The clock is ticking for the fundraising foundations of Haywood Regional Medical Center and Harris Regional Hospital to spend earmarked money in their coffers to benefit the hospitals.

The sale of the hospitals in Haywood, Jackson and Swain counties to Duke LifePoint Healthcare next year will bring an unexpected windfall for local coffers come tax time.

Maintaining high-quality doctors in Haywood County emerged as a common theme in a public hearing last week on the future of MedWest-Haywood.

The hospitals in Jackson and Swain counties formally declared last week that they want out of the partnership forged nearly three years ago with Haywood’s hospital — however, it’s not at all clear whether the leaders of Haywood Regional Medical Center will agree to let them leave.

The Westcare Board of Directors met for more than four hours Tuesday, Aug. 7, to discuss the future of MedWest-Harris and MedWest-Swain hospitals.

The board did not take an official vote on whether to pull out of the MedWest partnership or whether to dissolve its ties with Medwest-Haywood. Instead, the board will remain study mode and reconvene toward the end of August to make a more conclusive decision.

Harris and Swain partnered with Haywood Regional Medical Center two and half years ago under the MedWest banner. However, doctors and hospital staff in Jackson County, and to some extent Swain County as well, have been unhappy with the affiliation.

Despite their requests, Haywood County commissioners will not be guaranteed a spot on the new joint operating board of Haywood Regional Medical Center and WestCare.

Commissioner Mark Swanger initially called for the seat to ensure transparency and accountability to the public, which has a vested stake in the hospital.

Commissioner Bill Upton said as an elected leader, they are the first ones to be blamed “if things go south.”

“I think it would keep us closer to the situation,” Upton said. “It makes a difference. I think it would be positive for all of us.”

When HRMC failed federal inspections two years ago and had to all but shut down for five months, commissioners were criticized for not providing enough oversight of HRMC. Two commissioners up for election that year lost, with backlash over the hospital crisis blamed as one of the reasons for their ousting by voters.

Commissioner Skeeter Curtis said the public still thinks of HRMC as “their” hospital, since county taxpayers backed a loan used for its construction, even though the hospital in fact paid back the loans and the public did not have to pony up any money.

HRMC CEO Mike Poore said he disagreed that a commissioner’s presence would somehow provide more transparency. Poore said the county commissioner serving on the board would not be able to share what was discussed by the joint hospital board outside its private meetings anyway.

“The county commissioner has no more authority to speak outside that meeting than anyone else,” Poore said. “They are not a county commissioner at that meeting. They are a member of the joint operating committee.”

Mark Clasby, chairman of the HRMC board, said giving a county commissioner a permanent seat at the table would have been a deal killer in the joint venture. Clasby added that commissioners can serve, and indeed one is on the inaugural board, but they aren’t guaranteed a spot going forward.

Is it true that Haywood and WestCare have merged?

No. The boards of Haywood Regional Medical Center (HRMC) and WestCare Health System (WestCare) have formally agreed to form a unified healthcare system that will integrate the strategic, operational, and financial aspects of both organizations. This integration is not a “merger;” rather, it is a legal arrangement that will provide patients within the newly defined service area with enhanced access to a broader array of services.

WestCare Health System includes Harris Regional Hospital, Swain County Hospital and other healthcare facilities serving a four-county area in Western North Carolina. The goal of the new arrangement with Haywood Regional is to help reduce operating expenses, while improving quality and patient safety.

The recently approved Joint Operating Agreement (JOA) permits the continued existence of separate boards of directors, but vests much oversight responsibility with a newly formed Joint Operating Company (JOC) board of directors.

HRMC and WestCare will be the sole members of the Joint Operating Company (JOC) and will share equally in the financial operations of the new company. In the healthcare industry, hospitals may form a JOC to provide a stronger financial structure and to enhance service delivery.

By what process did the two organizations come together?

The boards of the respective hospital systems have been engaged in the process of selecting a partner and joining the two systems together for over 18 months. Members of both boards have spent hundreds of volunteer hours in meetings with consultants and legal advisors in order to garner and evaluate the technical advice needed to make the very best decision.

