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In today’s Journal Gazette, Sherry Slater shares this helpful article about hospital governance:

It is both revealing in that Parkview reflects local values and that Community Health System’s (CHS)/Lutheran Health Network (LHN) can and does ignore local advisors. Clearly, this creates differences including these:

1. The profit strategy of CHS worked well, until it didn’t. The system grew to 200 hospitals, more or less, with a strong rural focus that operated growing numbers of hospitals under a strict system of cost controls. Some described the strategy as “Buy, Squeeze, Repeat,”–somewhat unfairly, perhaps, but not altogether inaccurate. Then, healthcare foundations began to change across the country, with the rural population aging, rural joblessness, increased rural drug problems, new Federal regulations, the Accountable Care Act, and a recession. In a short time, it became difficult to operate a small rural hospital at a profit. Then, in 2014, with very bad timing, CHS bought 60 Florida hospitals from Health Management Associates for $7.6 billion. Very soon, as Modern Healthcare reported: the “Nation’s Largest Investor-Owned Hospital Systems in Full Retreat.” As Slater wrote in the Journal Gazette, local boards had no influence on CHS’s bad decisions.

2. Financial news sites reported that it was not helpful to CHS profits that in 2014-2015 they paid out over $200 million to settle fraud charges by the Federal Government–while of course admitting no liability. LHN board members had no clear view and no effective oversight of CHS-guided admission or billing practices.

3. And then we have future problems for local “advisory boards.” Parkview is in a good position to recruit new talent, especially medical specialties. LHN is far less so. One can only imagine what Lutheran Hospital recruits will see if CHS drags its corporate feet and takes 2 to 3 years to correct equipment deficiencies, nursing ratios, and “bottom half” Medicare-Compare hospital ratings. In an era of increasing physician shortages, why would top-quality specialists entrust a career to such a system when they are better supported by Lutheran Hospital’s competitors?

Local board members will know local conditions, but as Ms. Slater reports, only one local board has any authority.