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.

Haywood Regional Medical Center and WestCare are in the final stages of forming a partnership, with plans to launch a new joint venture as early as January.

The two entities will join forces under a new umbrella organization with a single CEO and new board of directors. While daily operations will be merged, the arrangement stops short of a full merger with the assets and long-term balance sheets remaining separate.

Haywood County Commissioner Mark Swanger questioned how the interests of the public will be safeguarded under a new joint venture.

Currently, Haywood Regional is a public hospital. The public and media are allowed to attend hospital board meetings, and finances, policies and nearly all its records are open. The new joint entity will be a private nonprofit, however, entitling the public to only very limited disclosure about operations.

Swanger said the new entity won’t be required to operate in a transparent manner, and thus the public’s vested interest in Haywood Regional could be thwarted.

Swanger expressed his concerns at a county commissioner meeting this week, which was attended by Mark Clasby, chairman of the HRMC board.

Swanger suggested a slot for a county commissioner should be a reserved on the new governing body.

“Has there been thought of having a county commissioner serve on that board to ensure our county government and citizens have as much transparency as possible?” Swanger asked Clasby.

Swanger said he wants to see a stipulation guaranteeing a Haywood County commissioner a seat on the joint operating board written into the bylaws.

“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 to count on the trust issue is not good business in my view,” Swanger said. “I think a commissioner seat needs to be part of the operating agreement so the citizens who have the financial investment in the physical plant of Haywood Regional are properly represented.”

Swanger asked Clasby to deliver the suggestion to the rest of the hospital board. The current hospital board will continue to exist once the new entity is formed, but which decisions will lie with the Haywood Regional board versus the new joint operation board has not been stipulated.

The new joint board will have 14 members: seven appointed by Haywood Regional and seven appointed by WestCare. County commissioners appoint the members of the Haywood Regional board, which in turn will appoint members to the joint operating committee, giving commissioners a small, albeit twice-removed, measure of control.

Although the board of Haywood Regional Medical Center could lose much of its control following its affiliation with WestCare, it will remain a public, county-owned entity nonetheless.

Haywood Regional and WestCare have announced their intention to unite under a newly created umbrella organization. The hospitals would be managed jointly, with just one CEO at the helm and one operating budget. That new organization will be run by a new board, comprised equally of members from both Haywood and WestCare.

“The joint operating company will sit atop the two entities. WestCare will remain its separate entity and Haywood will remain ours,” said Haywood County Commissioner Kirk Kirkpatrick. “To my knowledge there is nothing about the agreement that would change the public status of Haywood Regional.”

That public status means county commissioners appoint board members, the hospital’s books are open to the public and board meetings can be observed.

“We are under the impression that our hospital will still have a hospital authority with open board meetings,” agreed Pam Kearney, HRMC board member.

But it could be stripped of much of its power. Haywood’s current hospital board will likely no longer have hiring and firing authority over its CEO or autonomy over budget decisions, for example. Those would likely fall under the purview of the new board, which won’t be public. Members of the public and media would not be entitled to attend meetings of the joint entity where most decisions would likely be made.

Mike Poore, CEO of Haywood Regional, said the details of the arrangement are in the early stages to say the least. Exactly what power will remain with Haywood Regional’s existing hospital board and what will be delegated to the new entity will be refined over the lengthy affiliation process.

“There are a thousand things we still have to do,” said Roy Patton, an attorney and HRMC board member. “This whole thing is not a done deal. Whether it is done still depends on an awful lot of due diligence.”

This week, a team from Haywood Regional is at WestCare poring over all its financial ledgers and books.

“And vice versa they will be looking at everything within our organization,” Poore said, calling the two entities “deep into due diligence right now.”

“We are at the very beginning of this,” Kearney added.

Haywood Regional’s hospital board is appointed by county commissioners. How members are appointed to the board of the new joint entity are among the issues to be hammered out.

Poore said it is not unprecedented for a public hospital to come under the umbrella of an entity that’s not public, yet remain public itself.

“I think there are several examples of that within the state,” Poore said.

State statute

Haywood Regional’s status as a public hospital dates to its construction with publicly-backed bonds. The hospital building belongs to the county, and that ownership won’t change. While the daily operations of WestCare and Haywood will be co-mingled, each hospital will keep a separate balance sheet and its assets will remain segregated.