Starting in the early months of 2008, HRMC and WestCare began informal discussions regarding how best to enhance the delivery of healthcare services to the people of their respective communities. In late 2008 both boards agreed that the best course of action was to secure a partner to assist in bringing the two organizations together.

Shortly thereafter, formal RFPs (requests for proposals) were sent to select organizations that had the resources needed to effect both a unification effort and also provide continuing management services to a combined operation.

Following a very intensive review process, the boards selected Carolinas HealthCare System as the manager. At that point, in April 2009, a Joint Study Committee was formed to negotiate the details of the future affiliation.

The JOA announcement on Oct. 21 represents the culmination of that effort.

What is the name of the new organization?

“MedWest Health System” is the name of the new Joint Operating Company; however each of the individual hospitals will continue to use their current names: Haywood Regional Medical Center, Harris Regional Hospital and Swain County Hospital.

When will the new company begin operations?

It is anticipated that MedWest Health System will begin integrating the operations of the two systems in January 2010. Some approvals are still pending, but those are expected to be received in a timely manner.

Who will be CEO of the new JOC?

That decision will be made by the newly constituted board of MedWest Health System and CHS in the next few months. A proficient management team at each hospital has helped to guide this integration effort, and they are to be commended for their conscientious and unselfish leadership throughout each step of the process.

Who will be on the governing board of the new JOC?

The board will be made up of 14 members, with seven from Haywood County and seven from the counties that comprise WestCare’s primary service area. The boards of HRMC and WestCare have appointed five members each and those 10 will select four at-large members to complete the board.

Will there be physicians on the new JOC board?

Each of the member systems, HRMC and WestCare, will have two active medical staff members on the board of MedWest Health System.

What will be Carolinas HealthCare System’s role with respect to MedWest?

The board of MedWest Health System will enter into a management services agreement with Carolinas HealthCare System. Under the terms of the agreement, Carolinas HealthCare will employ the executive team and provide MedWest Health System with a wide range of corporate-level management services.

Carolinas HealthCare will not have an ownership interest or a direct role in the governance of MedWest Health System.

Carolinas HealthCare will provide MedWest with the experience and resources of a comprehensive, multifaceted organization. Those resources will be brought to bear in a way that will help all of the MedWest hospitals improve patient access, lower patient costs and improve patient outcomes.

With the addition of the MedWest hospital group, CHS will operate 32 hospitals across the Carolinas. CHS provides a strong support structure for those hospitals and the hundreds of other care locations it manages. The management services agreement ensures that these support mechanisms are available to MedWest.

What will be the continuing responsibilities of the existing HRMC and WestCare governing boards?

Under the terms of the JOA the individual hospital boards will continue to credential medical staff at their respective facilities and will have certain other reserved powers. For example, the JOC could not accept new members without the approval of the individual boards.

What impact will the new arrangement have on employees?

Salaries, benefits and retirement plans have always been subject to annual review by HRMC and WestCare, and from time to time over the last few years changes have been made as necessary to those plans. That process will continue. The formation of the combined organization will not be a sole factor in deciding if there will be changes. In fact, one of the reasons for selecting the JOC organizational structure was so that the current retirement plans could remain in place.

Will any employees lose their jobs as a result of the JOC?

This question has not been addressed and likely will not be for at least several months. In some organizations that have formed a JOA, over the long term, the employment base has actually increased as the new organization developed new services and expanded existing services.

Will patients in this part of the state now have to travel to Charlotte for more complex medical services?

No. There is no plan to disrupt existing physician referral patterns. Patients, their families and their doctors will continue to make decisions about where patients will go for care.

As noted, it is anticipated that over time additional and more sophisticated services will be offered, thus allowing patients to stay closer to home for their care.

What impact will the JOC have on local doctors?

Physician representation has been important from the beginning of this process, and members of the medical staff at both HRMC and WestCare have participated in the work of the Joint Study Committee. The committee was diligent in seeking physician input and making sure that issues of particular interest to doctors were addressed during negotiations.

The JOC is expected to provide numerous benefits for the medical community, including the enhancement or expansion of existing services, and the development of new programs.

