BY JAY GREENE Carving out a new specialty-hospital niche for imaging and surgical services in a rural county of 50,000 people with two other hospitals, United Regional Medical Center is steadily turning around its opera- tions by expanding services and improving business practices. One of the biggest challenges for the for- mer county hospital in Manchester, Tenn., has been changing the perception in the community that the days of low-quality care and poor customer service are over, says Wendell McAbee, M.D., chairman of the 54-bed hospital’s board. “We needed a motivated staff, not just physicians, to provide high-quality care,” says McAbee, adding that within a year of the 2002 acquisition only 10% to 20% of the hospital’s employees remained. “The atti- tude of county employees was they had a fairly secure job and didn’t feel a great need to work hard and promote the hospital.” Continued on p. 2 COVER STORY Why the AAFP became a clinic “adviser” Page 4 Editorial Features News . . . . . . . . . . . . . . . . . . . 4 Briefly . . . . . . . . . . . . . . . . . . 6 Opinion . . . . . . . . . . . . . . . . . 8 First Person . . . . . . . . . . . . . . 9 Special Report . . . . . . . . . . . 10 By the Numbers . . . . . . . . . . 11 News Makers . . . . . . . . . . . 12 Business news and information for physician-executives, leaders and entrepreneurs What kind of doc works for big pharma? Page 9 Hospitals getting biz advice from whom? Page 10 DOC OWNERS REVIVE TENNESSEE HOSPITAL Vol. 10/No. 6 • June 2006 Lucky Knott Bob George, left, and Wendell McAbee, M.D., say they have helped turn around the culture at United Regional, and along with it, public perception of the hospital.
Transcript
BY JAY GREENECarving out a new specialty-hospital
niche for imaging and surgical services ina rural county of 50,000 people with twoother hospitals, United Regional MedicalCenter is steadily turning around its opera-tions by expanding services and improvingbusiness practices.
One of the biggest challenges for the for-mer county hospital in Manchester, Tenn.,has been changing the perception in thecommunity that the days of low-qualitycare and poor customer service are over,says Wendell McAbee, M.D., chairman ofthe 54-bed hospital’s board.
“We needed a motivated staff, not justphysicians, to provide high-quality care,”says McAbee, adding that within a year ofthe 2002 acquisition only 10% to 20% of thehospital’s employees remained. “The atti-tude of county employees was they had afairly secure job and didn’t feel a great needto work hard and promote the hospital.”
News Makers . . . . . . . . . . . 12Business news and information for physician-executives, leaders and entrepreneurs
What kind of doc works for big pharma?Page 9
Hospitals getting biz advice from whom?Page 10
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Vol. 10/No. 6 • June 2006
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Bob George, left, and Wendell McAbee,M.D., say they havehelped turn around the culture at UnitedRegional, and alongwith it, public perceptionof the hospital.
During the past four years, thephysician-owned hospital also over-came problems that included a lackof accuracy in medical record-keep-ing, documentation, coding andbilling, as well as inconsistent emer-gency department staffing, unfavor-able managed-care contracts, risingemployee health insurance costsand indifferent physician involve-ment, says Bob George, the hospi-tal’s chief financial officer.
“We bought the failing countyfacility and, from near disaster, arenow making a difference in thecommunity,” George says. Thehospital also operates a 72-bedattached skilled-nursing home.“They say it takes three years toturn a hospital culture. We are onthe back side of quite a turn.”
A neuro-interventional radiologist,McAbee was one of the drivingforces in purchasing the hospitalfor $4 million from Coffee County.“We raised the money in threeweeks,” he says. Investors include52 physicians and 20 others.United Regional is governed by a10-member board, all investors,including nine physicians and alocal business leader.
The 56-year-old former Armyphysician envisioned a small, physi-cian-friendly hospital that couldfocus on imaging and surgery.
“In Tennessee, primary-carephysicians have trouble makingincome commensurate with theirlevel of education,” McAbee says.“It seemed reasonable to me for
physicians to have some owner-ship in hospitals that could supple-ment their income.”
During the first year in 2002,United Regional lost about $1.5 mil-lion, but in 2003, the hospitalrebounded to earn about $275,000.For the first two months of 2006,United Regional has recorded pretaxprofits of $142,000 on net total rev-enue of $2.5 million, according tohospital financial records. The hos-pital projects 2006 earnings of$1.8 million on revenue of $15 mil-lion, George says.
