Help me save my community hospital!!!!!

[rachmoninov3]

I don't know how much play this will get in a smaller forum, but I think it's the place to ask.

I am finishing up my 4th year of medical school, looking to start a family medicine residency in the next year. Throughout undergrad and medical school, I have worked as a CNA for a small community hospital. The hospital was originally owned by the church, and was sold to the community with the clause that it remain a community hospital. Or so hospital lore goes. Well 2 years ago it sold 49% of the hospital to a large corporation. This merger has lifted the hospital from the red back into the black (it had never been in the black previously.)
However, the new company is making a lot of changes that are not in step with what the staff and the community would like. They tried to close the psychiatric services department and were only stopped by extreme community activism. They are more concerned with appearances and the gloss on the floor than on outcomes. And they have been firing people without cause and ignoring the nursing union grievences.
I know this sounds like just hourly employee b*tching, but I grew up in this hospital and want to work here as a physician. There aren't too many community hospitals like this left, and I want to do whatever I can to keep this hospital independent, not for profit, and most of all serving the people north of albquerquerque and south of pueblo.

So my long winded question is: where do I start? Is there a "hospital administration for dummies" text somewhere? And ball park, exactly how many millions of dollars are we talking about for a 49% stake in a small, 250 bed acute care hospital if for some miracle, the community could buy it back?

thanks in advance.

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[hardy]

And ball park, exactly how many millions of dollars are we talking about for a 49% stake in a small, 250 bed acute care hospital if for some miracle, the community could buy it back?

Corporation value is generally a function of gross sales, profit, capital, human and other forms of capital. The number of beds doesn't really allow one to make a judgment regarding value. If the hospital is actually losing money and has no chance of ever making a profit, the stakeholder might actually sell you the 49% for one dollar.

 

[FutureCTDoc]

Corporation value is generally a function of gross sales, profit, capital, human and other forms of capital. The number of beds doesn't really allow one to make a judgment regarding value. If the hospital is actually losing money and has no chance of ever making a profit, the stakeholder might actually sell you the 49% for one dollar.

Or you could use EBITDA multiplied by 4 to 6 and comps to figure out a fair market value. Remember that assets have value that won't show up in an EBITDA valuation. This is a complex process, a boutique M&A firm could help you out. Hospitals are unique in that they often have valuable and highly liquid assets, MRI machines and the like which are valuable and can influence the pricing of the shares.
As an aside if hospitals wish to remain profitable they will need to close their ERs and only allow for direct admits as well as spinning off poorly paying services. Some services are huge money makers i.e. heavily trafficked ophtho, gen surg and dialysis, others are losers i.e. Psych, ER. Hospitals need to make money to survive and that company should have shuttered psych if it was dragging down the hospital.
I think the company is appropriate for trimming the ranks and assuming that this is in an employment at will state they can fire without cause. Welcome to the world of business. There is a choice remain a money loser and shutter the doors or cut services and maintain coverage.

 

[nontrdgsbuiucmd]

EBITDA for any non finance trained folk is earnings before interest, tax, depreciation, and amortization. Earnings are important because that's what you have left from revenue after paying expenses. For net income purposes, a corporation is allowed to reduce their earnings by depreciation/amortization, which is not really a cash outlay; its like if you bought a 20K car cash for your company and the IRS lets you assume the car can be used for 5 years, so your taxable income is reduced by 4K per year.

Corporations are typically valued based on cashflow/net income, ebitda, etc. times a multiple that's typical for that industry, and then (how I was taught) assume the business is sold in the future, and add the future sales value (brought back to today's dollars) to the current multiple-based value.

Alternately, look at the value of all the assets -- if the hospital has $20 million of assets but the approach above shows it's worth $10 million, the more accurate sales price will approach $20 million as a theoretical buyer could purchase it, liquidate everything, and have $20 million.

re: your original question -- you can read books on hospital administration, another approach would be to look into a 1 year MBA concentrating in healthcare admin (sounds like you may be near Denver? Daniels school has one focusing on running a hospital). Then I'd suggest getting some experience working in hospital administration -- it seems difficult to consider buying out the corporation without understanding how they're approaching the hospital.

As per above, #1 in importance is... Keep The Doors Open. If the hospital is running in the red, eventually it'll be shuttered, despite keeping the best people on staff and keeping the psych unit open. Have you considered moving into management within the hospital to improve how they run things? Given my experience inside quite a few larger companies, management may be perceived as being stupid, insensitive, and poorly informed, but that's generally a less-than-fully-informed opinion.

 

[rachmoninov3]

Thanks for all the great and informative replies guys!
I'm currently looking for hospital data (pressganey, morbidity/mortality) to see if this corporation has made any difference in the hospital quality. If it has and it's negative, I have a conflict of interest as I want to train there.

However, for future endevours (as I have sooo much to learn), someone said something about how ER and Psych drain resources...well if some red tape laws could be changed, and the community health center moves on campus, could they just do direct admits without costing the hospital money? I know that this community clinic will do everything in its power when there is a clinic patient who needs to be admitted to bypass the ED. Well if the clinic were on campus and could directly admit it would save the hospital money. Furthermore, it may change the way people utilize health care by being triaged to clinic where they get a PCP if they like it or not, rather than an ER bill they won't pay.

 

[rysa4]

I don't know how much play this will get in a smaller forum, but I think it's the place to ask.

