While nearly all Orlando, Fla., hospitals have merged into three systems, tiny Health Central in the growing suburb of Ocoee, Fla., has resisted all suitors.
With a profit margin of 18% and a certificate-of-need law protecting its exclusive franchise near Walt Disney World, Health Central is financially able to remain independent -- a situation expected to continue even after $4.5 million in annual taxpayer funding dries up next year.
Independence from the big downtown tertiary players is part of Health Central's philosophy; the hospital doesn't want to be anyone's cash cow.
"We want to put money back into the suburban hospital. That's where we feel the future is," says Richard Irwin, president and chief executive officer of the 338-bed hospital.
Health Central christened a sparkling $58 million replacement hospital in 1993, and it's slated to open a $10 million addition this year, funded by reserves.
With so many hospitals joining systems in the 1990s, it's easy to forget that many hospitals -- in fact, a majority as of two years ago -- remain independent.
A few are even thriving in their autonomy, helped by fortuitous locations, financial prudence, community support and strong physician relationships.
For this report, MODERN HEALTHCARE polled a variety of sources to find institutions that illustrate the range of strategies of successful stand-alones. Included are hospitals with no national or regional system affiliations, although they may participate in contracting networks or cooperate clinically with other hospitals. In governance and finances, they remain staunchly independent.
Some stand-alones, such as 762-bed Cedars-Sinai Medical Center in Los Angeles, are major players in their markets. Others, such as Health Central, possess a small but critical niche. Each attempts to offer something unique.
Some stand-alones eagerly touted their success. Others did not.
For example, Ted Wasson, president and CEO of independent William Beaumont Hospital in Royal Oak, Mich., declined to be interviewed. Wasson "is not big on doing interviews. He's a very low-profile guy," says Colette Stimmell, spokeswoman for the 859-bed hospital
Taking a risk. In 1997, 56%, or 2,835, of the nation's 5,057 nongovernment hospitals didn't belong to systems, according to the American Hospital Association's latest annual survey. That's down from 3,273, or 63%, of 5,229 hospitals in 1994.
Hospitals determined to remain autonomous do so in the face of potential financial sacrifices.
But some stand-alones are willing to take the risk to preserve local control, clinical philosophies or religious traditions.
System-affiliated hospitals in 1997 reported higher operating margins -- an average of 3.7% compared with 2.3% for nonaffiliated hospitals, according to Medicare cost report indicators compiled by the Center for Healthcare Industry Performance Studies in Columbus, Ohio.
Margins for stand-alone hospitals, however, may be dragged down by a disproportionate number of rural hospitals with negative profit margins, says Carmela Coyle, the AHA's senior vice president for policy.
System-affiliated hospitals also reported a higher return on equity -- 10.8% vs. 8.1% for those not in systems, according to CHIPS.
But generalizing about stand-alone hospitals is difficult.
By the AHA's definition, stand-alones can include everything from the sprawling Northwestern Memorial Hospital in Chicago to Cook County North Shore Hospital in Grand Marais, Minn., which has 12 acute-care beds, Coyle says.
"There's a huge amount of variation," she says.
Under the AHA's definition, a system owns or manages multiple facilities. That excludes networks that coordinate care among institutions and alliances for managed-care contracting, such as the Northwestern Healthcare Network. Northwestern Memorial Hospital is the flagship of that nine-hospital alliance, whose members are independently owned.
For example, Health Central is not completely unattached. The hospital has a managed-care contracting arrangement with 904-bed Orlando (Fla.) Regional Medical Center, which it uses primarily for tertiary referrals.
So far, none of Orlando's top three systems, which also include Florida Hospital Health System and Columbia/HCA Healthcare Corp., have tried to establish primary-care sites in Health Central's market. Because Health Central refers patients to all three Orlando health systems for tertiary care, "we're not a threat to anyone," Irwin says.
Health Central also has refrained from buying physician practices or owning an HMO, he says.
Patients may be further confused about stand-alone status because some hospitals belong to regional or national parents but operate independently for local managed-care contracting and clinical care.