That is largely the reason Haywood Regional will still be considered a public hospital, even if it’s autonomy is siphoned off. State statute specifies a change in status occurs only if a public hospital is sold or leased.

“My understanding is that the ownership of the facility would rest with the county, and it wouldn’t be sold or leased,” said Jeff Horton, the director of N.C. Division of Health Service Regulation.

Another layer in affiliation is a management contract with Carolinas HealthCare System, a network of 23 hospitals based in Charlotte. The initial length of the contract could lock Haywood Regional and WestCare in for up to a decade, but a management contract does not qualify as a sale or lease, and therefore doesn’t trigger the state statutes regarding Haywood’s public status. If it did, the ultimate decision would rest with Haywood County commissioners. It appears commissioners will dodge such a vote, however.

“Right now with the anticipated structure it doesn’t appear there is any need for a change or for us to vote on it,” Kirkpatrick said.

If negotiations start heading in a different direction, however — one that would jeopardize the hospital’s public status and therefore land in the commissioners’ laps — Poore said he would let the commissioners know right away.

The commissioners, at least as a whole, haven’t drawn any lines in the sand about the ultimate structure the hospital takes on.

“I don’t know that it would matter to me as long as the services are better,” said Commissioner Kevin Ensley. “But I would want to listen to the medical community and hear what their consensus would be. I would also want to know what our hospital board thinks. We have appointed some really good people that understand the medical community.”

Patton said the hospital board hasn’t expressed a proclivity one way or the other, but it would be a major step to undo the hospital’s public status and wouldn’t be taken lightly, he said.

“Personally I would have to feel very comfortable if there would be a change like that,” said Patton, an attorney and member of the hospital board. “I would have to feel like that change is for the betterment of healthcare in this county and the area and that it would outweigh the benefits of being a public hospital.”

The board of Haywood Regional Medical Center bid farewell to chairman Glenn White April 24.

White had served on the hospital board nine years and became chairman in March 2008 following the resignation of then-chairman Dr. Nancy Freeman. White called his experience “very educational and enlightening.”

“The last year was very difficult,” White told the board and audience at his final meeting. “There were a lot of dark days, but I think at the end of it we’ve come out probably a better hospital than we were before.”

The board presented White with a plaque that had a stethoscope attached to it. Former interim CEO Al Byers, who guided the hospital in the aftermath of it’s loss of federal healthcare funding and who has rarely been seen since his retirement, attended the ceremony. So did former Haywood County Commissioner Chairman Larry Ammons, who led his board at the time the decertification took place.

“Glenn is a leader,” said hospital board member Cliff Stovall as he presented the plaque to White. “He doesn’t push himself out front, but things are happening in his head and behind the scenes that make an operation work.”

Hospital CEO Mike Poore also stood up to thank White for his service. He called White “a good steward” during a “very eventful period in this hospital,” and thanked White for his “sage advice and guidance.”

White was one of the last board members still serving who was on the board when the hospital’s decertification took place in February 2008. Now, only two of 12 remain who were part of that board — Mark Clasby and Dr. Dick Steele.

Clasby, whose three-year stint makes him the longest serving member, was appointed as the new chairman.

“This is a new chapter in our history, and an exciting time as we go forward,” Clasby said as he accepted his new post. “I welcome the new board members to help us with this endeavor as we continue to make this hospital the best hospital in the nation.”

At the meeting, the hospital board welcomed three new members. One is taking White’s place. The other two are filling newly added positions, part of the planned expansion of the board to 12 members total.

New board member Norman Yearick is an industrial engineer with management experience in manufacturing. Also joining the board is Bennie Sharpton, a resident and practicing surgeon in Haywood County who has previously served on the hospital board. The third new board member is Dr. Christofer Catterson, an orthopedic surgeon specializing in sports medicine

County involvement changes

When two positions opened up on the Haywood Regional Medical Center board of directors a year ago, Haywood county commissioners spent hours conducting interviews with each of the 37 people who applied.

But this most recent go around, commissioners drastically reduced their level of involvement in vetting hospital board candidates. Instead of conducting interviews with the 19 applicants, commissioners only interviewed the five recommended by the hospital board.

