The wheels of change keep churning at Baptist Health System in Birmingham, Ala.
Since last July, when Baptist's board sacked its longtime chief executive officer, Dennis Hall, the state's largest healthcare provider has gone through three other top officers, including an interim CEO who abruptly resigned after just four weeks on the job. Meanwhile, a dozen board members have left in the eight months since Hall was dismissed after a revolt by doctors forced the faith-based system to reject a plan to sell Baptist to for-profit chain Triad Hospitals.
The upheaval hasn't ended. Last week, the system unveiled a new restructuring plan, announcing that it will shed three of its 10 hospitals, funnel significant funds into capital improvements and focus efforts on acute-care and ambulatory-care facilities by selling two nursing homes.
"It's good news; we're building from a position of strength," said Beth O'Brien, the system's president and CEO since early January. "We've refocused ourselves and we're moving forward."
She said the restructuring had nothing to do with an announcement on the same day last week that Baptist had agreed to pay $1.3 million to settle a federal whistleblower lawsuit filed by a former Baptist employee. The lawsuit, which dates back to 1997, involved charges that Baptist wrongfully submitted Medicare claims for outpatient physical- and occupational-therapy services. O'Brien said there was no criminal conduct involved. "We're obviously pleased that the matter has been resolved," she said.
The new strategic direction, O'Brien said, underscores and rededicates Baptist's mission as an 82-year-old faith-based system.
O'Brien, a former nurse, said the new Baptist "celebrates its historic roots while addressing the needs and pursuing the opportunities presented to us today."
She said Baptist plans to sell two hospitals: 101-bed Coosa Valley Baptist Medical Center, Sylacauga, and 45-bed Cherokee Baptist Medical Center, Centre. The system will not renew the lease on county-owned Lawrence Baptist Medical Center, a 37-bed hospital in Moulton, when it expires March 31, 2005. The system's board of directors approved the divestitures last week.
Baptist, which has about 9,000 employees, appears to be on the rebound after posting a net loss of $18.1 million on net revenue of approximately $775 million in the fiscal year ended June 30, 2003. The system had net income of $13.2 million on revenue of $404 million in the first six months of fiscal 2004, officials said.
The three facilities represent less than 10% of Baptist's net annual revenues, with Coosa Valley leading the way among the trio with about $44.2 million in net revenues in the 2003 fiscal year. Lawrence Baptist had revenues of about $14 million, and Cherokee Baptist posted revenues of about $10.5 million, officials said. All three had increased revenues from the previous year. The bottom line-net income or loss-was not available at deadline.
John Floyd, chairman of the Sylacauga Health Care Authority, which has the first option to purchase the Coosa Valley facility, said, "We're going to evaluate all options." He declined to elaborate.
The Lawrence County Health Care Authority, meanwhile, has hired Chattanooga, Tenn.-based consultant Ken Conner, a partner with Decosimo Corporate Finance, to evaluate potential purchasers of Lawrence Baptist, located in the growing Huntsville-Decatur metropolitan area. That growth, he said, has triggered considerable interest despite the hospital's size.
O'Brien said the seven facilities in the pared-down system represent a group with "market relationships to one another." She said it's too early to tell who might bid on the hospitals.
Robert Hernandez, a professor in the department of health service administration at the University of Alabama at Birmingham who watches the local healthcare market closely, said the restructuring is an example of "larger systems contracting to allow them to be more cost-effective." Baptist unloaded a money-losing HMO four years ago and now plans to sell two nursing homes along with the two rural hospitals, as it rejects the kind of integration that once served as a model for the industry.
Baptist also has balked at spending as much as $44 million for a planned replacement facility and nursing home at Coosa Valley.
The decision to dump three hospitals came as a slight surprise to Rosemary Blackmon, a spokeswoman for the Alabama Hospital Association. She said the outcome of the divestitures-and the change in the complexion of the healthcare delivery system in northern Alabama-depends largely on who purchases Baptist's discards.
"It's hard to tell until you know what happens next," she said. "Is it going to be a purchaser with the same values and goals?"
David Jarrard, a spokesman for Baptist, said it would take about six to eight months to divest the two hospitals. O'Brien would not speculate on either the expected price of the hospitals or the system's plans for "major investments" in capital improvements in its remaining seven facilities.
"We literally just formulated this," she said. "This is too early. One of the things we're doing now is putting together our long-term financial plans, on a pretty fast track, for all the operations. I'm trying to get my arms around what we have here. This was a big step today, and we'll build on that."
With several key management positions unfilled at Baptist, including chief operating officer and chief financial officer, the system has hired a national turnaround firm, the Hunter Group, to fill key slots on a temporary basis, O'Brien said.
O'Brien said she hopes to develop some stability after "uneven performance over the last several years" throughout the system.