An affiliate of a Chicago-based rehabilitation provider has announced plans to consolidate its Kentucky facilities and form a new system in the state with annual revenues of $60 million.
Sounds like a run-of-the-mill deal until the name of the rehab provider is disclosed: the National Easter Seal Society.
Perhaps surprisingly, Easter Seals is rivaled by only Birmingham, Ala.-based HealthSouth Corp., the nation's leading rehabilitation provider, in geographic spread and has successfully competed with the for-profit giant for business in some areas.
In Kentucky, the society runs the largest inpatient rehabilitation hospital. In other states, such as Connecticut, it has partnered with larger healthcare systems.
In the past 78 years, Easter Seals has formed a loosely affiliated network of one inpatient rehabilitation hospital and more than 400 outpatient therapy clinics across all 50 states. HealthSouth is the only other rehabilitation provider to have a presence in every state.
In 1995, the not-for-profit organization served more than a million patients with disabilities and brought in close to $400 million in revenues. The society's combined annual income has increased 87% since 1986 (See chart, p. 19).
While Easter Seals' revenues fall far short of HealthSouth's anticipated pro forma 1996 revenues of $4 billion, the society's growth and presence nevertheless cast it in a different, more business-oriented light than its stereotypical reputation as do-gooders designing pretty stamps to raise money for disabled children.
James Williams, the society's chairman and chief executive officer, speaks the language of any other healthcare executive. He said the society plans to develop more strategic alliances with hospital systems, win more managed-care contracts and add more facilities.
"Our position in the healthcare industry has changed as the delivery system has changed to focus on outpatient care," he said. "We want to be recognized as a provider in the outpatient rehabilitation market. If payers and the provider community recognize that Easter Seals is a care alternative, then we're strengthened by that."
The society is among more than 100 national voluntary health agencies. Other examples include the Alzheimer's Association, the American Cancer Society and the National Multiple Sclerosis Society.
The majority of such organizations primarily offer a resource for medical research, direct public education campaigns, provide financial assistance and lobby on behalf of their patient constituencies.
By contrast, Easter Seals has also focused on directly providing patient services. The society has received accreditations from, among other groups, the Accreditation Council on Services for People with Disabilities, the American Speech-Language-Hearing Association, the Commission on Accreditation of Rehabilitation Facilities, the Community Health Accreditation Programs, and the Joint Commission on Accreditation of Healthcare Organizations. Easter Seals has also been licensed on a state-by-state basis to provide home-care and Medicare-covered services.
For the past 17 years, the National Health Council, which represents 44 voluntary health agencies, has ranked the society No. 1 among its members for funneling the most annual revenues to patient services.
In 1994, the society spent $284.5 million, or 94% of its total expenditures, on direct patient care, according to the council's "1996 Report on Voluntary Health Agency Revenue and Expenses." The average for all the agencies was a little over 23%.
"The National Easter Seal Society is indeed a major player in the healthcare arena and one of the leaders in the voluntary health agency community in providing services to those who need help," said Myrl Weinberg, council president. "While the healthcare community is only now beginning to recognize the Easter Seal Society's major contribution in this area, the society has been quietly but effectively providing these services for almost 80 years."
Edgar Allen founded what would become the society in 1919 in Elyria, Ohio, following his son's injury in a trolley car accident. Frustrated at the difficulty of finding appropriate care for his son, who died soon after the accident, Allen sold his successful railroad-tie business and built a new acute-care hospital for the town. He then established a number of outpatient rehabilitation programs where patients could receive ongoing therapy.
His work eventually led to the formation of the National Society for Crippled Children and Adults, whose associates were called Easter Seals after the first stamp rolled out in 1934. The group officially adopted the name "National Easter Seal Society" in 1979.
Today, the society has 105 state affiliates that offer a range of rehabilitative services. Williams described the relationship between the national society and the affiliates as a "franchise model."
Williams said local providers pay an affiliation or membership fee in exchange for use of the Easter Seal name and logo, program development and public relations support, and the chance to share in some $50 million in financial assistance each year.
