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Q: What do people mean when they talk about “syndication”?

A: Syndication refers to partial physician ownership of a hospital system. In Fort Wayne, for example, approximately 20 – 28% of LHN and Dupont Hospital are physician owned. It is a structure of governance and ownership that increases physician involvement in details of operating a health care system. Dupont Hospital was a syndicated “joint venture” between physicians and the hospital company that began with building plans. Because of physician engagement, this model brought new care delivery methods to the community and became a model, under CEO Tom Miller, for creating a similar syndicate for all of Lutheran Health Network.

After the aborted attempt by physicians to purchase LHN, Community Health Systems (CHS) CEO Mr. Wayne Smith had a negative impression of syndication and, through the actions of his LHN CEO, seems to have resolved to end syndication. However, in doing so he paid too little regard to the consequences inherent in physicians and specialty teams being in ever-shorter supply. The adversarial relationship between LHN’s management and medical staff is such that significant harm is likely to be done. Money can solve isolated hiring problems, but for the time, CHS is short of cash and establishing teams in such fields as cardiac or neurosurgery/stroke recovery is extremely difficult. Our guess is that whomever CHS places as LHN CEO will be directed to force both independent groups and joint-venture partners into a hired-physician-group model. Some irony exists in that decision because it is gradually being statistically shown that a fully faceted hired-physician model increases the costs of both health care and running a hospital system.

Becker’s Hospital Review recently cited a report by Moody’s on hospital financial trends (http://www.beckershospitalreview.com/…/moody-s-high-rate-of…) that found “while physician employment was an effective strategy for growing hospital and health system revenues, it comes at a price of damaging their operating margins and, by implication, their creditworthiness”

All of these variables factor into the current healthcare debate in Congress. But whatever solution is proposed, the most critical factor remains the growing shortage of physicians and nurses vs. the aging of the U.S. population. If the syndication is destroyed, it is likely to be a Pyrrhic victory for CHS.

Q: Who are the new CEOs of Dupont and St. Joseph’s hospitals?
We are told that Kirk Ray has withdrawn his name from contention. New CEOs are being chosen. Maurine Cate former CEO of CHS-owned, Spokane WA, Deaconess Hospital–a part of the Rockwood Hospital System–is quite possibly on the short list. We are also told that Cate may bring along, from Washington State, her #1 report, Meg. OLeary.

Deaconess has had its own problems of late (see http://www.spokesman.com/…/for-profit-owner-of-deaconess-…/… and http://www.spokesman.com/…/hospitals-accused-of-billing-th…/). A second lawsuit involving the sale of Deaconess Hospital involved non-payment for use of a Gamma Knife (see http://www.spokesman.com/…/gamma-knife-sues-former-deacone…/). While all the facts of these controversies are yet to be known, no administrator enjoys being involved in such controversies, whether true or false.

Cate was with Deaconess since 2016, and may not have known details of CHS’s behavior and accounting relating to the above charges. Many of her references are quite good (see https://www.bloomberg.com/resear…/stocks/private/person.asp…), as one would hope them to be, and should she be considered, she deserves to be heard about Deaconess and with regard to maintaining the quality at Dupont Hospital.

Two other names that have surfaced are Joe Thomason and Lorenzo Suter, both now in Texas and previously at troubled Tenet Healthcare. Tenet, like CHS, has been forced to sell hospitals to reduce debt and has also been troubled by regulatory issues (see https://www.dallasnews.com/…/tenet-healthcare-repeat-offend…).