“We are in a rural community,and it is difficult to get enoughphysician involvement to run a suc-cessful business enterprise,”McAbee says. “Investing in thehospital increases physicianawareness of operations.”
With an excess number of beds inthe county, United Regional limitsits inpatient services to about 12DRGs, including services for pneu-monia, gastrointestinal complaints,gynecology, congestive heart failureand stroke. Surgical procedures forthe hospital’s two operating roomsinclude general, orthopedic andpediatric dental, McAbee says.
“We have some surgeonsinvolved in our group,” McAbeesays. “But what keeps the hospitalopen is the imaging department.”
During 2003, several new imag-ing services were added, includinga two-slice spiral computerizedtomography, an open MRI, mam-mography, ultrasound and singlephoton emission CT, McAbee says.
In December 2005, UnitedRegional became only the third hos-pital in Tennessee to purchase apositron emission tomography scan-ner to conduct rubidium studies forheart disease; it’s also used foroncology and neurology. It is the onlyfull-time PET-CT scanner in use southof Nashville, about 80 miles north-west, and north of Chattanooga,
about 60 miles to the southeast,George says.
“If we perform 200 studies permonth (at 75% capacity), theincrease to the hospital cash afterexpenses will be $3.2 million annu-ally” at Medicare rates, George says.“This is readily attainable given thefact that Medicare is economicallydriving the market in this directionusing rates as the incentive.”
In 2006, Medicare increasedreimbursement for the technicalportion of the rubidium PET-CTscan to $2,484 per scan from
$737, George says. “We hope toget payers to increase their ratesas well,” he says.
George says the increasing useof PET-CTs for cardiac evaluationswill help rural hospitals specializingin imaging.
Diagnostic imaging is growing attwice the rate of other physicianservices, according to the
American College of Radiology.From 2000 to 2003, there was a196% increase in nuclear medi-cine, including PET, to 35.5 millionprocedures from 12 million.
United Regional is part of a grow-ing trend of specialty hospitals thatare focusing on imaging, says JimVeteto, director of healthcare serv-ices with Tichenor & Associates,an accounting and consulting firmin Frankfort, Ky.
Over the next decade, Veteto pre-dicts, many small county hospitals
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Modern Physician | June 2006 • 2
Radiology Director Jeff Wolf prepares a patient for a PET/CT scan.
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will be purchased by physicians.“As the demand for inpatient bedsdecreases, small rural hospitalswill be converted to do imagingand high-cost exams,” he says.
There are now more than 100physician-owned specialty hospitals,says the American Surgical HospitalAssociation. The number of hospi-tals with PET scanners is expected
to increase to 1,500 by 2010 fromabout 1,100 in 2004, up about36%, says HBS Consulting USA.
United Regional, however, is notlicensed by the state of Tennesseeor certified by the CMS as a spe-cialty hospital, but as an acute-carefacility. Even if United Regional wereconsidered a specialty hospital,George says he doesn’t believe thefacility would have fallen under thespecialty-hospital moratorium, whichprohibits Medicare payments forservices to specialty hospitals whenpatients are referred by physician-
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investors. “There are a lot of physi-cians who refer to us who don’teven own any stock in the hospital,”McAbee says.
McAbee says he also is involvedin another physician-investor groupthat owns 55-bed Stones RiverHospital in nearby Woodbury. “Webought it from HCA in 2001. Theywere going to close it because itdidn’t fit their corporate model ofhaving increasing profits,” he says.
That investor group also isexpected to close July 1 on a$5.7 million deal to purchase 51-bed DeKalb Hospital in Smithville,Tenn., from St. Thomas HealthServices, Nashville, McAbee says.
Two hospitals in Coffee Countycompeting against United Regionalare 110-bed Harton RegionalMedical Center, Tullahoma, ownedby Health Management Associates,and 49-bed Medical Center ofManchester, a critical-accessosteopathic hospital, which also ispartially owned by physicians,located about two miles fromUnited Regional.
“Our volume has increased butnot against those hospitals,”George says. “We are seeing a lotmore people who would have goneto hospitals in Murphreesboro,”located about 40 miles northwestof Manchester. ■
The high-tech MRI center shares acampus with the original hospital,built in 1954 with funding throughthe Hill-Burton act.
Jay Greene is a former ModernHealthcare reporter and now afreelance healthcare writer basedin Thompson, Conn. ContactGreene at [email protected].
