Byline: Michele Conklin News Staff Writer
Centura Health was formed in 1995 through a joint operating agreement between the Sisters of Charity Health Services and PorterCare Adventist Health System. It now forms Colorado's largest hospital system, managing 15 hospitals statewide including St. Anthony, Porter, Littleton and Avista hospitals in the Denver area.
Centura lost $61 million during the past two fiscal years. Joseph Swedish was brought in a year ago to help heal the organization.
News: What went wrong at Centura?
Swedish: Centura was formed with the intention of owning or controlling the entire health care continuum from doctor's office to hospital to home care. Many of the intentions that created the Centura model didn't come to pass or did not achieve what was intended. We found that bigger was not necessarily better. The bottom line is that we can't continue to be all things to all people and do any one thing well.
News: Your goal is to have Centura back in the black by the end of the current fiscal year. What has been your strategy?
Swedish: We're changing our business fundamentals to be a strong provider of health services once again. If you focus on doing those few thing you do well and doing them right, then the marketplace will reward you. For the past year, we've focused on basic business principles and improvement of our infrastructure.
News: Can you give an example?
Swedish: We divested the Centura Medical Group physician practices, which resulted in 60 doctors going back in private practice. That business resulted in a $20 million loss last year for Centura. We also cut $8 million from the corporate office through massive downsizing. We eliminated a lot of executives and senior vice president positions that didn't serve our core business. We returned many of the functions that had been consolidated at the corporate office, such as human resources, back to the hospitals where they belong.
News: Have your financial problems jeopardized patient care, for instance, by reducing staffing or not upgrading technology?
Swedish: I can unequivocally say we provide very safe health care focused on the individual needs of every patient, whether those needs are physical or spiritual. We have not had to make a decision that adversely affects patients, but we are presented with many choices of where to put our money. Last year, we spent $23 million on Y2K improvements. If we spend it there, we're making the decision not to spend it somewhere else. But we didn't have a choice, so we had to forgo spending it elsewhere. But before we make those decisions, we evaluate the clinical significance.
News: Your two largest metro-area competitors, Columbia / HealthOne and Exempla Health, have closed or sold their home health services due to cutbacks in Medicare reimbursement. Are you considering the same action?
Swedish: No. We will keep home care. It is a part of our mission. We cannot abandon it. In fact, that's a major difference between us and some other systems. Every decision we make must go through a ``values impact analysis.''
News: What are your plans for Precedent Health Center? (Precedent was a physician-owned hospital that opened in 1998 in the Centura-owned Mercy Medical Center and filed for bankruptcy protection last year.)
Swedish: Precedent, the building, continues to operate and we continue to look for tenants. It's clear, however, that it won't be a hospital. We will sell it because we're not in the business of owning real estate. It's continuing to support itself, so we can pick and choose the right opportunity.
News: Centura had plans to build medical facilities in Denver West and south Aurora. Where do those plans stand?
Swedish: We've abandoned those development efforts to focus on our core business. We were getting too far ahead of ourselves. We were putting capital at risk that is better used for investment in technology and staffing. In the near term, we have absolutely no interest in expanding our reach beyond being a darn good hospital system.
News: Does that mean you won't expand into the rapidly growing south metro / Castle Rock area?
Swedish: We are making a series of additions to our Littleton hospital. We're focusing on that as our primary mission. We will consider other possibilities. But in the near term, the improvement of the Littleton facility is highest on our priority list.
News: So you're not considering expansion?
Swedish: Expansion at Denver West and Aurora was not appropriate. We will continue to evaluate strategic opportunities for growth. If we can maximize dollars and better serve the community, then we'll do it. But I've only been here a year and we're just beginning to consider our strategic options along the Front Range.
News: The federal Medicare program is slowing its payments to hospitals. What is the impact on Centura?
Swedish: The Balanced Budget Act reductions are a phase-in, much of which is back-end loaded, meaning the bigger part of the hits occur in later years. The loss to us is somewhere between $50 million and $55 million over five years, most of that occurring in years three, four and five, and we're now in year two.
News: How will you absorb those cuts?
Swedish: We have a need to improve reimbursement, but the reality is reimbursement is declining, particularly with Medicare. Less in reimbursement, more in expenses leaves us only one choice: get more efficient. Our challenge as an industry is to get more for less. We're going to improve through technology and better (health care) practices.
When Centura was formed, there was an assumption that the hospitals would come together and establish benchmarks (that signal the best type of care). That was not done. We haven't taken advantage of our size. That's where we have to go as an organization in the future. Real improvement in the future is to provide better levels of health care administered in a more effective and efficient manner. It's not about cutting staff but retooling.
News: What are your concerns going forward?
Swedish: The critical question in this industry is how do we maintain access to capital that supports technological growth in the hospitals. Capital is the lifeblood of hospitals. When capital evaporates, the growth opportunity is choked off. Constrained capital and the tight labor market raise questions about the ability of this industry to keep up with the (demand) related to demographic shifts. More aging people means more illness, which means greater demand for health care.
INFOBOX
JOSEPH R. SWEDISH
Title: President and chief executive officer of Centura Health
Age: 48
Hometown: Richmond, Va.
Education: Bachelor's degree from the University of North Carolina at Charlotte; master's in hospital administration from Duke University
Family: Jean, wife; three children - Ian, 20; Evan, 17; and Erin, 15
Last movie seen: The Talented Mr. Ripley
Last CD purchased: Deuces Wild by B.B. King
Last stock purchased: World Commerce, an Internet company that specializes in e-commerce for the floral industry
First job: Cigarette manufacturing line during summer college breaks in Virginia
Worst job: Bill collector for credit agency while in college
Last book read: The Experience Economy, by B. Joseph Pine II and James Gilmore
CAPTION(S):
Photo
Joseph R. Swedish. By Hal Stoelzle / News Staff Photographer.
