Many independent hospitals are joining with bigger systems in search of access to capital, scale, and survival. But that doesn't mean acquisition is right for everyone, says the CEO of Lodi (CA) Health.
Joseph Harrington has been a hospital CEO for 38 years, and he's been president and CEO of Lodi Memorial Hospital, a 214-bed community hospital in California's Central Valley, along with the new umbrella organization Lodi Health, for the last 20 years. He's witnessed a lot of change during the course of his career, but it seems that most of it has come during the past three years, as the federal, state, and local governments, not to mention payers and employers, have begun to push back hard on healthcare cost growth.
Harrington knows is his executive and clinical teams have to do a better job of managing down their costs so that the hospital can continue to survive in a low-cost environment. Hospitals themselves are the highest cost center in healthcare, so they're first on the chopping block. Because they're less diversified and don't have the economies of scale of the big systems, the nation's small, independent hospitals are less able to absorb some of the belt-tightening that's necessary.
As he moves toward the end of his career, Harrington estimates that Lodi Health needs to cut $600 in cost per adjusted bed day over a two-year period to be able to survive on Medicare reimbursement rates. Many formerly independent hospitals have given up the fight—and local control—by affiliating or being acquired by larger systems.
I spoke recently with Harrington about his strategic thinking and recent tactics. It might happen that Lodi Health is eventually acquired by a bigger player, but neither Harrington nor his board is shutting the door on independence just yet.