OMC & Island Hospital Q&A
QUESTIONS & ANSWERS REGARDING
ORCAS MEDICAL CENTER AND ISLAND HOSPITAL
Updated May 7, 2011
1. Why is Orcas Medical Foundation (OMF) considering a contract with Island Hospital to operate the medical practice at Orcas Medical Center (OMC)?
OMC, like almost all rural family practices across the country, cannot operate without some additional type of support beyond practice revenue, which is usually in the form of philanthropy or a tax district, because of the very low reimbursement rates determined by Medicare and insurance companies for such practices compared to other medical specialties. Affiliation with Island Hospital will increase OMC’s reimbursement rates and revenue, and also reduce its operating costs, thereby reducing philanthropic support needed for operations.
2. PeaceHealth, which operates St. Joseph Hospital in Bellingham, is investing in a new 10-bed Critical Access Hospital in Friday Harbor. Why should OMF affiliate with Island Hospital and not PeaceHealth?
During 2010 and early 2011 OMF explored possible affiliation with Peach Health, concurrent with its affiliation discussions with Island Hospital. (Both entities were advised of this dual exploration by OMF.) Both PeaceHealth and Island Hospital invested considerable staff time, held meetings and conference calls with OMF, and shared information in an honest effort to advance mutual interests. In February 2011 PeaceHealth officials interviewed all three primary practicing physicians on Orcas with regard to their professional expectations of medical care on Orcas and their interest in collaborating with one another.
Despite this good will and sincere effort, however, PeaceHealth has concluded that its affiliation with OMF would need to be conditioned upon a broader plan for (a) improved collaboration among Orcas MD practices, and (b) progress toward broader public tax support for medical care on Orcas, like the tax district on San Juan Island. Since OMF cannot realistically promise progress on these two goals in the near term, and certainly not in 2011, PeaceHealth and OMF have different expectations for the short term. By comparison, Island Hospital has not conditioned its affiliation interest on Orcas taxes or an all-physicians-on-Orcas collaboration, and the mutual goals and interests of OMF and Island Hospital are more immediately attainable.
There is, however, no loss of mutual interest or good working relationships between Orcas Medical Center and PeaceHealth in Friday Harbor and Bellingham. Orcas Island remains exactly one ferry ride away from both the planned PeaceHealth facility in Friday Harbor and Island Hospital in Anacortes, and OMC patients will undoubtedly choose among both of these facilities and other mainland hospitals for their care in the future.
3. What is the history of OMF and its relationship with Island Hospital?
OMF owns the Orcas Medical Center facility at 7 Deye Lane in Eastsound. For more than 50 years the non-profit organization has contracted with qualified medical providers to use the OMC building and earlier facilities to provide medical care to Orcas residents and visitors.
From 1992 until 2004 Island Hospital managed Orcas Medical Center. Thus, Island Hospital already knows Orcas quite well, and OMF has previously worked with Island Hospital, including its current management, CEO Vince Oliver.
OMF currently contracts with Orcas Medical Center–PLLC, a medical practice headed by Dr. Anthony Giefer, to operate OMC. The current operating contract expires in August, 2011.
4. Is OMF dissatisfied with the performance of Dr. Giefer or his Practice?
Absolutely not! On the contrary, OMF hopes that any affiliation with a different entity such as Island Hospital would secure Dr. Giefer’s services for Orcas on a long-term and sustainable basis, provide additional support for the operation of the clinic, and help to secure all of the staffing required for the optimal operation of OMC long-term.
5. Is OMF considering selling the OMC building and/or equipment to Island Hospital?
No. The OMC facility was built by generous Orcas residents, and will continue to be owned by the non-profit Orcas Medical Foundation and used to provide quality medical care to Orcas residents and visitors.
6. Why bring in “outside” management? Can’t Orcas Islanders manage their own clinic?
If management of OMC were simply a matter of talent, determination, and generosity, certainly Orcas Islanders would continue to meet that test, as they have done for more than 50 years. The generosity of Orcas residents and their support of OMC have in fact increased exponentially in recent years.
However, every rural medical practice in the U.S. is under increasing financial pressure from escalating health care and drug costs, inadequate public and private insurance reimbursements, increasing numbers of un-insured and under-insured patients, and escalating patient expectations for up-to-date medical equipment and procedures. Orcas is no different.