I am finishing up my 4th year of medical school, looking to start a family medicine residency in the next year. Throughout undergrad and medical school, I have worked as a CNA for a small community hospital. The hospital was originally owned by the church, and was sold to the community with the clause that it remain a community hospital. Or so hospital lore goes. Well 2 years ago it sold 49% of the hospital to a large corporation. This merger has lifted the hospital from the red back into the black (it had never been in the black previously.)
However, the new company is making a lot of changes that are not in step with what the staff and the community would like. They tried to close the psychiatric services department and were only stopped by extreme community activism. They are more concerned with appearances and the gloss on the floor than on outcomes. And they have been firing people without cause and ignoring the nursing union grievences.
I know this sounds like just hourly employee b*tching, but I grew up in this hospital and want to work here as a physician. There aren't too many community hospitals like this left, and I want to do whatever I can to keep this hospital independent, not for profit, and most of all serving the people north of albquerquerque and south of pueblo.

So my long winded question is: where do I start? Is there a "hospital administration for dummies" text somewhere? And ball park, exactly how many millions of dollars are we talking about for a 49% stake in a small, 250 bed acute care hospital if for some miracle, the community could buy it back?

thanks in advance.

lemme give you a few other perspectives:

1. Who owns the other 51%? That would be one of those important questions and a number of questions and answers flow from there. Is it a single entity ( the church that you mention?)

2. The corporation you describe will be looking at an overall NPV equation relative to their overall profitability. There are likely more financial factors at play than just the ones strictly pertaining to the hospital itself. Specifically, what is the corporations overall strategic plan and how does this community hospital fit?

3. The scenario of community meets new corporate leadership and ugliness ensues is not uncommon. I have unfortunately, been part of this scenario myself back in my initial clinical practice days.

4. The comments you are making about unjust firings and the like may or may not be true, but indicate an adversarial mentality - that's a big big problem right there. If non-remediable, training MAY be OK there for you but you would not want to make long term plans there at present - or at least reconsider them.

5. The issue to me is one of leadership as opposed to a financial equation alone. If there is an elected medical staff president and a community of physicians with privileges, a well spoken and effective doc leader can likely work together with the church and the corporation in a way that addresses everyone's interests. The key is to get to a point where everyone considers everyone elses interests in trying to work things out - the 49% ownership issue speaks volumes as to a triangular power structure.

6. Sounds workable to me - but someone has to want to see that entrenched positions in the end is a losing play in this scenario.

Good luck.

 

[rachmoninov3]

lemme give you a few other perspectives:

1. Who owns the other 51%? That would be one of those important questions and a number of questions and answers flow from there. Is it a single entity ( the church that you mention?)

2. The corporation you describe will be looking at an overall NPV equation relative to their overall profitability. There are likely more financial factors at play than just the ones strictly pertaining to the hospital itself. Specifically, what is the corporations overall strategic plan and how does this community hospital fit?

3. The scenario of community meets new corporate leadership and ugliness ensues is not uncommon. I have unfortunately, been part of this scenario myself back in my initial clinical practice days.

4. The comments you are making about unjust firings and the like may or may not be true, but indicate an adversarial mentality - that's a big big problem right there. If non-remediable, training MAY be OK there for you but you would not want to make long term plans there at present - or at least reconsider them.

5. The issue to me is one of leadership as opposed to a financial equation alone. If there is an elected medical staff president and a community of physicians with privileges, a well spoken and effective doc leader can likely work together with the church and the corporation in a way that addresses everyone's interests. The key is to get to a point where everyone considers everyone elses interests in trying to work things out - the 49% ownership issue speaks volumes as to a triangular power structure.

6. Sounds workable to me - but someone has to want to see that entrenched positions in the end is a losing play in this scenario.

Good luck.

Thanks for the great perspective! I understand your concerns about training in such an environment, and of course I'm applying to similar programs elsewhere, I just have an admitted irrational attachment to this place. I just hope that I can do as you say when the time comes and I'm a practicing physician. In the mean time I do as much as I can to learn about all the business, the leadership, and the political side of things so that I can be prepared when I am actually able to do something.

 

[bowzer]

I don't know how much play this will get in a smaller forum, but I think it's the place to ask.

I am finishing up my 4th year of medical school, looking to start a family medicine residency in the next year. Throughout undergrad and medical school, I have worked as a CNA for a small community hospital. The hospital was originally owned by the church, and was sold to the community with the clause that it remain a community hospital. Or so hospital lore goes. Well 2 years ago it sold 49% of the hospital to a large corporation. This merger has lifted the hospital from the red back into the black (it had never been in the black previously.)
However, the new company is making a lot of changes that are not in step with what the staff and the community would like. They tried to close the psychiatric services department and were only stopped by extreme community activism. They are more concerned with appearances and the gloss on the floor than on outcomes. And they have been firing people without cause and ignoring the nursing union grievences.
I know this sounds like just hourly employee b*tching, but I grew up in this hospital and want to work here as a physician. There aren't too many community hospitals like this left, and I want to do whatever I can to keep this hospital independent, not for profit, and most of all serving the people north of albquerquerque and south of pueblo.

So my long winded question is: where do I start? Is there a "hospital administration for dummies" text somewhere? And ball park, exactly how many millions of dollars are we talking about for a 49% stake in a small, 250 bed acute care hospital if for some miracle, the community could buy it back?

thanks in advance.

If you do not like it then just build your own clinic and hire all the staff from your old clinic. problem solved.