Tough Decisions, Positive Results: Carthage Area Hospital shows profit after years of restructuring and reorganizing strategic plan

AMANDA MORRISON / NNY BUSINESS
Rich Duval CEO at Carthage Area Hospital.

Carthage Area Hospital CEO Rich Duvall has been working diligently to bring the hospital out of financial debt, with 2016 showing a profit for the first time since 2009. Duvall says he was able to accomplish this through making hard decisions like closing facilities and decreasing staff. However, these decisions have increased efficiency and allowed the hospital to focus on educational and preventative programming and outreach.

NNYB: Carthage Area Hospital struggled for many years, at one point having a debt that reached $21 million. What were the largest factors contributing to these deficits?

Duvall: I would say the single largest factor is the hospital grew uncontrolled for a number of years. We opened up multiple clinics without allowing for the proper business maturation period for each clinic. So when those clinics were opened, kind of in rapid fire succession, there was no business there. You were opening a new business every time we opened a new site, and we had opened close to 30 clinics. I want to say that occurred in about a two-and-a-half to three-year period.  When I first started with the facility, I actually recruited about 18 providers to staff the clinics – and we opened in relatively quick order – and it was a startup for each and every one of those. So you had the provider salary, all the office staff, supplies… all that type of stuff, without knowing whether the business was going to be there. So unfortunately those business models didn’t develop as quickly as they could have if that growth was controlled. So because of that, along with a major change in health insurance reimbursement – a couple of our major payers had changed the way they paid facilities like ours – it kind of created a perfect storm. And on top of those two things, in 2010 we implemented a new electronic medical record for the hospital, which was implemented quickly, and that caused all sorts of problems for the facility. So you combine the three and you truly had the perfect storm, which then led to over $20 million in losses from 2009 to about 2015.

NNYB: In July 2014, CAH was designated a critical-access hospital. Why was that designation vital?

Duvall: So a couple of things. One, we took a hard look at the organization and said, “Does it make sense for us to have 48 acute beds available in our community?” when the reality was our daily census was around 20. So it’s like owning a hotel and having 50 rooms with only 20 of them rented the majority of the time. So once we evaluated that, we looked at other options, one of which was converting to critical-access designation. Under that designation you’re only allowed to have 25 acute care beds, so that number obviously lined up with our average daily census. And it also shifted our reimbursement model to be based on cost-based-reimbursement. So because of that, that switch to cost-based-reimbursement, appropriately sizing the facility to the service needed by the community, added the revenue we needed to the facility. In addition to that we also restructured the entire organization. So we closed about 15 clinics and we laid off about 100 people at that time.

NNYB: Why are Medicaid and Medicare reimbursements so important for a rural hospital?

Duvall: If you look at the north country, most of the facilities in the north country are heavily reliant on both Medicare and Medicaid and I think the reason behind it is our population mix, if you will. We have a lot of elderly, and unfortunately with the industrial shifts in the area, we have a lot of folks that have to rely on Medicaid – the working poor if you will. So those two areas, I think, are important to just about every health care organization in the north country. Moving to the critical care access model makes sense because the reimbursement is based mostly on Medicare, so the cost-based-reimbursement comes back for those services provided to those insured with Medicare.

NNYB: The move to a critical-access hospital compelled CAH to end its association with several outpatient facilities. Did that help or hurt the hospital’s bottom line?

Duvall: I would say two things – back to the uncontrolled growth – this facility grew into markets that weren’t our primary service area. We had clinics in Sackets Harbor and Clayton and Cape Vincent, Edward Knox, you know all over the place, a 50-mile geographic radius, if you will, around the facility. It just doesn’t make sense for us to be in those markets because it’s not our primary area. So pulling back from those areas helped us fortify the services needed for the Carthage community and our primary service area.

NNYB: At the same time, CAH reduced its number of acute care beds from 78 to 25. Does that lower number meet the community’s needs?

Duvall: It does. It’s a little misleading the 78. Thirty of those 78 were skilled nursing beds, 48 beds were actually acute care beds. So those were the only ones available if you were to arrive at the hospital and need a bed. So the reality is health care is shifting from inpatient care to outpatient care and prevention. Luckily, we had put together a solid plan to be ahead of that shift, so reducing the beds did make sense for our community, because as I said, we did a study and found that our average daily census was somewhere around 20 including an OB. So it made a lot of sense to make that move.

