MDS Consulting’s CEO: Distressed Hospitals Are ‘Cause for Great Concern’

The first quarter of 2014 saw seven acute-care hospitals and health systems file for bankruptcy protection or announce their closure, noted MDS Consulting.

In a release, MDS Consulting said that comes on the heels of 18 acute-care hospitals shutting their doors completely in 2013 and doesn't take into account those who closed individual services, units or departments ... or were forced to sell because of distressed situations.

"The growing number of distressed hospitals has a chilling effect on the healthcare industry and can be devastating for the communities they serve, especially communities with only one hospital," says Phil Dalton, president and CEO of MDS Consulting. "There is great reason for concern, and attention must be paid."

A 25-year veteran of healthcare strategy, policy, planning and business development, Dalton says that hospitals may find themselves in an unstable position for a variety of reasons, many of which revolve around the economic realities of the changing industry.

"Hospitals require a strong cash flow to support operations, but in today's economy that simply isn't happening for many institutions," he says. Among the reasons Dalton cites include too little commercial insurance with favorable rates, too high charity or bad debt, insufficient government reimbursement of Medicare or Medicaid or not enough non-operating income to offset these shortfalls.

"Reimbursement cuts to hospitals due to healthcare reform are exacerbating the problem and are forcing hospitals to be far more strategic and thoughtful in building their business plan," says Dalton. "It is critical that hospitals today not only assess their expenses but adapt to new payment models that incentivize hospitals and physicians to coordinate care, manage the health of individuals, and ensure that care is provided as early as possible and in the most cost-efficient setting."

Dalton says that many distressed hospitals also suffer from a shortage of physicians or the lack of a strong physician alignment strategy.

"Hospitals need to explore new relationships with physicians and others who share common values and with whom they can partner to better serve the community while assuring their own sustainability," he says. Physician alignment models, according to Dalton, could include the creation of medical foundations, clinical co-management agreements of outpatient clients, and the development of an assortment of management services organizations.

At MDS, Dalton leads a team of seasoned healthcare professionals who help distressed hospitals identify and evaluate the underlying reasons for their condition and then provide road-tested solutions to their situation. These could range from strategies to reduce a hospital's cost structure and expansion of its physician alignment models to the development of commercial accountable care organizations and even finding like-minded partners for a host of merger and integration arrangements.

"It is time for all freestanding hospitals to candidly assess their long-term sustainability relative to market position, physician relationships, financial footing, payer mix, workforce competencies, product offering and overall reputation," says Dalton.

MDS Consulting is a national healthcare consulting firm that helps hospitals, medical groups, health systems and other healthcare organizations achieve their goals for development, growth and profitability.

More information:

www.mdsconsulting.com

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