Hospital Defies Predictions of Imminent Demise

The COO of a small Mississippi hospital says he was frustrated—and surprised—to read of its endangered status in a non-profit organization's report after all the money and energy that the hospital's parent company has committed to improvements.

Last week, while writing about the Dec. 1 closure of Pioneer Community Hospital in Newton, MS, I came across a study detailing the economic impact of rural hospitals in that state.

The Center for Mississippi Health Policy noted that 31 rural hospitals in the state were at risk of closing. Nine hospitals were placed at greatest risk of closing. (Pioneer Community Hospital was not on the Center's endangered list, even though the critical-access hospital closed three weeks after the report was released.)

To find out more, I called on one of the nine hospitals that made the most-endangered list: Highland Community Hospital, a 60-bed hospital in Picayune, MS. I wanted their perspective on what they're doing to turn things around. Doug Jones, COO of publicly-owned ForrestHealth, the Hattiesburg-based five-hospital parent system that owns Highland, says the Health Policy study is accurate based on the narrow methodology they used, but he says that the methodology doesn't tell the entire story.

"They based their report on 2012 data and they didn't look at any of the outliers that were going on in 2012," Jones says. "We were building a $58 million hospital, which we moved into on July 28, 2012. We had a lot of costs associated with staffing, training, and activating the new hospital that you are not able to capitalize. There were some high expenses associated with that."

"The other thing you may remember is we were going through this little thing called meaningful use at that time. So, we were implementing electronic health records. A lot of expenses hit that year and they made our financials look worse."

To be blunt, the financials still don't look that good at Highland. In 2014 the hospital generated nearly $104 million in gross patient revenues, but accrued net losses of $16.9 million, although Jones says the hospital has made incremental improvements on its financials and will have a positive cash flow in 2015.

To appreciate Highland, Jones says you have to look back to about 2006, when ForrestHealth assumed hospital operations after Hurricane Katrina.

Slow Progress, But Encouraging Signs
"The hospital was damaged and there was a lot of population shift," Jones says. "People were moving out of New Orleans, Slidell, getting away from the coast, Gulf Port and other places and moving into the community, which created a lot of issues with the high charity load at that time."

Local doctors in Picayune had purchased the bankrupt hospital in 1998. "After Katrina, the damage to the hospital became a great financial burden to the doctors and we took over," Jones says. "The intent at that time was to replace the facility, but the [economic] downturn of 2007 happened shortly after that and remember that nobody could issue bonds at that time."

In 2009 Jones went to Highland as interim administrator and made a community needs assessment. Ultimately, the ForrestHealth board in 2009 authorized the construction of the new hospital that opened on July 2012.

"The board decided that in order to serve the community we needed to build a new hospital and replace the hospital that had been there since 1952 and we needed to recruit new medical staff. Investment in recruiting medical staff is expensive also," Jones says. "On average to recruit and move in a doctor and get them up and running and subsidize them for the first two years of practice can run you $500,000 to $700,000. This is a health professional shortage area, even though we've been fairly successful recruiting doctors into the community, and we still have more to recruit."

Jones says the board at ForrestHealth determined that Highland's patient migration to out-of-county providers was a key issue that could only be addressed with significant facility and staffing upgrades, starting with a new hospital.

"Could we make gains and maintain the people in the community at the old facility? The answer was no," Jones says. "On top of that the old facility had structural, mechanical, electrical issues that would have to be addressed from a codes standpoint. We could easily see investing $14 million to $15 million into a 60-year-old building, not to make it function or look any better, but just to deal with the structural/mechanical issues associated with it."

"The question was could we make it work financially," Jones says. "We went about an analysis, looking at the patient population, looking at the financial projections, being very conservative on what we thought we could gain from revenues, our ability to recruit physicians, the ability for those physicians to build practices, and a lot of factors. It was a big risk, but the board at that time felt they needed to do something."

While the financials are still wobbly, Jones sees encouraging signs that the hospital has turned things around.

"Every year we pick up a little more volume," Jones says. "If you go back to 2009, we saw about 15,000 ER visits. This year we are right at 24,000. In 2009 we didn't have specialists coming to the hospital. We have cardiologists now five days a week, and ENT, neurosurgery, [and] orthopedics two days a week. We have general surgery, ICU, [and] the physical therapy is there on site. There are a lot of changes in the way we operate."

Frustration and Surprise
When the Mississippi Center on Health Policy report was issued in early November, most media outlets in the state didn't look at it as an economic impact analysis. The Associated Press lead read: "At least nine rural Mississippi hospitals are at risk of closing down, according to a new study." The nine hospitals were identified in the second paragraph.

Jones says he was frustrated—and surprised—to read of Highland's imminent demise, especially after all the money and energy that ForrestHealth has committed to improve the hospital.

"We have done a lot of work to increase community confidence in that hospital and the services that are being offered and anytime something like this comes out it can be damaging," he says.

"All it takes is for someone to think 'Oh the hospital is closing. I don't want to be a patient of this or that doctor because they won't be here long because the hospital is closing.' We've responded. The local paper did an article about it. The hospital has seen steady improvement since 2012, continues to grow, and that was the intent when we made the decision to build a new hospital. We were going to grow that hospital and the services it provides for the community."