Will the three hospitals that form MedWest be jointly marketing their services?

Yes. MedWest will oversee the marketing of services for each of the individual hospitals. This is just one of many ways that savings can be realized, while highlighting the benefits that will be available through joint operations.

A long-awaited affiliation of the hospitals in Haywood, Jackson and Swain counties will become official in January 2010.

That’s when a newly created hospital company, dubbed MedWest Health System, will take over day-to-day operations for Haywood Regional Medical Center and WestCare’s two hospitals: Harris Regional in Sylva and Swain County Hospital in Bryson City.

At the same time, the two companies will enter into a management contract with Charlotte-based Carolinas HealthCare System, which currently runs 29 hospitals in North and South Carolina.

HRMC and WestCare officials say joining forces with each other and with Carolinas HealthCare will bring many benefits, whether it is gaining expertise in hospital management or buying medical supplies in bulk.

With the country mired in a recession and possibly headed toward an overhaul of the health care system, some hospital board members see the need to partner up sooner rather than later.

“It’s a no-brainer. Something’s gotta happen,” said Fred Alexander, chairman of WestCare’s board of trustees. “What do you want to be in the storm, the aircraft carrier or the two little PT boats?”

HRMC officials were especially optimistic about the new venture, likening their company to a phoenix rising and making multiple allusions to the “dark days” when Haywood Regional failed federal inspections and lost its Medicare status, followed by an exodus of private insurance companies. The hospital was forced to cease all but emergency operations, touching off a financial and public relations crisis.

“We’ve come a long way,” said Mark Clasby, chairman of the HRMC board.

“It’s a new day,” said HRMC CEO Mike Poore. “We are no longer looking toward the past. We are looking toward the future.”

Vying for CEO

In the next few weeks, the new board of directors for the joint venture will have to decide who will become MedWest’s CEO. Both HRMC CEO Mike Poore and WestCare CEO Mark Leonard are vying for that position though they publicly downplay the competition.

“This is the right thing for all of our communities,” said Poore. “That’s more important than if I’m the CEO or Mark is the CEO.”

HRMC and WestCare will keep their existing boards, but they will retain autonomy in only limited areas, like approving credentials for doctors. Their main influence will be appointing representatives to the joint MedWest board, which will make most major decisions.

As of now, no name changes are planned for the three individual hospitals. The name “MedWest” will primarily be used for legal and accounting purposes.

“If we try to call this hospital MedWest tomorrow, a hundred years from now, they’re still going to call us [by the same name],” said Poore.

John Young, group vice president for Carolinas HealthCare’s western region, repeatedly stressed that his company was not interested in taking a dictatorial approach in running the three hospitals.

“We believe healthcare is a local event,” said Young. “Healthcare in this community will not be run out of Charlotte.”

Poore said the goal is to expand services locally, rather than send patients off on long trips to receive treatment at affiliate hospitals.

Advantages of partnering

WestCare has already experienced the benefits of affiliation in the past. CEO Mark Leonard said after Harris Regional Hospital integrated with Swain County Hospital, his company was able to improve services and introduce new programs.

Leonard said the goals with this affiliation are the same: reduce cost, improve patient outcomes, and expand services. The hospitals can split the cost of expensive new medical equipment they couldn’t afford otherwise. And by pooling their patient base, the hospitals can attract specialty physicians.

Linking up with Carolinas HealthCare, the nation’s third largest nonprofit public system, would also allow HRMC and WestCare to gain insight on best practices in financial management, staff recruiting, and safety and quality improvement.

Clasby said there are provisions for leaving the joint operating agreement, though he would not give specifics.

But leaving the agreement is far from anyone’s mind at this point, as HRMC and WestCare prepare to deal with a possible overhaul of the health care reform, an aging population, and a shortage in nursing and clinical staff.

“We want to be better strategically positioned,” said Alexander. “The last thing we want to do is just be a rural hospital hanging on by our fingertips.”

The joint board that will run the eventual Haywood Regional Medical Center-WestCare affiliation needs to have a sitting Haywood County commissioner as a permanent member, as one Haywood County commissioner is now suggesting.

