With a growing army of rural hospitals, a not-for-profit healthcare system is becoming a conquering hero in remote areas of East Texas abandoned by larger healthcare companies.
East Texas Medical Center Regional Healthcare System caused a stir two months ago when it reopened an emergency center at tiny Gilmer (Texas) Medical Center, a hospital Columbia/HCA Healthcare Corp. closed two years ago for lack of patients. ETMC reopened the facility for "less than $1 million."
"ETMC has come to towns like Gilmer with the intent of keeping services available," says Bob Glaze, a chiropractor by profession when he's not representing Gilmer as a member of the Texas House of Representatives.
"Historically, Gilmer has had 24-hour hospital care for over 50 years and supported the facility," Glaze says. "That was long before Medicare and Medicaid."
But the Tyler-based system says it isn't trying to cause trouble for Columbia.
Rather, its strategy just happens to go against the grain of investor-owned companies and other not-for-profit systems that use smaller hospitals simply for referrals to their larger facilities.
"We're not into the circle approach," says Elmer Ellis, the system's president and chief executive officer. "We don't just want to refer patients to our big hospitals. What we want to do is create enough cash flow to reinvest in the community."
Gilmer residents were so upset about Columbia closing Gilmer Medical Center that some bought shares of the Nashville-based healthcare company's stock in order to gain admittance to Columbia's annual shareholders meeting in May.
At that gathering, then-Columbia Chairman and CEO Richard Scott reiterated his company's stand on the hospital, telling them there wasn't "sufficient patient demand" in the Gilmer area to reopen the facility (June 9, p. 19).
It wasn't the first time the hospital, which once had 34 staffed acute-care beds, had been imperiled. Columbia inherited the facility when it acquired Healthtrust in April 1995. Healthtrust bought it from Dallas-based Baylor Health Care System in January 1993. Baylor, a not-for-profit, had threatened to close the money-losing hospital in 1992.
But Ellis says his system will be financially viable even if its rural hospitals only break even.
"If you can make it cover itself, you can keep it growing," Ellis says. "We're constantly investing in small hospitals and small communities to keep as much as we can at home. We think that we really ought to be medically justified in moving them into tertiary hospitals."
ETMC owns three hospitals, leases eight, manages one and is affiliated with three.
It had net income of $12.4 million on net patient revenues of $306.4 million in 1996. That's up from $9.4 million in earnings on net patient revenues of $232.9 million in 1995, according to MODERN HEALTHCARE's 1997 annual Multi-unit Providers Survey (May 26, p. 66).
When deciding on a purchase, ETMC executives say they look at the financial potential of a market rather than a hospital's current financial shape, says Mike Thomas, ETMC's vice president of strategic planning and marketing.
In Gilmer, ETMC executives saw that Upshur County had 34,348 people with a median household income of $27,523, which would be in the upper 50% income bracket for East Texas.
"Based on our modeling system, we saw 4,785 hospital admissions in that market," Thomas says. "That little hospital wouldn't get all of those admissions, but it would get a good share."
ETMC operates 42-bed East Texas Medical Center Pittsburg in Camp County, which has fewer than 2,000 admissions. ETMC executives say the hospital's employment has grown to 250 full-time-equivalent workers today from 86 employees in 1982 when ETMC began to lease it.
In Gilmer, the decision to open the emergency center was a no-brainer, as the town has more than double the patient population Pittsburg has. "For us, it would be among the top three or four markets we're in," Thomas says.
Analysts say the trick to operating a successful rural hospital is convincing the community it can keep a facility viable.
"You need to focus on the community's healthcare needs locally, and, typically, their No. 1 concern is emergency care," says Edie Johns, senior consultant with Prism Healthcare Consulting of Glen Ellyn, Ill. "Emergency care is the most time-critical service. It's the one thing you can't travel for."
Columbia miscalculated in Gilmer, Glaze says. "The kind of service they rendered was viewed as more of a first-aid and ship out," he says. "They didn't want to go there to be shipped out so they would just go somewhere else."
ETMC also has bought a novel approach of preventive care to East Texas. Executives have replicated-albeit on a much smaller scale-a hospital-based rehabilitation facility known as an "Olympic Center" located at ETMC's hub hospital, East Texas Medical Center in Tyler. "I was in Rusk (Texas), and an older man in his 70s asked if he could use the (rehabilitation) facility there after hours for exercise," Ellis says.
Today, ETMC boasts nine rehabilitation centers Ellis calls "mini-Olympic Centers without the water." The smaller centers don't have swimming pools, but they offer something in towns that don't have any recreational facilities.
"Ours is not a plan for short-term returns," Ellis says.
Nevertheless, ETMC's plans appear to be paying off already.
The health system's long-term approach has caused a 150% increase in revenues over the past five years. Revenues were $152 million in 1992 and are projected to be $380 million this year.