A conglomerate bought and shuttered a hospital in a tiny NC town, so the town's mayor is walking to Washington, D.C. in a bid to reopen the CAH. The story illustrates the struggles of rural healthcare delivery across the U.S., and the real-life impact of M&A.
Did you miss Part I? Be sure to catch up.
A new multi-specialty clinic
Ahoskie is a Vidant hospital. Almost all of their doctors don't live in town now. #saveourhospital pic.twitter.com/InEWOaJuXt
— Adam O'Neal (@MayorONeal) July 17, 2014
In February, Pantego Creek LLC, a group of investors in Vidant Pungo Hospital, had voted against transferring the facility's ownership to the town; instead, it supported Vidant's plans to close the hospital and build a new $4.2-million multi-specialty clinic in Belhaven. There is controversy about the group's vote; O'Neal said Vidant asserted undue influence on it, and had assigned powerful managers to the LLC without a proper vote by members.
Federal mediation came about after North Carolina's NAACP chapter joined with O'Neal to file a Title VI complaint under the Civil Rights Act with the Justice Dept. over the hospital's impending closure. Their argument was that the Belhaven area's minority communities were put disproportionately at risk when federally-funded Vidant reneged on its promise to keep the hospital open.
Vidant did not return calls for comment. But Roger Robertson, president of Vidant Community Hospitals, said in a June 30 statement on the company's website that Vidant had fulfilled all of its obligations under the April 1 mediation agreement, and had continued to operate Vidant Pungo Hospital for the agreed-upon 90-day extension. He said Vidant had tried "extensively" to transfer the hospital's ownership to the town, but the town didn't cooperate and was unprepared to take over its operations.
A plan to become profitable
Yet O'Neal and others insist that they have a town-sponsored business plan, vetted by independent consultants, that shows Pungo hospital can become profitable in three years by downsizing to 10 beds and 55 employees—and becoming part of an accountable care organization arrangement.
The mayor is walking to promote that view. Pungo hospital could make about $43,000 in the second year, and about $450,000 in the third year under the new business plan—"and that's based on very conservative numbers," he said.
"The reason I'm walking to Washington, D.C. is a big healthcare conglomerate took over our hospital and decided to close it for their business model," O'Neal told Healthcare Dive. He conceded that Pungo hospital lost about $1.8 million in 2012 and just over $1 million in 2013. But he said Vidant only made a half-hearted attempt to run it, sending a manager to Belhaven half-a-day per week. "We have extreme concerns they were shifting expenses from other facilities to make their case," he added.
Nonprofit Vidant made a $127 million surplus over expenses in 2012, O'Neal said. "In 2013, they made $107 million. They have about $540 million in the bank in reserves. So a healthcare conglomeration [of that size] decided to close a critical access hospital that was not their worst-performing hospital."
A 'devastating' economic reality
Dianne Bowen, president of the Belhaven Community Chamber of Commerce and a lifelong town resident, told Healthcare Dive July 17 that "when you add up everything that's happened economically in this community and compound that with the hospital's closing, it's pretty devastating." Aside from lost jobs at the hospital, mostly held by local workers, she said the hospital "used a lot of electricity and water, so the town's income [from its electricity, sewer and water business] is severely cut."
Bowen said Pongo hospital's shutdown is stirring fear in a town with many people on welfare and many seniors on fixed incomes. It also likely will keep away affluent retirees otherwise willing to relocate and live in the Belhaven area along what is being marketed as North Carolina's Inner Banks, she said.
"The question is whether retirees would move here, instead of Greenville, if they don't have a life-saving place...to stabilize them to the point where they could get somewhere bigger," Bowen said. If retirees don't come, she said, "they won't buy houses and condos—and shop at the grocer's, the pharmacy, the local tire store—and they won't bring that money here."
But Bowen gives Vidant some credit, too. "Vidant could have bought 20 acres outside town for their 24-7 clinic and still got water and sewer, and cheaper electricity from the cooperative outside Belhaven," she said. "But Vidant stayed in town."
Bowen said she doubt there will be any equipment on Vidant's clinic building site for awhile: "until this campaign that Adam O'Neal is waging, and the NAACP, finally comes to an end, one way or another....If there is a way to reopen the hospital, this area wouldn't require two facilities."
Bowen described the hospital's shutdown as another economic blow to the area's economy.
"I understand the hospital was too big, and I can wrap my brain around the economics of it," she said. "But I can't understand why Vidant couldn't have found another way to make it smaller, to make it more efficient, to maintain that critical-care designation without shutting it down."
Want to read more? You might enjoy this story about the cheap and efficient delivery of rural healthcare at a CAH in the mountains of Tennessee.