NNYB: You took over at CAH in 2014. What operational changes did you implement to try to turn around the hospital’s finances?

Duvall: We had a kind of skeleton strategic plan. I would say the biggest thing we did was solidify that plan, and that plan we are still working on/working off of today. It included a lot of reorganization of departments to increase efficiency, included a lot of restructuring the way we provide care, and refocusing the entire organization on the patient. That’s what we are here to provide care for and it’s one patient at a time that we are doing that with. So there has been several pieces: I would say clinical, quality and building space utilization have been the biggest things that we have focused on.

NNYB: The hospital was able to announce recently that 2016 was its first profitable year since 2009. How did it feel to be able to make that announcement?

Duvall: It was wonderful to finally be able to prove, not only to myself and the board, but also to the staff who have worked so hard to make this happen, plus the community – to show that they can rely on our services for the long run. And we are going to make the choices, although some of our announcements – restructuring, reutilization of space, and clinic closure meant some adverse reaction from the community – but overall they are seeing that the plan was successful and we are able to produce a profit.

NNYB: You are in the process of closing your skilled nursing unit. What led to that decision?

Duvall: As I mentioned earlier, we had put together a strategic plan and one of the points on the strategic plan was developing a strategy around long-term care. The reality is we have a 30-bed skilled nursing facility that is outdated. We have done a number of cosmetic things to try and make it more attractive, but there are other facilities in this market that are much more attractive than ours. The other piece to it is, out of the skilled nursing beds that we offer, a majority of the rooms are double occupancy rooms. Because of that, it’s challenging to keep that full census. For instance if you have a female room, two females in one room, and one of them moves to another facility you only have a female bed available. So if a male comes up on the net to be referred to our facility we can’t necessarily just drop them into that bed. Even if we had another room down the hall with just one female in it you have to ask the family, the resident and everyone to get permission to clear that room out to be able to put a male occupant in it. On top of that, if you look at national averages, it’s somewhere between 80 and 120 beds for a skilled nursing unit to actually break even or to make a small profit. So our scope and size just didn’t allow for that. So again, strategic plan dictated we determine a strategy for it. We had looked at partnering with other providers to run our skilled nursing unit so they could gain the economy of scale, but were unfortunately unable to put that together. We worked on it for about two years and then we made the decision to close the unit, which I think not only stabilizes Carthage Area Hospital, but also other providers in the community, because everyone has that same struggle. As you may know, we had 23 residents; we are down to three left in the facility, one of which is waiting for a bed hold and the other two already have them and are just waiting for the availability to move. So what does that tell you? Well, within a month we were able to place 23 people. So that tells you the market has the capacity to absorb more people –  not only does it help us, but it stabilized the other facilities so they are not sitting on open beds.

NNYB: Has the closure process gone as smoothly as could be expected?

Duvall: I think, in fact, it has gone better than expected. Within the first week I think we had almost half of the residents placed, which I was shocked at. I knew there was capacity in the market; I wasn’t aware that there was that much capacity. I was also shocked at when we announced this and met with all the residents and their families how supportive they were at the decision because they could tell that, unfortunately, inefficiencies were present because of the 30-bed-unit. And several of the families said we are not happy that you are closing, but we certainly understand why you would make this decision. I think the other key piece is our staff worked diligently with all of the residents to ensure they were placed where they wanted to be placed and that was in the local community; so either Watertown, Carthage or Lowville is where all of our residents have gone.

NNYB: You’ve previously used the term “medical village” to describe CAH’s model. What does that mean?

Duvall: In accordance with the Medicaid redesign and DSRIP (Delivery System Reform Incentive Payment Program) in New York state, the idea is to find ways to repurpose acute care space to be utilized for outpatient care or ambulatory care type services. So what we’ve done, is we’ve taken a look at the entire footprint of the hospital, plus our other clinics, and were looking at designing a clinical space, if you will, hence a ‘village’ with multiple services in one location. So that way a patient can arrive, have their vehicle parked by our valet service and then walk in and receive multiple services at one point of entry, instead of having to go to different locations.

NNYB: Is recruiting medical providers a challenge for CAH?

