By Josh Shepherd
Instead of launching a major construction project, Trover Health Care in Madisonville and Pattie A. Clay Regional Hospital in Richmond found a more cost effective way to get bigger. Both hospitals officially announced they would be full-fledged members of the Kentucky healthcare industry giant, Baptist Healthcare System, earlier this September. In addition to giving both regional hospitals greater access to capital and a position of strength in the face of health care reform legislation, the merger also increases BHSI’s presence in Kentucky’s healthcare market whose reach throughout the Commonwealth is rivaled only by KentuckyOne Health and Lifepoint.
Andy Sears, Baptist Healthcare Vice President for Planning and Development, described the partnership terms between his company, Trover, and Pattie A. Clay as a true asset merger. Both health care providers are now full-fledged members of the Baptist system, which grants them an equal share in the company’s considerable resources in capital, professional infrastructure, and ability to flourish in the changing landscape of the American healthcare system.
“It’s a fact that smaller companies within the health care industry are, or will be, under tremendous pressure to consolidate,” Sears said. Looking at the factors influencing change in the delivery of health care for the next few years – consumer demand for advanced technology, continued development and implementation of electronic medical records systems, concern about the impact of the federal Affordable Care Act – smaller systems are looking at consolidation as the best way to thrive going forward. “Larger systems have a better opportunity at surviving in the reform of the industry that we know is coming,” said Sears.
The Trover Health System in Madisonville has operated for over a half century as a successful independent regional health care provider. It has built a distinctive reputation and has made good on its mission to provide health care to underserved areas of western Kentucky.
E. Berton Whitaker, CEO and President of the Trover Health System, said the board of trustees and medical staff spent several years debating whether to weather the next decade’s challenges as an independent or merge their assets with those of a larger organization with greater resources.
“We have a long standing history as an independent, not-for-profit company and there was plenty of sentiment to retain that identity,” Whitaker explained. “We challenged ourselves to weigh the gains we would make remaining independent against our potential progress as part of a larger organization.”
Among the factors the board weighed was access to capital, access to corporate support services, and assistance in the development of new models of payment reform. There were other factors involved as well, but these three points were particularly crucial, he said.
“We did the math. It became clear that in the long term, we were not producing enough to be on our own … it made sense to be part of a larger healthcare network so that we can be prepared to purchase smarter, plan smarter, and ultimately grow where we might struggle alone,” Whitaker said.
In early 2011, Trover announced it would seek out a partner and by November, the trustees and medical staff agreed to enter into exclusive negotiations with Baptist. “We were in a good position no matter whom we went with. The finalists [Baptist, Owensboro Medical Health System, Lifepoint Health System] are very respected and responsible organizations,” Whitaker said. “The board and staff just felt that the greatest amount of synergy was between Trover and Baptist.”
But more than that, Trover’s leadership felt that Baptist shared with them a similar mission and core values. “Joining Baptist allows us to become part of a multi-hospital network with gross revenues vastly greater than our own….we have access to more complex technology and corporate resources. While that may mean we have to standardize some aspects of our administrative operations, we also get the benefit of, for example, a marketing department that, independently, we just could not afford.
“We also believe that an affiliation with Baptist greatly enhances our ability to recruit physicians to this area and also provides us with expanded access to specialists that would have a positive impact on the service lines we provide,” Whitaker said.
Baptist Healthcare will also reap several benefits from an association with the Trover Health System.
“There was a gap in the western part of the state where we did not have a physical presence and Trover helps us fill that gap,” said Baptist’s Andy Sears
Prior to the merger, Baptist owned only one other property, Western Baptist Hospital in Paducah. They also have a management agreement with Hardin Memorial Hospital in Elizabethtown. Trover’s geographic location is spaced just far enough from Baptist’s other western Kentucky interests to make the health system a dominant presence all along the western parkway.
“If you look at our system, we have hospitals serving both the eastern and far western sections of the state as well as being well placed in Kentucky’s two largest metropolitan areas. But there are pockets of the state we don’t serve particularly well. So in looking at our geography, Trover meets our needs very well,” Sears said.
Pattie A Clay Regional Hospital
Pattie A. Clay was already operating under a management agreement with Baptist and had thrived within that relationship. But it was also under pressure to ensure its future fiscal health against concerns over federal legislation and the increasing intensity of competition among the powerful health care systems operating in the surrounding Lexington area.
Unlike the Trover Health Care System, Pattie A. Clay had an advantage from an existing association with the Baptist Healthcare System and its close proximity to one of its cornerstone properties – Central Baptist Hospital. It is also not that distant from another major Baptist property in Corbin.
Todd Jones, CEO and President of Pattie A. Clay Regional Hospital, said that the hospital’s board decided to take the next step and name Baptist as the sole member of the Pattie A. Clay Infirmary Association to ensure that the Madison County service area would continue to have convenient local access to health care. “Residents of Madison and surrounding counties rely on our local community hospital. We believe this relationship will enable our community hospital to be well positioned to meet present and future healthcare needs,” Jones said.
“A lot of the conversation we have had with Lexington, Corbin, and Richmond is how they can be complementary to each other,” Andy Sears added.
“In terms of our proximity to Central Baptist and Baptist Regional, we are working in conjunction with both hospitals to develop strategies and services that compliment how we deliver care. We are looking for ways to enhance the quality of care and at the same time … lower the cost of providing care in a more efficient manner,” Jones continued.
As to future building or renovation projects, Jones said there are plans to expand the hospital’s emergency department. He and the trustees are working with Baptist to prioritize other capital improvement projects as well. Asked if those plans included new facility construction, Jones said a facility planning group has been working with the Richmond hospital. “They will design and advise us on potential renovation and growth strategies for our campus, based on community need,” Jones said.
With regard to either hospital system, there is still a formal strategic planning process to be conducted. Most of the immediate changes resulting from each hospital’s affiliation with Baptist will be cosmetic – sign changes that identify the new facilities as members of the Baptist system. But improvements will come, Sears said. It will arrive in a planned and structured way.
“Expansion plans tend to run in cycles,” Sears said. Baptist is currently involved in only one major construction project at Central Baptist Hospital. But the health system has also completed a renovation to Baptist East in Louisville and another in Paducah. Other properties will also be improved, he said.
“In our [Baptist’s] opinion, the way the economy is moving, the way the healthcare industry is going, larger systems are simply going to be better poised to survive. But we all are facing the same challenges that all hospitals and healthcare systems are going to face – discovering the ways to reduce costs and improve quality at the same time.
“It’s going to make for some interesting developments in the coming decade,” Sears concluded.