Memorial Health Systems has an opportunity to expand its marketshare through expanding to other parts of Colorado -- even toKansas.
The hospital system is beginning to reinvent itself as a regionalcenter, and is building the infrastructure to compete, said MikeScialdone, CFO for the system at Memorial's monthly update to thecity council.
After spending the last two years recouping form a devastatingfinancial hit in 2008, Memorial is ready to begin spending oninfrastructure and reorganization, he said.
'We've lost a great number of outpatient visits for imaging andradiology,' he said. 'Insurance companies are sending more people tothe freestanding centers, and not the hospital. We're reorganizingthe department -- to be more competitive and more efficient.'
That's just one way the hospital plans to compete in a complexhealth care environment. It needs to stop thinking of itself as a'hospital,' only, said CEO Larry McEvoy.
'We need to move away from thinking of ourselves as a bricks-and-mortar building and move toward thinking of ourselves as a networkof physicians who are providing regional care.'
Currently, 87 percent of Memorial's patients come from itsprimary area -- El Paso County. There's an opportunity to expand tothe secondary and tertiary markets, which include counties on theeastern plains, western slope and even into Kansas.
The way to do that is to provide those communities with expertisethey don't already have, he said.
'Then, when they have a deep-water issue -- like heart surgery orcancer -- they'll come to us,' he said. 'We don't want to do this ina predatory way, but we do want to be good neighbors.'
The move to focus regionally makes sense locally, McEvoy said.
'If we grow our business regionally, then it brings resourceshome to take care of people here,' he said. 'It's what hospitals aredoing now.'
It's a switch from past thinking about the health care industry,he said. Hospitals used to only think about the local market.
'But we don't want to grow by hurting Penrose (St. Francis HealthServices),' he said. 'We view them as a partner. But we do want togrow, and this is the way to do it.'
It's also an opportunity Penrose doesn't have. It's part ofCentura Health, which already has hospitals in Canon City andPueblo.
'They don't have as much room to expand as we do,' Scialdonesaid. 'It's another reason this makes sense.'
Scialdone and McEvoy made their pitch to council as they alsogave them number from 2010 and April 2011. Those numbers showdeclining inpatient volumes and fewer outpatient visits.
In 2010, the hospital saw an 8 percent decrease in admissions forinpatient admissions, and a 6.6 decrease in outpatient visits. Thebright areas of the financial picture: emergency room visits were up4.2 percent and the net income margin grew to 5.8 percent, showing ahealthy hospital environment.
'Our days of cash on hand and our overall net income increased,'Scialdone said. 'That was due to the health of our investments in2010. The markets were strong, so we did well.'
Net revenues were down for the year, from the anticipated $574million to $536 million, he said.
The monthly snapshot for April 2011 was a little brighter.Admissions were down 9.4 percent from what the hospital budgeted and8.8 percent for the same month in 2010.
Outpatient visits for April were up 1.1 percent from budget and4.2 percent from April 2010.
Overall, net patient revenue for the month was $180 million, downfrom the $198 million budgeted by 8.7 percent, but up from the sametime last year by 1.9 percent. April 2010 saw net patient revenuesof $177.5 million.
'These numbers show we can't put off changes,' Scialdone said.'We have to invest now, and we have to invest in the right places.That's what we're doing in 2011 to prepare for the future.'
If the hospital hopes to expand to other markets outside ColoradoSprings, it will have to be free of city control. As a municipallyowned system, city law prohibits expansion beyond El Paso County.
'We really think this is where we need to be,' McEvoy said. 'It'sthe way to pull costs out of the system while increasing quality.'
