The Rise and Fall of the Independent Hospital (Part 1 of 2)

by webadmin on July 9, 2013

HMR-thumb2The independent hospital is going the way of the dinosaur and saber-toothed tiger.

This point is driven home by the recent announcement that Ohio’s University Hospitals was acquiring one of the two final independent hold-outs in the state, Parma Community General Hospital.

According to John Commins at HealthLeaders Media, Terrence G. Deis, Parma’s president and CEO, is confident they made the best decision: “It was the right combination of commitment to us and the community, a quality footprint, and culture, so we feel pretty good about it. The medical staff maybe even more importantly feels good about it. There is a lot of work to be done between now and a definitive agreement but I feel a lot better about it than I felt I would have even a few months ago.”

Northeast Ohio will now be a two-system market, healthcare analyst Allan Baumgarten observed, with UH and Cleveland Clinic occupying both sides of the proverbial street. There’s a possibility that Catholic Health Partners could eventually be a competitor, but with the Parma acquisition, that section of the state is now UH and CC turf.

There was a time when Parma was deeply in touch with its “fiercely independent” spirit, but Deis said “it became time to acknowledge the realities that independent hospitals face in a consolidating market,” Commins writes.

These realities include a shrinking demographic that was making it difficult for Parma to compete. Then, there was the breakdown of the region’s three-hospital collaborative, which itself is merging with UH, leaving Parma a lone wolf. Deis speaks candidly of the “reek of inevitability” surrounding them like the dome in Stephen King’s popular novel.

More critically, there was the sequester, the final nail in the coffin, so to speak.

Deis elaborated: “For us, the sequester was a big deal. We are a large Medicare facility and a 2 percent reduction doesn’t seem like a lot, but in a decent year 2 percent is our whole bottom line. It’s tough to make that up. The job went from getting more difficult every month to more difficult every week to more difficult every day. The money was needed to attract and retain physicians and the more we were fighting to hang on, the more difficult that became because the first thing people want to know is where are you going to be in five years.”

For its part, UH is rightfully excited about the acquisition and plans to bring new and expanded services to the region. CEO Thomas F. Zenty III views Parma as a “vital anchor institution in the communities that they serve.”

Parma brings it 2,000 employees, 500-plus physicians, and six-city service area into UH’s 18,000-employee, 10-hospital, 20-outpatient health center system.

As hospital executives on many sides of the spectrum—big, small, medium—how do you view this acquisition? Do you feel that the independent hospital is on its way out? In our next post, we’ll take a look at some other acquisitions that seem to indicate the inevitability of it all. Is this good for healthcare in the long run?

-by Pete Fernbaugh

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