Current government and private insurance payment schedules are heavily stacked against family-practice clinics and general health practitioners, particularly ones operating independently of hospitals or large medical organizations with rate-bargaining clout. OMC’s affiliation with Island Hospital would increase revenue through higher Medicare and insurance reimbursements and lower the amount of philanthropic support needed to sustain operations.
7. Can’t OMC simply tighten its belt and operate within its revenues?
No. Rural family practices without some form of additional financial support are simply not financially sustainable due to current insurance reimbursement biases. But the answer is not only about cutting costs, but also about services needed. OMF believes that the Orcas community wants and deserves:
a medical center which is a modern and well-maintained community health facility,
a health care practice which is more than one doctor deep, and which provides professional back-up and continuing education support for skilled and up-to-date practitioners,
an open-door practice which serves all Orcas residents and visitors, including Medicare, Medicaid, and privately-insured individuals and families, as well as persons who are un-insured or under-insured but need medical care,
a coordinated local urgent care resource which avoids expensive off-island evacuations whenever possible, and
a practice which professionally connects Orcas Islanders to mainstream health specialists and facilities as needed, with electronic record transfer and physician consultation between the island and the mainland services.
So the OMF challenge is certainly financial, but considerably broader than that. OMF is pursuing both financial sustainability in the face of serious challenges and a level and quality of medical care which Orcas wants and needs.
8. Is health care on Orcas administered as efficiently as it should be?
No, unfortunately it is not. Today on Orcas there are three separate physician practices, operating from different facilities (one from the Medical Center, the other two from rented offices), plus a county-funded Emergency Medical Service operating from the fire department.
In early 2010 OMF re-organized its business structure, incorporated a new entity named Orcas Medical Center Services (OMCS), and invited all of the (then four) separate physician practices on Orcas to operate independently and in association with OMCS. The design envisioned sharing office space and administrative systems and thereby lowering administrative costs for all medical practices on Orcas. The three practices other than OMC-PLLC chose not to participate in OMCS.
Given the failure of that effort to reduce administrative costs by on-island collaboration, OMF moved to focusing on external alliances, and this effort has led to the planned affiliation with Island Hospital.
9. If Island Hospital assumes management of OMC, what happens to the current OMC staff ?
A major goal of OMF is to retain current OMC staff. Under the terms being discussed, OMC medical and administrative staff will become employees of Island Hospital. Through Island Hospital affiliation, OMF anticipates that current staff jobs and benefits will remain secure through 2011, and more secure in the longer term.
10. If the OMC staff are going to remain the same, why do they need to be employed by Island Hospital rather than a local organization?
Services provided by medical staff (doctors, physician assistants, and nurses) who are employed by Island Hospital will be reimbursed more by insurance and government programs than those services are now being reimbursed as employees of a free-standing clinic.
Employment of administrative staff by Island Hospital will also be important for management control and efficiency. In addition, some administrative savings will be realized when human resources functions like payroll and benefits administration are absorbed into the larger and more efficient hospital human resources system. Joining the larger system may also offer OMC staff more options for health insurance and retirement benefits.
11. Island Hospital managed OMC from 1992 until 2004. Why did they leave in 2004, and why are they interested in coming back now?
Island Hospital receives public funding from Skagit County Hospital District #2. The five elected Hospital Commissioners are answerable to Skagit County taxpayers for hospital costs. They made the difficult decision in 2004 that they could not financially sustain the OMC practice at that time, given a very limited Orcas philanthropic subsidy for medical operations.
In the intervening years, although the Skagit County tax structure is the same, history has shown Orcas Island to be a major, steady and reliable customer source for Island Hospital, whose primary service area includes the San Juan Islands. Given the capital expansion of PeaceHealth in Friday Harbor, Island hospital and its Commissioners recognize the competitive value of solidifying its Orcas and Lopez clientele base as much as possible now.
Since 2004 the Orcas philanthropic situation has changed as well. Through hard work and the generosity of its members, OMF has grown into a substantial source of private support for the clinic, with levels of funding which were very limited in 2004. A commitment from OMF to continue a specified level of support of Orcas Medical Center operations after Island Hospital assumes management is a necessary part of the current affiliation discussions.