Commissioner Mark Swanger worries that the interest of Haywood County’s citizens — who own the buildings and property at HRMC — could be compromised if a commissioner is not on the new joint board. HRMC now operates as a public hospital, and most of its dealings are subjected to the state’s open meetings laws. The new venture with Carolina’s HealthCare System will form a private nonprofit, entitling citizens to very little knowledge about the decisionmaking process.

Swanger’s reasoning makes good sense: “While I don’t doubt the motives of anyone involved in this now, 10 years from now we will have an entirely different cast of characters, so counting on the trust issue is not good business in my view. I think a commissioner needs to be part of the operating agreement so the citizens who have the financial investment in the physical plant of Haywood Regional are property represented.”

There’s little doubt among those who have been following the affiliation of WestCare and HRMC that the board members from both hospitals are working with the best interests of their communities at heart. The driving force here is to provide three communities — Haywood, Jackson and Swain counties — with stronger, better delivery of health care services for many years into the future.

What if, however, some kind of cataclysm occurs at Carolina’s HealthCare and its smaller entities become expendable or begin to be treated as mere profit centers for certain types of specialized care rather than as stand-alone hospitals? Or if a future CEO from Charlotte begins to make decisions without regard to citizens in this region?

The kind of scenario described above is not likely to occur, and we would hope that the board members from this region — whomever they are — would stand up for our citizens. But county commissioners — and most elected officials — typically operate from a different mindset because at any monthly meeting they face reminders that they serve the public’s interest, whether it is someone complaining about taxes or a neighborhood group seeking help about barking dogs disrupting the peace.

This one is easy. Citizens in Haywood County — and those of Jackson and Swain, for that matter — would have another measure of confidence in this affiliation if a county commissioner gets a seat at the table.

By Julia Merchant • Staff Writer

The Smoky Mountain News caught up with Carolinas Healthcare System Chief Operating Officer and President Joe Piemont this week. The hospital system — the largest in the Carolinas and the third largest public non-profit system in the country — recently entered into a joint management contract with Haywood Regional Medical Center and WestCare Health System.

Here’s some of what Piemont had to say.

Smoky Mountain News: Will Carolinas Healthcare receive a cut of the profits under the management contract?

Joe Piemont: No. Management contracts generally consist of a base management fee and some opportunities to earn incentives, provided Carolinas Healthcare hits benchmarks detailed by the local board. These benchmarks are set each year and can be related to financial or clinical performance or strategic mission, among other things.

SMN: Did Carolinas Healthcare want HRMC and WestCare to join forces before entering into a management contract?

JP: We strongly encouraged them to talk to one another because we thought for the long-term it would be in their best interest to explore some permanent form of combination. The relationship needed to start between HRMC and WestCare. I think that those two communities share a lot of similarities. They are separated by the mountain to be sure, but if you look at the challenges they’re going to face, they’re simply going to be better off doing it together.

SMN: How will the hospitals benefit from being part of the Carolinas Healthcare System?

JP: We bring various economies of scale and economies of skill to our colleagues and teammates in our system. Scale economies are things such as purchasing — we’re able to get everyone in the system a better price on supplies. Economies of skill mean that rather than having to study things on their own or rely on a myriad of consultants and experts, we provide the hospitals with assistance. We have a full array of subject matter experts.

SMN: Can you estimate a timeline for the management contract process?

JP: I think a short timeline is probably six months. I think you’ll see more concerted and combined activities before the end of 2009.

SMN: Has Carolinas Healthcare ever entered into a management contract with a hospital that has lost its federal healthcare funding status, like Haywood Regional Medical Center did?

JP: We have not. We’ve never seen that before. I think Haywood acted very quickly to get on a path to recertification. They were all over it, and that was very clear to us. I think they’ve done a remarkable job of getting back on their feet.

SMN: Who will the CEO report to, and how will this impact local control?

JP: The CEO will not only be accountable to the board of the combined enterprise, but will also have administrative contact inside Carolinas Healthcare. It shouldn’t impact local control at all. We as management make recommendations for certain actions, but the board makes the decisions. Our authority is no greater than the CEO’s authority has been traditionally.