Not even a 60% market share could insulate Wyoming Valley Health Care System in Wilkes-Barre, Pa., from losing money. In fact, the system's market share is making matters worse.
Eight years after a merger gave it majority control over the acute-care beds in Wilkes-Barre and Kingston, Pa., the two-hospital system is losing money, has hired a turnaround firm and is considering yet another merger.
Wyoming Valley is losing money on its inpatient cases because of inadequate payments from private and public payers, said William Fuchs, a senior vice president at the Hunter Group, a St. Petersburg, Fla.-based turnaround firm.
Fuchs has been serving as Wyoming Valley's interim chief executive officer since Patricia Finan, the system's president and CEO, resigned on March 28--eight days after the Hunter Group came on board.
Finan, who could not be reached for comment, had been the system's top executive for 21/2 years.
"The fact that we have more market share does not help in the loss ratio," Fuchs said. "We're just losing more on more volume."
For the fiscal year ended June 30, 1999, the system had an operating loss of
$25 million on net revenue of $264 million, Fuchs said. In the current fiscal year, the system is expected to lose $22.5 million on operations with net revenue of $265 million, he said.
Two years ago the system posted a profit of $1.3 million on total revenue of $209 million for the fiscal year ended June 30, 1998, according to the Pennsylvania Health Care Cost Containment Council in Harrisburg.
Wyoming Valley was created by the 1992 merger of Nesbitt Memorial Hospital in Kingston and Wilkes-Barre General Hospital. Together, the two hospitals have 442 staffed beds.
A lawyer who helped convince the U.S. Justice Department that the high market share merger wouldn't be anti-competitive said that the system's latest troubles don't mean the deal was a bad one.
"We did a good deal . . . that has kept them afloat for this many years," said attorney Raymond Jacobsen Jr., who works for McDermott, Will & Emery.
A chief strategy for turning around Wyoming Valley will be renegotiating the system's managed-care contracts.
"That's the key element," Fuchs said.
He also said he is moving forward with plans--first announced by the system in 1995--to relocate all acute-care services to Wilkes-Barre General from Nesbitt Memorial.
The Hunter Group will complete a performance-improvement plan for the system by May 19. Fuchs said he will stay on to implement the plan until a new CEO is found.
Further complicating matters is that two days after the Hunter Group began work at Wyoming Valley, the system announced it would be exploring a possible affiliation with Cincinnati-based Catholic Healthcare Partners, which owns 173-bed Mercy Hospital of Wilkes-Barre.
Such a deal would place three of the four hospitals and 83% of the staffed beds in Wilkes-Barre and Kingston under common control.
"That's very preliminary," Fuchs said about an affiliation. A consultant is studying the feasibility of such a deal.