Affiliation, debt relief offer lifeline to Georgia medical center

James E. Crissey watched the election returns closely on May 20. President and CEO of the Southern Regional Medical Center in Riverdale, Ga., Crissey had a vested interest in a ballot measure in Clayton County that included a financing option for the medical center. When the votes were counted, 62 percent of residents approved the plan, giving SRMC $50 million in debt relief from an increased sales tax.

SRMC and other hospitals in Georgia have struggled financially in recent years. Eight rural Georgia hospitals have closed since 2000, and four of those closures came in the past two years.

Though not a rural hospital, SRMC has lost money since 2007 while revenue has dropped as well. Of those losses, $43.7 million came since 2009, including $20.7 million last year (see table). The nonprofit, acute-care facility serves Clayton County residents just south of Atlanta. It has 331 beds, a staff of 1,800, and an ambulatory care center at Spivey Station in Jonesboro that offers outpatient surgery, women's health and imaging services. More than 80,000 patients visited its emergency department last year.

Hospital administrators say the losses stem from providing care to the indigent. Uncompensated care cost SRMC $21.6 million last year, Crissey reported. In Clayton County, Southern Regional's primary service area, 21.5 percent of residents live below the federal poverty level, according to the U.S. Census. For comparison, 17.4 percent of Georgia's residents live below the FPL.

Before the county vote, Crissey assured residents that administrators were doing what they could to boost income and cut losses, eliminating 61 positions in recent months, for example. If voters approved the sales tax, Crissey said SRMC would allow county commissioners to appoint four members to the medical center's board of directors, and two of them could serve on its executive committee. 

Perhaps the most significant step was its decision in 2012 to contract with Emory Healthcare, the largest health system in Georgia, for management services and to qualify as a participant in the Emory Healthcare Network. Under the agreement, Emory Healthcare is guiding Southern Regional's quality, financial and operational improvements while governance remains with the SRMC board. In exchange, Southern Regional pays Emory a management fee, although the amount has not been disclosed.

Benefits of affiliation

Being affiliated with Emory allows Southern Regional to expand access to quality, cost-effective care for patients while increasing efficiencies and reducing costs, Crissey said. There are other reasons as well. 

"As a standalone hospital, SRMC did not have the resources to establish a physician network that would prepare us for health reform and new payer models," Crissey explained. Emory's reputation improves SRMC's ability to recruit top physicians, and its nurses can participate in Emory's professional development programs. The medical center also gets preferred pricing from vendors and gained access to technology and guidelines it didn't have as an independent nonprofit.

"We will be the first hospital to connect with Emory's health information exchange," Crissey added. "Once connected, we anticipate that the pace of clinical integration will increase."

But to date, increases in patient volume have been modest. "We can effectively track referrals into our specialty physician clinics and in outpatient imaging services. But referral relationships don't change overnight just because you are part of a network. The shifts we have seen have been cultivated by our physician sales team," he said.

As SRMC has found, there are no easy solutions to the problems of declining revenue and rising costs, particularly in Georgia, one of 19 states that to date have decided not to take the federal money offered under the Affordable Care Act to expand funding for Medicaid. 

Nonetheless, the affiliation with Emory should improve the medical center's financial health. 

"Affiliation and clinical integration offer an opportunity for hospitals to access a stable physician network, negotiate stronger reimbursement rates, align physician practices, improve quality and patient safety, and enhance performance metrics, which include monetary rewards. Better performance with increased revenue will stave off closure," Crissey said.