.

Lassiter said there was no move to siphon away business to its flagship — Pitt Memorial in Greenville — 60 miles away from Roanoke-Chowan.

“The only care they would want to serve is tertiary care that cannot be provided in the local community,” Lassiter said. “Quite frankly, Pitt does not want any of our patients. They are at capacity all the time. They are trying to figure out how to send patients back to the local community.”

Lassiter said the motive for the merger wasn’t financial.

“The benefit is from a quality and patient safety perspective, in terms of having access to expertise that we wouldn’t be able to afford as a stand-alone community hospital,” Lassiter said. The merger occurred during a wave of hospital mergers in the mid- to late-1990s.

Lassiter’s hospital has its own board of directors, but is an advisory board only. Final decisions rest with a system-wide governing board. Nonetheless, it feels like local control, Lassiter said.

“I’ve never seen them make a decision other than what’s been recommended by the local directors council,” Lassiter said.

Lassiter answers to the corporate office, so it is unlikely she would say anything negative about the merger. Haywood doctors on the merger committee could find it difficult to get a straight story from any hospital that’s undergone a merger. Their best chance might lie in talking to other doctors in communities where buyouts occurred rather than rely on the take proffered by a hospital CEO beholden to the parent hospital.

Lassiter did have this advice to offer: “Good luck, it’s a big decision. I feel for that hospital.”

Haywood’s drawing card

It’s not clear yet how much leverage Haywood Regional will have when — or if — it negotiates a deal. While the hospital shouldn’t be short on suitors, Haywood is not exactly in a strategic bargaining position.

Just a year ago, it would have been a much different story. The year-end profit margin had averaged $3 million since 2002. The tide turned in 2007, however. Haywood ended the year $1.9 million deficit, despite mid-year layoffs hoping to stem the tide.

One off year doesn’t signal a struggling hospital, but combined with the current crisis it doesn’t look good. Hopefully, any suitors would look at the hospital’s largely positive performance over the past five years and not just recent history.

“That positive bottom line is not indicative of just the dollars. That kind of positive bottom line says that hospital is well respected and trusted in that community and that people want to get their health care there,” said Don Dalton with the N.C. Hospital Association.

The public has rallied to the support of the hospital in the face of the crisis. Despite outrage and the feeling that the hospital administration and hospital board are largely to blame for the crisis, the public has made a distinction when it comes to the hospital itself. From wearing purple ribbons on their lapels to holding a prayer service in the hospital parking lot, the public’s support has been strong.

“A prayer service for the hospital speaks volumes to what that hospital means to that community,” Dalton said. “It would tell me that community, despite very significant problems, still has a very positive image of their hospital and still has a willingness and desire to see their hospital succeed and get service back.”

Anger over the crisis is a sign of support in itself. If people didn’t care about going to their local hospital, they wouldn’t be mad.

“There has been a lot of support for the hospital,” said Dr. John Stringfield. “People want this fixed. People want a viable hospital and they want to get their care here.”