Duvall: I think recruiting medical providers in the north country is a challenge, it’s not just for Carthage Area Hospital. I think the reality is the north country has a lot to offer, but it’s not a big city. So as we meet with most of the providers, a lot of them are interested in the various things offered in the cities from airports to easy access to cultural things and shopping and those types of things so I think it is a challenge. The other thing I think we face in the north country that’s a challenge is, quite often, especially in what I’ll call the “sub-specialty care” area, most of the providers are one. So if you are able to recruit someone who is just out of school they are a little scared because they have no colleague or they have no one else in the area that they can lean on or talk to for support. One thing I think is there are positives. We do have, because we are in a health professional shortage area, the ability to offer various grant programs and incentives to help pay off student loan debt and things along those lines that I think do help. Also, another positive is our proximity to Canada. A lot of the medical professionals that we interview have some sort of tie to Canada and the various cities there with family members and whatnot; it gives them the ability to work close to family or home.

NNYB: Carthage Area Hospital emphasizes wellness and educational programs. Why are these important?

Duvall: Aligning with our strategic plan, another point on the plan is looking at ways that we can help influence the health of the population. One of the areas we had looked at as kind of a deficit area is that of education to the community. We focused this year on putting together a monthly series of wellness topics – everything from stroke and cardiovascular disease to diabetes and eating well. We even had a men’s health month, trying to promote different areas of men’s health, which was attended by about 25 people and was well-received. When we first started the programs, we had about five or six people at them. The stroke and heart events are probably our biggest, with attendance reaching into the fifties. Now, they’ve become so popular that we’ve actually had other community groups reaching out to ask if we could take these shows on the road. So they’ve been up to Croghan and other places along those lines to provide education to the area.

NNYB: Carthage Area Hospital is credited with having the shortest emergency room wait period in the area. How is that accomplished and why does it matter?

Duvall: I think there are two pieces to that. We have a doctor on staff, 24 hours a day, seven days a week. Then for 12 hours a day we have another model called a Fast Track, which is staffed by a mid-level provider, either a physician’s assistant or nurse practioner. That allows for a quicker flow of patients through the ER. The other operational things that have been put in place are things like bedside registration. If available, patients are taken right to a bed rather than traditionally staying in the waiting area. If a bed is open, that patient goes directly to a bed. I think all of those things, the operational forces as well as the way we have it staffed, help support that. I think why it’s important is obvious. You’re coming to the ER for a reason and you wanted to be treated as quickly and as appropriately as you can. Back to the community education events, we are focusing a lot on why you need to come to emergency room, eliminating the unnecessary ER visits. There are folks who could be better treated in their primary care office or an urgent care. We are trying to educate when that makes sense, as opposed to coming to the ER.

NNYB: Your maternity ward also receives frequent praise from the public. What makes Carthage Area Hospital a choice place to have a baby?

Duvall: It’s a couple of things. Our OB unit is an eight-bed unit and there are LDRP rooms, which means labor, deliver, recover and postpartum. So once you are admitted to that bed, you don’t ever move again. The entire process is taken care of in one location. I think the patients find that incredibly comforting and also is well-received by family members because the patient is not constantly being moved around. The other piece that makes it convenient is that our OB unit is attached directly to the OR. If there was ever an emergency or you need to have a C-section, you are literally within 25 feet of the OR. Also, the staff on the unit provides that one-on-one care. Quite often, we hear from our patients that they never feel like a number. They receive the one-on-one direct care both from an RN and an LPN. The LPN usually takes care of the baby and the RN takes care of the mother. It’s a combination of all these things.

NNYB: The Hospital has implemented a locally grown produce initiative. What do you hope to achieve through this?

Duvall: The hospital obviously serves two purposes. One, as the health care provider in the region, but additionally as an economic driver in the area. I think we all know that one of the areas that struggles here is agriculture. Myself, the head of clinical nutrition, and head of our kitchen put our head together and thought, what is something unique we could do that would help us pair those two factors together? Having wholesome food grown by our local farmers to serve to our patients, staff, and visitors obviously meets the nutrition piece because it’s better than processed foods. It also stimulates the economy. In fact, when we started with the local group they had just a few farms and now they have over 20 in a co-op. They deliver to us once a week and also have a farmer’s market right outside the hospital that our staff goes to. Anyone else who happens to be by the hospital that day can buy fresh fruits, vegetables, honey, baked goods, and all sorts of things. In addition to preparing and serving it ourselves, we also use those things in our cooking classes. That way, if you enroll in one of our cooking classes, you are taught how to work with those things. We are also expanding that class to the local supermarkets so people can learn how to shop appropriately, buy healthier foods, and make healthier choices. This all pairs nicely with our diabetes and weight loss program called The Weigh of Life. They do everything from diet and meal planning to exercise and all of those things. We bring in physical therapists who teach people how to exercise correctly. We’re also going to start preparing box sets, similar to what you see on TV. So if you’re in the class, you can purchase the set, which comes with all of the ingredients and take them home to cook. It’s very exciting.