So what gives?

According to County Commissioner Chairman Kirk Kirkpatrick, the most recent selection process followed correct protocol, while the previous one — where commissioners interviewed all 37 candidates — deviated a bit from statute.

According to state statute and procedures set up by the county when it formed the hospital board authority, the county makes all appointments to the hospital board based on the hospital board’s recommendations, Kirkpatrick said.

Last summer, however, the hospital board did not submit any recommended names to the county, so commissioners simply interviewed everyone who applied.

County commissioners have the authority to approve all the recommended candidates; approve some of them; or approve none of them and request a whole new slate of recommendations.

That was unnecessary this time around, because commissioners were satisfied with all five candidates the hospital board recommended to them.

“We could have interviewed more, but I think all of us felt the five that we interviewed were outstanding candidates,” said Commissioner Bill Upton.

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.

By Becky Johnson & Julia Merchant • Staff writer

Haywood Regional Medical Center and WestCare announced plans to join forces under a newly created parent company. In addition, they will enter a management agreement with Carolinas HealthCare System, a large hospital system based in Charlotte with 25 hospitals under its wing in North and South Carolina.

“We will gain access to the knowledge and expertise of an organization that has a proven track record of helping hospitals improve their bottom line and grow services in communities,” said Mike Poore, the CEO of Haywood Regional Medical Center.

The decision to enter a partnership with each other and a management contract with Carolinas HealthCare System was approved by unanimous votes by both the HRMC and WestCare boards in separate meetings Monday night (April 20).

The arrangement stops short of a complete merger of HRMC and WestCare. The hospitals will not merge their assets or balance sheets. However, daily operations from a revenue and expense standpoint will be managed jointly.

WestCare CEO Mark Leonard compared the arrangement to the partnership entered into by Harris Regional in Sylva and Swain County Hospital in Bryson City. Both continue to function somewhat independently, although daily affairs are managed as a single unit.

“The two organizations remain separate and district but there was a new parent,” Leonard said.

The primary advantage of a management contract with Carolinas HealthCare is an economy of scale to get better rates and prices on everything from insurance reimbursements to the cost of medical supplies.

“They can go to suppliers whether it is for linens or medical equipment and say, ‘We represented 2,000 or 3,000 beds and we want a better price or we go somewhere else,’” said Dr. Richard Lang, an HRMC radiologist.

Health care conglomerates, often organized under one flagship hospital, are increasingly common. On the other hand, rural hospitals flying solo are increasingly rare. Smaller hospitals struggling to stay relevant in the rapidly changing world of health care are increasingly partnering up.

“I believe this makes really good sense for medical coverage for this section of Western North Carolina, to keep a viable system available to the people here,” said Cliff Stovall, HRMC board member.

HRMC and WestCare will retain autonomy in some areas of operation, but will give up autonomy to the joint parent company in other areas.

“They are going to delegate much of their roles to this (new) board,” Poore said of the current WestCare and HRMC boards.

Exactly how much control would remain with the individual hospitals has yet to be worked out.

“All the details now have to come together,” said Mark Clasby, HRMC board member.

Hammering out the details of both the joint operation between WestCare and HRMC, along with the details of the management contract, could take another six months.

“There is a tremendous amount of work and due diligence that will have to occur,” Leonard said.

WestCare and HRMC will have just one CEO down the road, but neither Leonard nor Poore were concerned about that.

“I think both of our boards have made a brave decision to ensure not only that we keep the services that we have, but that we grow for the future,” Poore said. “It would be selfish of me not to go forward with this because it’s what’s best for the community.”

Other administrative functions, from payroll to purchasing, could also be consolidated, or could even be taken over by Carolinas as part of the management contract.

It is not known yet how much say Carolinas HealthCare Systems will have on the daily operations of the hospital or how much influence on long-range goals and strategies.

“What the trustees and physicians have heard is that Carolinas does not micromanage local leadership and local governance,” Leonard said.

When HRMC first began exploring the prospects of an affiliation with other hospitals, an outright merger was not out of the question. But leaders of the process soon realized there was little to be gained by the loss local control resulting from merger, not even the hoped-for cash infusion to upgrade equipment or expand the hospital.