Because such facilities aren't connected with other local hospitals, patients might not even be aware that they belong to giant corporations.
Yet in hard times, such institutions can draw on the financial strength and management expertise of their corporate parents.
Location, location, location. For true stand-alone hospitals, location can be as key an ingredient to success as the chocolate in chocolate cake.
St. Croix Valley Memorial Hospital, a small not-for-profit hospital in St. Croix Falls, Wis., is one of those with location on its side.
The only hospital in a town of 1,500, 69-bed St. Croix Valley Memorial is next door to the town's only physician-group clinic.
When physicians from the 22-member River Valley Medical Center hospitalize their patients, they have agreed to send them to St. Croix Valley Memorial.
"The physicians don't play hospital against hospital," says Steve Urosevich, St. Croix Valley Memorial's president and CEO. "Their future is intertwined with ours."
Financially, St. Croix Valley Memorial is thriving.
The hospital had net income of almost $1.5 million on total revenues of $15.5 million for the year ended June 30, 1998, according to financial statements provided by the hospital. That was more than a 36% increase over $1.1 million in net income on total revenues of $13.5 million in the previous year.
St. Croix Valley Memorial is ensuring its success with a deal that's in the works to buy River Valley.
The for-profit physician group includes general surgeons, internists and family practitioners.
Urosevich says the deal is expected to close in July.
Once the sale is completed, the physicians will contract with St. Croix Valley Memorial to provide services, rather than becoming hospital employees (Nov. 30, 1998, p. 22).
St. Croix Valley Memorial has no plans to relinquish its independence and become beholden to a system, Urosevich says.
Quite simply, he says, it doesn't have to.
Unlike other hospitals lured by systems, St. Croix Valley Memorial has no trouble accessing capital to fund improvements and expansions.
For example, the hospital has installed an $800,000 spiral computed tomography scanner and also has spent $1.5 million on a new computer system.
"We don't need to sell out to somebody else to upgrade," Urosevich says.
But although it's a stand-alone, St. Croix Valley Memorial doesn't act as if it's an island.
"It would be foolhardy for us to do that," Urosevich says.
The hospital has put together a network of specialists, including cardiologists and urologists, who come to practice at St. Croix Valley Memorial from hospitals and health systems in the nearby Twin Cities area of Minnesota.
Also, Minneapolis-based Fairview Hospital and Healthcare Services owns a 40% stake in St. Croix Valley Memorial's outpatient behavioral health program.
St. Croix Valley Memorial also jointly operates a home health company with three other hospitals.
Maintaining discipline. Cedars-Sinai President and CEO Tom Priselac says financial discipline is critical.
Now nearly 100 years old, Cedars-Sinai remains "a significant face" of the local Jewish community, he says, as well as a favorite with Hollywood celebrities. Cedars-Sinai enjoys tremendous philanthropic support, with contributions totaling $250 million over the past 10 years.
"The political, sociological and economic factors that create organizations like Cedars-Sinai likely will not exist again in the United States. As a result, the board here is committed to a prudent government process that ensures we remain successful," Priselac says.
Cedars-Sinai recently declined an opportunity to acquire two Tenet-owned hospitals in the market because of the financial gamble involved, Priselac says. However, since 1994, it has strengthened ties with private physicians by offering a variety of affiliation options, including management services.
At the height of the hospital industry's merger mania, facilities were casting names on and off like hats.
But not 421-bed Abington (Pa.) Memorial Hospital.
"We've been around 85 years and haven't changed our name," says Richard Jones Jr., Abington's president and CEO.
That stability, Jones says, helps Abington succeed as a stand-alone hospital.
"Stability really has a big role to play here because people want the consistency, and they want to know the institution is not going to go through tumultuous times," Jones says.
But stability isn't all Abington has going for it.
Jones says Abington's cachet with patients is heightened by its status as a community teaching hospital. The hospital trains about 100 interns and residents each year.
"We believe that education is a synonym for quality," Jones says. "To have residents asking questions keeps the faculty, keeps the attending staff, on their feet."