NNYB: What uncertainties remain for the health care industry?

Duvall: I think there are many. We read and hear things everyday about what’s going on in Washington with healthcare repeal and replace. Unfortunately, as a health care provider, we can speak to our elected officials, our community groups, and our hospital associations to influence change, but the reality is that our voice is relatively small. So we kind of have to roll with the punches as to whatever comes to us. What’s unfortunate about it, if you look over time, some changes have been very positive, some changes have been very negative and the healthcare market just has to suffer or prosper in those times. I think that’s the biggest uncertainty. The second area is actually finding providers. It is getting highly competitive, not just because of geographic location, but because there are fewer physicians entering the workforce. We also have an enormous amount of physicians that are at retirement age in the workforce. Especially for the north country, we are going to face some struggles with those two ideals.

NNYB: How has the hospital’s focus shifted since becoming part of the North Country DSRIP, the Delivery System Reform Incentive Payment Program?

Duvall: I don’t know that our focus has changed much because, basically, the idea of it is to work on the community and population health and reducing some of those unneeded visits, which I think all of the facilities were working on independently. The biggest thing it does it bring all of the community health care providers together at one table to have open discussions on the provision of care in the north country and how we can work together to provide that. Also, I believe it serves to eliminate some of the redundancies. It doesn’t make sense for every health care provider to do the exact same thing and compete against each other. If we could find a way to plan appropriately and do individual things, we can all prosper.

NNYB: What is the impetus behind the impact of Carthage Area Hospital emphasizing preventative and primary care more?

Duvall: Two-fold with that. Unfortunately, the north country has a lot of individuals without health care providers. With that, these people tend to enter the health care system when they’re sicker than they would have been if they were being treated by a regular health care provider. For instance, if you’re not being seen to monitor diabetes, blood pressure, or something along those lines and suddenly you have an event, you’re in the ER, or you can be hospitalized. This can be prevented by seeing a provider regularly and receiving routine physicals. If it does occur, there is a huge expense to the health care system. We need a way to eliminate that. However, the piece I’m still cautious about is that the patient has a say in this. So the government idea of having a primary care provider to monitor your care is absolutely great, but I think we’ve all seen a doctor at some point who has told us to do something. And you either do it or you don’t. As far as population health goes, because of that lack of providers for individuals, we figure if we can provide educational programs, it’ll help raise awareness of the more serious diseases, encouraging people to seek a healthcare provider before a full blown emergency. If we can get the population to a point where they all have providers and are all eating well, health costs in the United States would go down.

NNYB: IF Medicaid was cut and patients were to have less access to preventative care, how would that impact the hospital? What kind of associated costs might you see?

Duvall: Medicaid is a small portion of our business here at Carthage. If it was cut, there would be an impact, but it wouldn’t be as large as a more metropolitan area. The unfortunate part about it is in the long run, you would see a larger impact on the entire healthcare system because you would have those higher expenses for serious illnesses instead of getting that preventative and constructive care ahead of time.

NNYB: What does the future of Carthage Area Hospital hold?

Duvall: Where is my magic eight ball? We’re heavily focused on the patient and patient engagement. Our staff and providers are absolutely committed to that. The goal is to be the premier choice, if you will, for patients in this area. We recognize the fact that our hospital is a rural and acute care facility and we’re never going to be a tertiary  care center , which I think is very different from where we were before. I want to make sure we have the bread and butter services to treat what we can here, but also the resources to send patients to where they need to go, whether it be the Syracuse area or wherever the treatment is they need. The other future piece is Carthage taking a more active role in being an economic driver for the area. If the community is healthy financially, we’ll be healthy financially. Working two-fold, by providing health care and working with the community to stimulate the economy, we’ll keep this area stable and thriving. That is our goal.

~Interview questions by Holly Boname. Edited for length and clarity to fit this space.