“During this process, we found out even with a merger there is no cash infusion,” Clasby said.

Retaining autonomy is one reason a management contract was attractive.

“I think that’s one of the things that the board felt strongly about is that it kept control locally and got outside help to improve services,” Poore said. “The management company has really no powers or authority that are not expressly given to it.”

Haywood County Commissioner Mark Swanger said the management contract appears to be the best of both worlds.

“Under the contract, we still retain our independence, but yet we gain many of the benefits that a merger would provide. At this point I think it’s the best of the possibilities,” Swanger said. “I think it will improve healthcare, and I think it will improve the financial health and stability of both WestCare and HRMC.”

WestCare and HRMC said that patients will not be forced to leave their own county to get health care services they currently enjoy at home. Each hospital will still strive to provide the full array of medical care they do now rather than integrate clinical operations, such as cardiologists only operating in Haywood or hip replacements only being done in Sylva.

“I think it is unlikely that we would have that kind of consolidation. Our communities are 26 miles apart. Those kinds of consolidations work when you’re in a very close proximity,” Poore said. “We don’t have any plans to merge services on a local level. I think what would be more likely is that we would work together to create new services.”

That is particularly the case when it comes to highly specialized care, where there could be just one center to serve patients across the counties. Some services are too specialized to offer currently, but the larger patients base that would come with a joint affiliation could help recruit specialties the area doesn’t currently have, Poore said.

Poore says hospital staff, particularly front line staff, will see little if any change in their jobs.

Mission Hospitals in Asheville was the runner up in a quest for a management contract.

“Mission put forward an excellent proposal, but I believe the judgment was that Carolinas has the experience that no other group could match,” Swanger said.

Mission said while it appreciated the opportunity to make a pitch, it was disappointed in the decision.

John Maher, vice president for services at Mission, said that patients in the western counties have a high level of confidence in the health care provided at Mission. During the negotiation process, Mission conducted a survey in the western counties and found that 66 percent of patients preferred Mission over the other entities being considered for a management contract.

Further, Mission’s vision of an integrated comprehensive health system across the region is compromised by the decision to go with Carolinas, Maher said.

Maher also questioned how many jobs may be lost by Carolinas taking over the administrative functions of the hospitals. Those details, of how much Carolinas HealthCare would assume control of, are unknown.

“The language of the operating agreement has not been fashioned yet,” said Gail Rosenberg, spokesperson for Carolinas. “It is going to ba number of weeks before it is as to what pieces and part would be part of that.”

Leonard said he does not expect the referrals of patients to Mission from the western counties to change.

“We have a lot of respect for the folks at Mission, the specialists and sub specialists in Asheville. They do an excellent job for our communities,” Leonard said. Doctors will still have the freedom to refer patients to whomever they pleased, despite Mission not being selected for the affiliation.

“I don’t see the referral patterns changing whatsoever. Mission is a very excellent hospital,” Lang agreed.

Haywood Regional Medical Center could miss out on as much as $750,000 in revenue over the course of a year after missing a federal billing deadline for its new mental health wing.

The missed deadline, which occurred last fall, was the result of a misunderstanding between the hospital and the federal Medicaid office.

The psychiatric unit is eligible for a higher rate of Medicare and Medicaid reimbursement than other hospital units. To qualify for the higher rate, the new wing had to be visited by state inspectors and get certified.

State surveyors told the hospital to apply for the survey by mid-August of 2008 in order to meet a cut-off date of Oct. 1. If the hospital missed the deadline, it would have to wait a full year for certification that qualifies it for the higher rate.

This is where state surveyors got picky. The surveyors received the hospital’s application for a survey on Aug. 19, “a date which apparently the state does not consider to be mid-August, although two of the four days in question were over a weekend,” explained hospital CFO Gene Winters, who didn’t work at the hospital at the time.

The state told the hospital that its request was four calendar days late — forcing HRMC to wait another year before it can qualify for a bigger return on the psychiatric unit.

The 16-bed unit has been mostly full since it opened in October of last year, thus serving as a steady source of revenue for the hospital, between $250,000 and $300,000 a month if the unit remains near capacity.

