A small Ohio hospital that was set to close this month will stay open for the foreseeable future because of an early Christmas present.
The angel in this holiday story is Oberlin (Ohio) College, a private liberal arts school with a huge endowment and a longstanding tie to the city of Oberlin's only hospital, 91-bed Oberlin Medical Center.
In December, the college gave Oberlin Medical $2 million in return for a seat on the hospital's board.
The $2 million barely dented Oberlin College's $600 million endowment. But for the hospital, the money made all the difference between staying open and shutting down.
Oberlin Medical lost $1 million on total revenue of $26.8 million in 1999, according to healthcare information firm Solucient, and hospital officials estimated last year's loss could be as high as $4 million.
The hospital leveraged the college's donation into a five-year management contract with Community Health Partners, a Lorain, Ohio-based division of Catholic Healthcare Partners. In addition to the college's donation, the hospital is seeking a $4 million line of credit, $2 million of which will be backed by Community Health, says Edwin Oley, Oberlin Medical's president and chief executive officer. Oley, formerly administrative operations officer at Community Health, became head of Oberlin Medical with the contract.
"Obviously, (the $2 million gift) was a very gracious thing for Oberlin College to do," Oley says. "Oberlin College, the city of Oberlin and Community Health Partners collectively put this deal together. It wouldn't have flown without the participation of all three."
The college pitched in because "a strong, vibrant hospital is essential for our community and our college," says Alan Moran, vice president of college relations. The donation was made under the condition that Oberlin Medical remain an accredited acute-care hospital.
Oberlin is a city of about 8,000 less than an hour's drive southwest of Cleveland. The nearest hospital emergency room is at least 20 minutes away, says Clayton Koppes, Oberlin College's interim president. "And that can make all the difference in the world in some cases. Last year we had 300 student visits to the ER," Koppes says.
Without the college's help and the management contract, Oberlin Medical would have closed this month, he says. "Things were that bad," Koppes says. "The losses continued to accelerate. We were losing $300,000 a month. We were racing the clock."
The hospital will use the $2 million donation for payroll and other operating expenses. Right now, its cash reserves are almost zero, Oley says. "We were cutting it about as close as you could get," he says.
A new management structure is now in place at Oberlin Medical. As a condition of the gift, the hospital's 16-member board had to replace itself with an eight-member board.
The new board has six voting members and two nonvoting ex-officio members. The college is represented with a voting seat by its vice president and chief financial officer, Andrew Evans.
Also, James Shaum, the hospital's president and CEO for 12 years, resigned in anticipation of new management by Community Health.
None of this would have happened without support from the college, which has had a strong link to Oberlin Medical since the hospital opened in 1907. In fact, in 1954 the college donated to the city the land on which the hospital sits to help secure a bond issue.
"There's a big gap between saying a hospital is important to the community and putting some money behind it," Koppes says. "We were very concerned about the serious economic impact that the closing would have had on the community. It would have meant losing 250 jobs."