Some hospitals need a good friend

Regulations, costs push more remote health facilities to consider affiliating

Marengo Memorial Hospital in Marengo on Thursday, May 21, 2015. (Cliff Jette/The Gazette)
Marengo Memorial Hospital in Marengo on Thursday, May 21, 2015. (Cliff Jette/The Gazette)

Rural hospitals are searching for the perfect match.

An ever-changing health care landscape with increased regulations can make maintaining independence difficult and costly for rural hospitals with paper-thin financial margins.

That makes affiliation with a larger health care system — with access to more resources and help — increasingly popular. But starting a relationship with another organization is a big commitment.

“It's like a marriage,” said Brock Slabach, senior vice president for member services of the Leawood, Kan.-based National Rural Health Association, noting you want to find a partner who shares your vision and mission as well as is a good cultural fit.

“If there are key gaps that the hospital can't provide for themselves, they may need to look outside to fulfill them,” he said.

There are four primary reasons why a rural hospital may choose to affiliate with a larger system — clinical needs, capital needs, access to insurance products and health information technology needs, Slabach said.

A 2014 University of Iowa study found that between 2007 to 2012 connecting with a system and participation in a network increased among hospitals of all sizes — from 25-bed critical access hospitals to large, metropolitan facilities.

A network is a group of hospitals, physicians or insurers that work together to coordinate and deliver services to their community. A system includes two or more hospitals owned, leased or managed by a central organization.


The study, which analyzed data from the American Hospital Association, found that critical-access hospitals network participation and health system membership climbed in those five years.

In 2007, 20.5 percent of the 1,243 critical access hospitals participated in a network, and 37.7 percent were members of a health system. By 2012, nearly 42 percent of the 1,279 critical access hospitals were in a network and 42.8 percent were in a system.

Finding the right partner

More than three-quarters of Iowa's hospitals have some kind of affiliation, according to the Iowa Hospital Association. But not all affiliations are created equal.

It's important for rural hospitals to forge partnerships that benefit both the hospital and the system, Slabach said.

“Once it's done, (the hospitals) lose control,” he said. “They have to ensure this is being done in the best interest short-term and long-term for the community.”

Such as with a hospital in Carthage, Miss., that affiliated with a larger hospital in Jackson, Miss. The relationship eased financial burdens and allowed the rural hospital to build a brand-new facility, Slabach said.

Slabach noted that in a good affiliation agreement, there is clear communication. And if there are problems, adjustments need to be made, he said.

“Having a partner being able to support you when you might need it ... having that relationship is so important,” said Barry Goettsch, chief executive officer of Marengo Memorial Hospital.

The hospital was affiliated with the University of Iowa Hospitals and Clinics for about seven years before joining Des-Moines-based UnityPoint Health three years ago.

Marengo Memorial, a 25-bed critical access hospital, looked at its options before making the jump and, ultimately, Goettsch said the hospital went with UnityPoint because it was the “right fit.”

The relationship is different from a typical affiliation, he said, because it ensures that the hospital is not owned or managed by UnityPoint.

“But we have access to resources — for instance, our primary legal counsel is through UnityPoint,” he said. “We could go with another firm, but that comes at a high cost, and this firm has health care-specific knowledge.”

Marengo Memorial also is able to participate in group purchasing, which Goettsch said has a “significant financial impact,” and orders prescriptions through St. Luke's Hospital's pharmacy.

Those cost savings allow Marengo Memorial more financial flexibility for its upcoming expansion project, which will expand its emergency, surgical and physical therapy departments as well as add new space for administrative and support services.

But he admitted there also are advantages to not being owned or managed by the system.

“We are truly a local health care provider,” Goettsch said. “The autonomy we have as an independent facility means we can make the best decisions for us.”

Providing Community Services

But Dr. Anthony Leo, a physician who has worked in Oelwein his entire career, is cautious when it comes to affiliation. He can see the benefits the security brings.


“But affiliation means that they don't always fulfill the needs of the community sometimes,” he said.

The general surgeon grew up in Oelwein and returned to the city of 6,200 after he finished medical school at the University of Iowa. He worked with the Mercy Hospital but maintained an independent practice.

Mercy is part of the Wheaton Franciscan Healthcare system, providing 24-hour emergency room services, ambulance transportation, radiology and digital mammography services, as well as rehabilitation therapies and other services.

But the hospital closed its operating room three years ago, Leo said, meaning he now spends more time working in Independence, about 20 minutes away. He believes that change leaves health care gaps in the community.

This has led Leo and other community members to form the Oelwein Community Health Care foundation, a not-for-profit group that is planning to build an outpatient medical facility.

The group just hired a project manager and had land donated to the project.

“We're going to build something that the community is lacking,” he said. “We want to bring services to this area that are underrepresented or we've lost over the years.”

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