The amount of revenue the hospital is missing out on could be as high as $750,000 over a 12-month period until the window rolls around to get the unit certified, Winters said. According to Winters, the true budget impact from the missed deadline will likely be small, around $300,000. The hospital had budgeted for the psychiatric unit conservatively.

“We are in the process of sharing the pain of the reduced revenue with our psychiatric unit management company, so the impact to the hospital will be minimized,” Winters said.

— By Julia Merchant

The prospect of an outpatient surgery center in Haywood County has drawn support from 14 doctors willing to pitch in on a feasibility study to get the ball rolling.

Haywood Regional Medical Center will split the cost of a $40,000 study with interested physicians. It could lay the groundwork for a joint venture between the hospital and private doctors in the construction of a surgery center down the road.

A surgery center would be more convenient for patients, who now have to navigate floors of the hospital for even the simplest of outpatient procedures like cataracts and colonoscopies.

A new surgery wing was well on its way to a ground breaking early last year. Architects were in the final phase of the design, with interior color palettes already selected. But the entire project came crashing down when the hospital lost its Medicare and Medicaid status after failing federal inspections in early 2008. Savings squirreled away to pay for the surgery wing were spent instead to keep the hospital afloat until it rebounded from the crisis.

While involvement from 14 doctors in the feasibility study might sound unwieldy, Haywood Regional CEO Mike Poore welcomes the broad interest. The threshold for the venture to be successful is between eight and 10 physicians, so it’s good to have so many, Poore said.

“It is important to me to make sure we have physicians involved,” Poore said.

The attitude marks a change from the former hospital administration, which excluded participation by physicians. For years, surgeons tried to make the case for a joint venture with the hospital to build and run a surgery center, but to no avail. Former CEO David Rice, known for his top down control of the hospital, wanted a surgery wing under the exclusive domain of the hospital rather than a joint venture preferred by the overwhelming majority of doctors.

A joint venture provides a better business model for doctors, who want more autonomy and to build equity in their own practice.

“I think it creates a better relationship between the hospital and physicians and helps with the recruitment and retention of physicians in the community,” said Dr. Chris Catterson, an orthopedist.

Stand-alone surgery centers are such common fixtures these days that the lack of one means some doctors wouldn’t consider coming here, according to Dr. Al Mina, a surgeon.

Mina said that a surgery center will streamline the process for patients. Check-in will be quicker. Families will have a better waiting area. Parking would be closer.

It’s also cheaper for the patient. Under the strange formulas used by insurance companies, the co-pay is lower for the same operation at a free-standing surgery center versus a surgery wing attached to a hospital, doctors explained.

“It’s important not just to have a fancy new building that people feel comfortable going to, but the out-of-pocket cost to the patient is lower from their insurance company,” said Dr. Richard Lang, a radiologist.

A stand-alone surgery center would also be cheaper to build than trying to shoehorn a wing onto the hospital, Mina and Catterson said.

The project being pushed by Rice had a price tag of $16.5 million. It not only included a makeover of the surgery wing, but also a new main entrance and lobby for the hospital, new offices for hospital administration and “shell space” for future expansion of the hospital. The new wing would have had an over-built foundation that could support up to seven stories in the future.

Poore is no novice when it comes to launching surgery centers. The consultants selected for the study, called Stroudwater Associates, did a similar study at the hospital in Georgia from which Poore moved from.

The consultants will evaluate the demand for a surgery center, factoring in demographics and HRMC’s market share.

“You don’t want to spend millions building one and find out you don’t have the volume to support it,” Catterson said.

The meat of the study will examine possible business models, such as how much will be owned and run by the hospital versus the doctors. Poore said he expects the consultants to develop a tier of options.

One final question is where to build it.

“There is no predetermined location. Part of the study is to take a look at possible locations,” Poore said.

Once the consultants get started, Poore expects the study to take less than two months.

The Haywood Regonal Medical Center Foundation had $400,000 in donations in the bank for the surgery support wing prior to when the crisis hits last year. A hospital board member asked at last week’s board meeting what will happen to funds raised for the surgery center.

“The surgery center has been put on the backburner, so donors can donate their funds elsewhere or their funds can be held,” said Robin Tindall-Taylor, Foundation director.