Healthcare Business News

Cooperating in N.D.

‘Innovative’ deal helps bolster hospitals’ bottom line

By Jessica Zigmond
Posted: October 20, 2008 - 12:01 am ET

A creative bargain—and nearly $1 million in federal funding—is expected to help two North Dakota hospitals improve their bottom line.

Earlier this month, Richardton (N.D.) Memorial Hospital and Health Center and St. Joseph’s Hospital and Health Center in Dickinson signed a memorandum of agreement in which Richardton will relinquish control of its critical-access hospital status to St. Joseph’s, a 49-bed acute-care hospital 26 miles from Richardton. Subsequently, Richardton will convert to a skilled-nursing facility by March 31, 2009, according to Jim Opdahl, administrator of the Richardton facility. Richardton will also continue to operate a rural health clinic, and, as Opdahl explained, the hospital is working on a strategy to ensure the hospital adheres to a state requirement that medical clinics be operated only by physicians.

Sen. Kent Conrad (D-N.D.) led efforts to secure a federal grant of $942,000 through the Health Resources and Services Administration to help with the conversion, Opdahl said. And as part of the swap, St. Joseph’s—through its parent organization Catholic Health Initiatives—gave Richardton $500,000, and local matching grants brought the total to $991,700.

“We’ve been a critical-access hospital since 2001 and Richardton purchased the clinic and faced operating losses,” Opdahl said. “From that point on, our situation got progressively worse—a decrease in utilization and we came to the conclusion that we could not sustain ourselves as a critical-access hospital with a clinic.”

Meanwhile, St. Joseph’s was also struggling financially. Claudia Eisenmann, president and chief executive officer at the hospital since February 2007, said the hospital had been promoting a “tertiary strategy” to include specialties such as cancer treatment and behavioral health services. The plan, she said, was ultimately doomed.

“The hospital had drawn down all of their cash to pursue some of these things and there was not the population base to support it,” Eisenmann said. “Another one was behavioral health—there wasn’t sufficient volume here to support it. The other thing that is a reality in smaller, isolated markets is the inability to recruit subspecialty physicians.”

Eisenmann cited two main problems at St. Joseph’s: First, the hospital was pursuing a failed strategy. Second, it was suffering financially, as operational losses totaled about $13.2 million from 2002 to 2007. After reviewing about 15 years’ worth of statistics on St. Joseph’s volume, financial performance and attrition, Eisenmann said she then needed to make other recommendations to the hospital board and CHI.

This resulted in the deal with Richardton, which Eisenmann called a “very innovative arrangement” that will help both facilities improve.

“I think the most important thing is there are innovative ways to work through issues on rural healthcare delivery,” Eisenmann said. “It can create challenges, but also an awful lot of opportunities. It takes some open minds and collaboration.”

Eisenmann, 48, will leave St. Joseph’s on Nov. 21 to take a new position at a hospital about 100 miles away. In December, she will become the vice president of professional practices at MedCenter One in Bismarck, a tertiary-care facility that she said has about $100 million in revenue and about 600 full-time employees, compared with St. Joseph’s $42 million in revenue and approximately 300 employees.

“What I was brought to do was ‘right the ship,’ and that was achieved,” Eisenmann said about her departure from St. Joseph’s after nearly two years as its CEO. The best person to now oversee St. Joseph’s, she said, is a critical- access hospital specialist.

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