3 Actions That Could Save Community Hospitals

Because I like to think I am as smart as the next guy, and because it's pretty much my job, I get a kick out of trying to predict what our healthcare system will look like 10 years from now.

It doesn't look good for independent standalone community hospitals, unless your hospital happens to be of the critical access variety. Why do I believe that? Well, think of hospitals in the 30-300-bed category as the hardware store in the middle of town. Think of the bigger, multi-hospital systems as the Home Depots of the healthcare world. Now, before you crush me with comments at the bottom of this page, I'm not saying that it's exactly a direct metaphor for what's happening in healthcare. It's overly simplistic, but stay with me.

So not only do you have organizations with huge resources competing, directly in some cases, with small one-off shops that offer essentially the same products and services, but now you have both parties' biggest customer saying they're going to reward for value and outcomes. Uh-oh. It's not that it's near impossible for smaller hospitals with limited clinical integration and fewer IT resources to offer equivalent care of the Hospital Depots, it's not. And they can. But can they prove it to skeptical payers, employers, and most of all, the federal government? In the new era, data will be king, and if you can't show you're at least as good—and as cheap—as your competitors, you're likely not going to be around long.

I talked to Skip Cimino a little while back. He's president and CEO of Robert Wood Johnson University Hospital Hamilton in New Jersey. He used to be in flooring and tile. But before you judge him as unqualified to run this 284-licensed-bed hospital on that history, he built the company in 20 years from $19 million in annual revenue at its locations in central New Jersey to a seven-state operation with $140 million in annual revenue. He's also served in the Governor's cabinet in New Jersey, but that's almost beside the point. He and his leadership team made a hospital in New Jersey profitable (although a 1% margin is nothing on which he's going to rest). That's probably enough, but in case it's not, the hospital has also won a Baldrige Award.

Given the forces he sees at work in healthcare, Cimino sees perhaps at least three actions community hospitals should take to remain viable long-term, although to be fair, there are dozens more routes an independent can take to remain relevant.

1. Join a system while preserving some independence:
While RWJ-Hamilton has long been part of the Robert Wood Johnson System, which counts the 600-bed university hospital in New Brunswick as its flagship, "everyone kind of did their own thing," says Cimino. "Part of our future will be the ability to clinically integrate with one of the top hospitals in the country, which allows our residents in this area to have top notch care from a tertiary center without having to leave to go to Philly or New York City."

2. Establish a physician council, or something similar, to ensure that you and the docs agree on how to work together.
Ironically, integrating the financial and clinical information systems, which is extraordinarily difficult might be the easy part here. What's more challenging is the change in process and patient care that are necessary parts to effective clinical integration. At RWJ-Hamilton as well as other community hospitals, says Cimino, "we'll have to deal with a far more competitive environment," he says. That requires treating physicians as strategic partners. Cimino established a physician council to help further that strategic partnership. "This is really different from the medical executive committee in that it's about strategic relationships and ensuring that we are dealing with and resolving those in partnership with physicians." 

3. Build a focused outpatient growth strategy:
The growth is not in inpatient. If you don't have strong outpatient facilities, you don't have much hope. RWJ-Hamilton created a center for health and wellness years ago, for example. But what might have been seen as a white elephant back then is now a key strategy in diversifying revenue streams and for patient engagement, says Cimino. "This is 88,000 square feet of medically based fitness," he says. It also houses our community education program where we touch more than 150,000 lives."

This is by no means a complete list. If you ignore all this opportunity for innovation, perhaps you still rest comfortably, believing you can make up all your disadvantages with a family feel and a local vibe. The decision on strategy is up to you, but that didn't get the neighborhood hardware store very far.