Although OCH Regional Medical Center will not be sold to a larger system, it could still become part of one.
On Tuesday night, Oktibbeha County residents resoundingly struck down a measure that would have allowed a larger hospital system to buy OCH Regional Medical Center, the county’s sole hospital. The final tally, with 58 percent opposed to a sale vs. 42 percent in favor of it, showed the bulk of voters wanted their hospital to stay in county hands.
But on Wednesday afternoon, as volunteers still worked to count absentee ballots, the hospital’s board of trustees voted unanimously to open the door to affiliating with a larger hospital system. An affiliation would allow the hospital to share some services and purchasing power without giving up its independence or public ownership.
But it’s also an indication that as the health care landscape shifts, stand alone hospitals may be safer weathering these changes under the umbrella of a larger system.
“Anytime an entity can look at improving revenue streams and look at ways of decreasing costs, it creates a good opportunity moving forward,” said Richard Hilton, president of OCH. “It’s just a good business decision to say well we’ll look at these opportunities and if it can reduce costs that’s great.”
The months leading up to Tuesday’s referendum had been contentious, pitting the hospital administration and its board of trustees against the county supervisors, who had voted 3-2 in March to sell the hospital system.
Declining reimbursements and increased costs have made the hospital business an increasingly risky one in the last decade, especially for small hospitals. Of Mississippi’s 102 hospitals, 25 are stand-alone, county hospitals, meaning they are publicly owned and not part of a system, like OCH.
Since 2010, five Mississippi hospitals have closed. Four of these were county-owned. And some industry experts have argued that the best way to keep these public hospitals alive is to make them private, usually by selling or leasing to a larger health system.
“If you vainly hold out to keep things the way they are the hospital becomes an asset of decreasing value. And one way to seize the value is to consider a sale while the entity has a reasonable business bottom line,” said Andy Taggart, a Jackson attorney who collaborated on a 2016 report that endorsed privatization as a way to stabilize hospitals.
Privatization, however, has been extremely controversial in these hospitals’ communities, where some residents take the idea of public ownership literally. Oktibbeha County resident often mentioned being born at OCH or having their own children there.
In some ways, then, affiliation is a half measure. In most instances, money doesn’t technically change hands. Instead, the smaller hospital gains the purchasing power of the larger system in exchange for a concession such as referring patients to its main hospital.
“They’re looking at what their options are, which is never a bad thing to do. And that’s where this is going, most county hospitals are going to have to go through (a period of) redesigning where they are and where they’re going, and I think it’s a positive step that they’re doing that,” said Therese Hanna of the Center for Mississippi Health Policy.
But Hanna also cautioned that for OCH, and other small hospitals, any discussions of affiliation are pointless without first conducting an official community needs assessment, to gauge how a hospital’s services meet up with the community’s needs.
“Different health systems have different strengths and weaknesses, and with the assessment you figure out what your vision is and you look for a partner that is consistent with that vision,” Hanna said.
But some advocates of privatization are concerned that even with an assessment, affiliation may not be enough. Oktibbeha County Supervisor Bricklee Miller, who emerged over the last year as one of the sale’s biggest advocates, said what the hospital needs more than anything is money, not just to stay afloat but also to grow. And an affiliation doesn’t provide that.
“Affiliations are not exchanges of capital. So what you’re doing is you’re sharing services. But that’s not going to stabilize the hospital. And Stroudwater’s assessment said the hospital needed that $3 to $6 million in increased capital a year to stay alive,” Miller said.
The assessment Miller referenced was one commissioned by the board of supervisors last year from independent consultant Stroudwater. The report, which was strongly rebutted by the hospital, concluded that OCH needed at least $3 million a year in additional capital to maintain operations.
Although OCH ended fiscal year 2017 with nearly $1 million in cash revenue, they also announced over $5 million in losses due to depreciation of the value of hospital equipment and facilities. Some industry experts consider depreciation a “paper loss” which doesn’t affect a hospital’s bottom line, but Susan Russell, the chief financial officer of OCH, acknowledged that “it hasn’t been a great year.”
Right now the affiliation is in a “very rudimentary” phase, according to Hilton. Over the last 15 months Hilton said he was approached by three hospital systems, all of which are based in Mississippi. The vote by the board of trustees will now allow him to go back to those three systems and open up the conversation on potential affiliations, something he said he was not able to do when there was a question of the hospital being sold.
“Nothing is offered without something to be given back in exchange. So I need to know what will that exchange be, so I can take it back to my board,” Hilton said. “Will it come in terms of something off of my bottom line? Something off of adjusted revenues? Or it could be something with patient referrals, in which case we’ll need our doctors to weigh in to make sure they have a level of comfort with that (hospital) system.”
For Hilton, who strongly opposed the sale, learning the outcome of the vote and then rolling into conversations on an affiliation has felt “surreal.” But he also said he’s relieved to move forward.
“Going through that whole process over 15 months is so distracting in terms of how you’ll be operating as a hospital and providing care,” Hilton said. “It takes away from enabling me to be the kind of leader I need to be for the hospital.”
Mary Kathryn Kight, director of public relations at OCH, said she hopes the vote has finally put the issue of selling the hospital to bed.
“I would hope this settles it,” Kight said. “But I’ve learned not to be surprised by anything.”
For members of the board of supervisors, the move towards affiliation hasn’t so much ended the conversation on selling the hospital, as it has redirected it.
“It’ll be the actions that are taken after the vote that will really determine whether selling or keeping the hospital, if this is the right course for the future of healthcare in this county,” Miller said. “But that’s something that we won’t know until the affiliation is done. I’m very interested to see if this affiliation will make our hospital sustainable and turn around the loss in revenue.”
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