Aggressive forays into managed care and physician ventures have left an Albuquerque healthcare innovator without a job.
Steven Smith announced his resignation as president and chief executive officer of four-hospital St. Joseph Healthcare on March 30 (April 3, p. 4).
In a news release, Smith said his decision to leave May 1 followed "mutual discussions" with the St. Joseph board of directors and the system's parent, Denver-based Catholic Health Initiatives.
Smith, who was appointed in 1996, is stepping down just as several of his projects are becoming operational.
Last fall, the system launched a Medicare provider-sponsored organization, St. Joseph MedicarePlus, after becoming the first to receive a waiver from HCFA to operate the risk product. Through PSOs, providers can contract directly with Medicare beneficiaries, bypassing HMOs.
Heart Hospital of New Mexico, a for-profit joint venture with Charlotte, N.C.-based MedCath and physicians formerly affiliated with rival Presbyterian Healthcare Services, opened in October 1999. St. Joseph owns a 35% stake in the $45 million facility.
Also last year, Smith formed an unusual partnership with a for-profit HMO, Cimarron Health Plan in Albuquerque, to expand access for commercial and Medicaid members to St. Joseph-affiliated physicians and services. As part of the deal, St. Joseph financed Cimarron's purchase of QualMed of New Mexico (March 29, 1999, p. 8).
That was followed by an agreement to absorb 2,700 of the HMO's Medicare members into the St. Joseph PSO (Dec. 6, 1999, p. 16).
Smith, 50, has not announced his career plans and did not respond to an interview request last week. Smith joined St. Joseph in 1992 as senior vice president of hospital operations after a stint with an HMO, Fountain Valley, Calif.-based FHP International Corp.
Although no specific reason was given for Smith's departure, St. Joseph is suffering financially. The four-hospital system is roughly $16 million behind budget for fiscal 2000, which ends June 30, said James Kaskie, senior vice president of operations for CHI.
He said the system is expected to lose $5 million to $7 million on operations for the year, compared with a previously projected profit of $9 million. Total annual patient revenue is about $175 million. In 1999, the system had an operating loss of $4 million on revenue of $194.5 million.
"We expected an improvement for this fiscal year over the prior year (in Albuquerque), and we have not achieved that," Kaskie said. Nevertheless, he said, the decision to leave was Smith's own.
CHI is attempting to recover from its own financial downturn, reporting a $12 million operating loss for the first six months of fiscal 2000, according to a February report by Moody's Investors Service (April 3, p. 42).
Kaskie blamed the shortfall in Albuquerque on Medicare cuts, changes in Medicaid reimbursement, increased charity care and bad debt, and losses from strategic initiatives. New Mexico is considered a difficult market because of its large uninsured population and high managed-care penetration.
St. Joseph's 8,000-member PSO is expected to lose about $1 million on operations, which is the amount budgeted for the year, Kaskie said. He said the system is also losing about $2 million annually on the St. Joseph physician group, a primary-care practice that Smith was responsible for expanding.
Kaskie said the heart hospital turned an operating profit in February, but that is not expected to have a significant impact on the system's finances this year.
Terri Cole, president of the Albuquerque Chamber of Commerce, said it's too early to judge Smith's initiatives. "Steve took some big risks. Time will tell as to whether those risks have been good for the hospital."
Cimarron President Garrey Carruthers said it would take five to 10 years to assess their impact.
"He's been a visionary as far as I am concerned, looking at new things and not going with the status quo," he said.
But all of those projects could be up for reconsideration. Kaskie said CHI is re-evaluating strategic initiatives in all markets every six months. "We're not prepared to say what our action plans are in Albuquerque," he said.
Kaskie said the system will retain an interim CEO from one of three outside management firms, which he declined to name. The appointment is expected to be made at the next St. Joseph Healthcare board meeting, scheduled for this week. After a formal search, the board will recommend a permanent replacement, subject to the approval of CHI.