Drs. William Cast, Matthew Sprunger and J. Philip Tyndall
A man who fell from a scaffold was heard to say, as he plummeted past the fourth floor, “So far, so good!”
This anecdote captures the dangers inherent in confusing motion with progress. Regardless of how quickly you’re moving, what matters most is where you land.
This cautionary tale may prove applicable to Lutheran Health Network and its parent company, Community Health Systems. Recent activity may make it seem like Community Health has made progress with regard to Lutheran. However, it may just be falling even faster.
As founding members of Northeast Indiana Citizens for Healthcare Excellence (NICHE) and longstanding members of the Lutheran community, we remain committed to helping clarify what’s transpiring because it has such a profound effect on northeast Indiana. We remain committed to returning Lutheran Hospital to four-star status.
Let’s begin with a bit of background: Community Health’s declining financial situation (as reported by Fitch and Moody’s, among others) led to decreasing investment in Lutheran facilities, equipment and people. This in turn led to longstanding concerns from Lutheran nurses and physicians – which in turn led to a buyout offer from a group of Lutheran-affiliated physicians. Community Health’s reaction was to fire key Lutheran leadership team members and physicians and intimidate others who have told us of lawsuit threats and impending contract terminations.
Earlier this month, Lutheran’s newly appointed CEO, Mike Poore, announced a truce of sorts, declaring that the 10 doctors involved in the buyout offer had agreed to forgo attempts to find a partner other than Community Health and to work with Community Health for patients’ benefit. He wrote:
“We are pleased that despite these differences, some positive developments have emerged from recent discussions, including a substantial capital commitment for Lutheran Health Network and wage increases for many of the hardworking employees across the network. … We know that this announcement does not immediately repair strained relationships, but I believe it is a positive step forward.”
A “step forward” or merely “So far, so good?” Let’s dig a little deeper.
In simple terms, Community Health is in financial trouble, as revealed by its below-investment-grade bond rating, as reported in Modern Healthcare. Consider this from Fitch Ratings, one of the “big three” credit ratings agencies:
“Fitch Ratings has assigned a ‘BB/RR1′ rating to CHS/Community Health Systems Inc.’s $1.75 billion senior secured notes…The Rating Outlook is Negative. The ratings apply to $15.5 billion of debt outstanding at Dec. 31, 2016… The Negative Outlook reflects CHS’ high leverage, weak operating trends since the acquisition of rival hospital operator Health Management Associates (HMA) in late 2014…Growth in EBITDA has also been hampered by ongoing government investigations and lawsuits.”
What does this mean for Lutheran Health Network? Lutheran is one of Community Health’s most profitable hospital systems. Community Health, therefore, needs Lutheran’s profits – and as a result, Community Health has deferred maintenance at Lutheran facilities and wages have stagnated. In short, Lutheran is paying for other system failures, plus lawsuits, federal claims and employee whistle-blower claims against Community Health. It is unknown what part of Lutheran earnings went to pay to settle claims of fraud and criminal activity (where Community Health denied liability) but settlements of about $150 million in 2014 and $75 million in 2015 (to name only the most recent) are not trivial – and another $100 million fraud claim has been filed (and denied by Community Health) in Washington state. We assume that if Lutheran provides 14 percent of Community Health profits, then Lutheran provided $21 million in 2014 alone.
“So far, so good?” or falling fast?
It seems Community Health is making promises it can’t keep. The “substantial capital commitment for LHN” committed to by Poore in his letter was couched in uncertain terms – “over five or six years.” However, Community Health makes $300 million each year from Lutheran facilities. Accordingly, over six years, Lutheran could provide Community Health with nearly $2 billion. Their “capital commitment” to Lutheran of $500 million, therefore, is about a fourth of that total. That may sound like a lot, but we believe the ordinary repair and rehabilitation costs of Lutheran will run between $75 million and $100 million a year – and that’s just to keep up with depreciation. The amount Community Health has announced will not allow for upgrading equipment and services. A much-needed electronic medical record purchase will run $90 million to $100 million when training is figured in, and they have approved plans to invest tens of millions in a new downtown facility. We estimate nursing staff levels at Lutheran Hospital, which has a two-star Medicare rating, to be half of its local competition. Parkview, with a four-star Medicare rating, advertises a 1-to-4 nursing care ratio. To bring wages and staff levels to a four-star level would cost Lutheran about $210 million over six years. Now, add to that replacement of expensive equipment needed in some cases for backup safety and you’ll see why the $500 million promise is a farce. You’ll also see how better staff ratios contribute to many improved Medicare ratings scores, given that better communications, serious complications and injury from patient falls are elements considered in Medicare safety ratings.
Community Health’s optimism would be inspiring if it were not so hollow – and so bad for our community. It is the optimism of someone who, while falling, denies that the ground is approaching quickly. The difference, in this case, is that it’s not just one man falling. It’s our community, too, and our standard of health care quality. Lutheran Hospital once held magnet status – and now we want our four stars back.
“So far, so good?” No. What matters is where we land. And right now, it looks like it’s going to be a hard, hard fall.
Source: The Journal Gazette