St. Joseph Hospital, the smallest healthcare facility in the highly competitive Augusta, Ga., market, lost its contract two months ago with the state's biggest private health insurer. Now, the money-losing hospital faces the prospect of being shuttered, sold or downsized by its parent, Ascension Health.
Ascension, the nation's largest not-for-profit health system, said those are the three "strate-gic options" it will consider over the next 60 to 75 days as it weighs the fate of the 107-bed facility, the only Catholic hospital in Georgia's second-largest city.
"We are trying to be sensitive to all the employees, and we truly do not have a preferred option at this time," said Laura Kaiser, the system's vice president for health ministry positioning and operations. "We're looking at all three, side by side."
The system's re-evaluation of St. Joseph, which lost about $2 million in 2004 and is projected to lose anywhere from $3 million to $3.5 million this year, is part of an ongoing analysis of all sites by St. Louis-based Ascension, which operates 63 hospitals. "We're looking at each of the local markets, the market demographics, the market position, to try to identify how best do we go about serving the needs of the communities," Kaiser said.
She described Augusta, where St. Joseph is competing against three far larger competitors, as a "slightly over-bedded" and "very competitive" market, adding that local administrators, board members and physicians are deeply involved in the discussions over the hosiptal's fate.
Hospital consultant Josh Nemzoff said the approach by Ascension is fairly unusual since sellers almost never reveal that the situation is so desperate they will likely close a hospital if a buyer isn't found. "I haven't heard of anybody saying, 'We're thinking of selling-or closing-the hospital,' " he said.
"It sounds like they've made the decision (to sell) on this one," said Nemzoff, a principal in Nemzoff & Co. "Given the small market share, the most logical buyer would be in the market and would turn it into a consolidation. Possibly, one of the for-profits might be on a big enough ego trip they decide they could compete where Ascension couldn't."
Andy Lasser, the hospital's chief executive officer, said St. Joseph has suffered through "several years of financial stress" as it struggled against bigger rivals in Augusta, a fast-growing city of some 200,000 about 150 miles east of Atlanta. "The hospital was looked at (by Ascension) and it was decided our long-term future wasn't solid," Lasser said.
He said the first and best option would be to sell the hospital. News of the potential sale and an expected request for proposals has already elicited some interest, he said.
In late April, the hospital severed its ties with Blue Cross and Blue Shield of Georgia, which has about 3.2 million customers and ranks as the state's largest private insurer. Just weeks later, the hospital, which relied on the insurer for one-third of its business, was forced to cut approximately 75 jobs, leaving it with about 650 full-time employees.
Lasser said a large part of the hospital's financial woes stemmed from its "long-neglected" contract with Blue Cross and Blue Shield, which he said was reimbursing St. Joseph about 35% below the hospital's average payers and about 25% below its lowest payer. After losing approximately $4 million on the contract last year, he said, the hospital asked the insurer to provide an increase to more typical levels in a market that includes competitors such as 255-bed Doctors Hospital, the 480-bed Medical College of Georgia Hospital and Clinics and 546-bed University Hospital, which is part of University Health Care System.
Charlie Harman, vice president of public affairs at Blue Cross and Blue Shield, said St. Joseph insisted on being paid higher reimbursements in a new contract, even though "what we were paying them was well within the market" in Augusta and across the state. "We were unable to come to a mutually beneficial agreement."
Instead, he said, Blue Cross and Blue Shield, whose network included St. Joseph, Doctors Hospital and the Medical College of Georgia, recently added University to a network that now boasts the three largest hospitals in Augusta. St. Joseph, meanwhile, is on the outside looking in. "I regret the circumstances that St. Joseph is facing," Harman said. "But I believe that the reimbursements that we offered are well within the market range."
Asked about the impact of the divorce from its big insurer, Kaiser said, "It's a factor but only one of the several factors we had to consider."