A suburban Philadelphia hospital, Abington also competes because of the big city services it offers.
After certificate-of-need requirements lapsed in 1996 in Pennsylvania, Abington started its own open-heart surgery program with surgeons from Philadelphia's Temple University Hospital (Feb. 17, 1997, p. 82).
In another of Abington's high-profile programs, pediatricians and specialists from Children's Hospital of Philadelphia manage Abington's 21-bed inpatient pediatric program.
All this helps keep the hospital's finances stable.
Abington had net income of $14.1 million on total revenues of $277.3 million for the fiscal year ended June 30, 1998. That's a 21% decrease from a net income of $17.8 million on total revenues of $249.3 million for fiscal 1997.
Besides its main hospital, Abington has another campus five miles away, which houses ancillary services, including a freestanding surgery center, a home-care agency, behavioral health programs and mammography and laboratory services.
As an independent, Abington also expanded its clout when it joined Allentown, Pa.-based PennCare, a voluntary network of 11 hospitals created four years ago for managed-care contracting. PennCare also is involved in developing networkwide clinical pathways to improve care at all the participating hospitals.
When it comes to Abington's success, good demographics don't hurt, either.
In Montgomery County -- where Abington is located -- about 40% of the households have an annual income of more than $60,000. About one-third of the county's residents have college degrees, and 18% of the residents are over 65, a hospital spokeswoman says.
"The elderly are mobile and affluent and really support the hospital," Jones says.
Growing independence. For 299-bed Holy Cross Hospital, an island in Chicago's competitive healthcare market, bigger really is better.
Mark Clement, the hospital's president and CEO, says Holy Cross has been able to stake its claim as a stand-alone because it has continued to grow.
Since Clement came on board as CEO in September 1992, a key to that strategy has been building a feeder system of 23 neighborhood clinics, which dot the hospital's 20-square-mile service area and are owned by Holy Cross.
The clinics, the first point of contact for many patients, have helped Holy Cross build a core business.
"We have been very aggressive," Clement says. "We really control our destiny, and what we've attempted to do is earn the hearts and souls and minds of the communities we serve."
Holy Cross seems to be succeeding.
The hospital turned a $3.1 million profit on total revenues of $123.8 million for the fiscal year ended June 30, 1998. That was a slight increase over the previous fiscal year when the hospital had net income of about $3 million on total revenues of $119.1 million.
The financial figures include not-for-profit Holy Cross and Holy Cross Health Partners, the hospital's for-profit managed-care contracting company.
A Roman Catholic hospital, Holy Cross is the only hospital sponsored by the Chicago-based Sisters of St. Casimir, which also runs a high school next door to the hospital on Chicago's Southwest Side.
Clement says the clinics, which are primary-care and ambulatory centers, are part of Holy Cross' strategy to be convenient and accessible to patients.
Holy Cross recruited 60 physicians to build practices at the clinics. The facilities are open evenings and weekends and are staffed by physicians who speak a variety of languages, including Spanish, Polish and Lithuanian.
Another major change at Holy Cross has been the addition of managed-care contracts at the hospital.
When Clement started as CEO, he says, the hospital didn't have any contracts. Now, he says, Holy Cross enjoys contracts with every major payer in the Chicago area.
The hospital's payer mix is about 40% Medicare, 28% managed care, 20% Medicaid, and the rest, commercial insurance, Clement says.
Besides building the clinics, Holy Cross also is thriving because it expanded hospital services, such as obstetrics, Clement says.
When he became CEO, the hospital was delivering about 350 babies annually. Since then, Holy Cross has recruited seven new obstetricians, and its baby business has grown to about 1,350 deliveries a year.
The overall hospital facility also has been modernized, and an "outpatient mall" was created by consolidating outpatient services in the hospital.
Clement says Holy Cross has flirted with the idea of joining a system but just didn't find enough benefit in it.
"Rather than spending time, effort and resources trying to consolidate or merge or align with another institution . . . we rededicated and doubled our efforts at doing all the things that would help make Holy Cross the provider of choice in our community," he says.