The affiliates own and operate outpatient centers, home-care programs and recreational camps that provide speech and language therapies, audiology services, physical therapy, occupational therapy, counseling and other therapy programs. They receive referrals from primary-care physicians, public health agencies, schools, specialists and hospitals. Government programs, including Medicare and Medicaid, pay for a third of the services; private insurance for another third; and donations for the remaining third.
At the state level, the society has begun to compete with other rehabilitation providers for spots within regional integrated delivery systems.
"As a long-term strategy, we'll pursue developing more alliances with hospital systems in communities across the country," Williams said. "We see a role for Easter Seals in integrated healthcare. It's a win-win situation from a referral standpoint for the providers and for the patients because they don't have to deal with fragmentation of services."
The Kentucky consolidation represents the first major effort to join all Easter Seal facilities in one state together to attract managed-care contracts and system partners.
In March, the Kentucky Easter Seal Society consolidated its 100-bed Cardinal Hill Rehabilitation Hospital in Lexington, four outpatient therapy clinics and one recreational camp to form Cardinal Hill Healthcare System. The system's flagship is the largest inpatient rehabilitation hospital in the state and the only one in the country operated by Easter Seals. The hospital had $48 million in revenues in 1996 and expects to bring in $60 million as a result of the merger.
Gillihan said the boards of Cardinal Hill and Louisville, Ky.-based Baptist Healthcare System are reviewing a $6 million proposal to jointly create a new rehabilitation company. He said the new company would manage the inpatient and outpatient rehabilitation services of the system's 313-bed Central Baptist Hospital in Lexington.
While Baptist would finance the project, he said, Easter Seals would provide the services, personnel and equipment. Both boards are expected to approve the deal by the end of May, he said.
In addition, Gillihan said the system has entered a joint venture with MedShares, a Memphis, Tenn.-based home-care company, to provide home-care services throughout the state.
"We're very pleased to position ourselves better to deal with managed-care networks," Gillihan said. "We have become a cohesive system and have become a much more viable entity."
Meanwhile, in Connecticut the society's affiliates have partnered with two health systems to provide rehabilitation services for their networks.
In June 1995, Easter Seal Rehabilitation Center of Southwestern Connecticut affiliated with Stamford (Conn.) Health System, which includes 305-bed Stamford Hospital and 180-bed St. Joseph Medical Center.
Kathleen Murphy is president of the center and a vice president for the health system in charge of its inpatient and outpatient rehabilitation services. She said the center agreed to provide management and clinical rehabilitation services for the system under a 10-year contract in exchange for a loan of $1.5 million for improvements in its physical facilities. She said the loan will be forgiven if the agreement stays in place.
Ronald Turnbull, executive vice president and chief operating officer at Stamford, said the partnership has allowed the health system to fill out its continuum of services. He said Easter Seals has particularly strong therapy programs for pediatric patients with disabilities in addition to adult day-care and vocational and physical therapy programs.
In fact, Turnbull thinks so highly of Easter Seals that it looks like the society will take over the rehabilitation services now provided by HealthSouth at the system's newly acquired St. Joseph Medical Center. Turnbull said the role of HealthSouth at St. Joseph, which joined Stamford on April 1, is being evaluated. He said the system may enter some outside joint-venture arrangements with HealthSouth but will likely leave the management of its rehabilitation services to Easter Seals.
"If HealthSouth came to the table with a huge array of services and we didn't have the strength and leadership that we do with the Easter Seals, then that might be an issue," he said. "There's a more competitive environment for HealthSouth here. In this market, the society is a major provider of healthcare services. They've been here 50 years and operate the premier rehabilitation services facility."
Similarly, in June 1995 Greater Hartford (Conn.) Easter Seal Rehabilitation Center affiliated with the city's 407-bed Saint Francis Hospital and Medical Center to jointly provide outpatient medical and vocational rehabilitation services.
The center maintained its membership with the national society but now shares a common management structure with the hospital. David D'Eramo, president and CEO of the hospital, said the facility has been linking with community-based organizations like Easter Seals to broaden its services.
Despite such affiliations, Williams said the society doesn't plan to consolidate all its facilities into one national healthcare system.
"Our strength is our local community-based presence," he said. "We have a strong sense from our volunteer base and affiliate structure that there is value to a local identifier."