12. Would affiliation with Island Hospital mean that patients at the Orcas Medical Center would have to use Island Hospital exclusively for their off-island care?
No. Island Hospital’s intent with this affiliation is to win Orcas patronage of its excellent facilities and services, not to force such utilization.
OMC doctors, even though employed by Island Hospital, will retain full independence in their referral decisions and recommendations, and patients of OMC will retain full independence in their choice of providers for any and all secondary services, including hospitalizations, surgeries, outpatient procedures, and drugs.
Island Hospital physicians, even in Anacortes, routinely refer patients to a myriad of other practices and specialists. Island Hospital itself has numerous referral and coordination agreements with other hospitals and health organizations, including PeaceHealth, Skagit County Hospital, Swedish Hospital, and many northwest physician groups and specialty practices in orthopedics, cancer care, cardiology, and others.
13. Will OMC patients get any special rates from Island Hospital after the affiliation?
No, special OMC rates are not part of the discussion between OMF and Island Hospital. Island Hospital, however, does provide exceptional facilities and personal care for rates which are highly competitive. In fact, hospitalization at Island Hospital costs substantially less for many procedures than at any other Northwest hospital.
In 2006 Island Hospital was one of only 19 small community hospitals honored in Solucient’s Top 100 Hospitals nationwide, based on a study which recognized hospitals with:
Fewer than expected complications, deaths and adverse safety events.
Improvement in financial stability, going from being barely profitable to achieving a healthy profit margin.
Patients discharged two-thirds of a day earlier than five years ago.
Increased expenses by 8% or less, while peers’ expenses increased 20%.
Increased patient volume.
Orcas residents who have not recently entered Island Hospital will be amazed at its hospital-wide renovation, its state-of-the-art Emergency Room, its 43 hospital rooms – each and every one a private (not shared) room — and its Birth Center. A new Medical Arts Pavilion is under construction, scheduled to be operational in early 2012. It will house an expanded Cancer Care Center, a Physical Therapy Center, and a new Wound Care Center featuring hyperbaric oxygen therapy units. Unchanged is the large force of hospital volunteers who make this hospital uniquely welcoming and comfortable for patients and their families.
14. Would Island Hospital be subsidizing health care costs at OMC?
Not directly. That is, Island Hospital would not be spending Skagit County taxpayer dollars on the Orcas Medical Center, located in San Juan County, with the possible exception of temporary initial investments to be repaid over time. Rather, Island Hospital would lease the Orcas Medical Center facility from OMF, and would employ the OMC medical and administrative staff. In cooperation with OMF, Island Hospital would operate the OMC program so as to achieve, at a minimum, budget neutrality while providing the level of service agreed upon by contract. Island Hospital would benefit from its continued exposure to Orcas residents, and OMF would maintain the OMC facility and benefit from the billing, claiming, management, and administrative services of Island Hospital.
For Island Hospital and its Commissioners, affiliation with OMC is good business. According to 2009 State Health Department, Orcas Island (not just OMC) referred almost $10 Million in billable inpatient care alone to hospitals off island. About one-third of Orcas Island’s inpatient referrals went to Island Hospital specifically.
15. If Island Hospital is not bringing cash to the table, how would affiliation with IH help OMC financially?
There are at least six major ways that this affiliation is expected to increase revenues and decrease operating costs of OMC:
Significantly higher insurance reimbursement for the same services performed at OMC, under Island Hospital claiming prerogatives
Savings on administrative costs when Island Hospital absorbs OMC into its billing systems
Savings in medical, pharmaceutical, laboratory, and supplies costs associated with clinic services, due to IH in-house laboratory and greater volume purchasing
Savings on computer and records systems costs by integration of OMC into the IH computer records system
Savings in staff payroll and benefits administration costs through integration of OMC staff into the IH payroll
Decreased cost of malpractice insurance due to Island Hospital’s more favorable negotiated insurance rates.
16. Does this mean that OMF annual membership drives and fundraisers will end?
Sorry, no such luck. Certainly the 2011 OMF fund drive will be as critical as ever, with the need to transition OMC operations to the Island Hospital systems, because enhanced revenues will not take hold until early 2012 at best.
For 2012 and thereafter, OMF will remain committed to shoring up operational losses in OMC. As explained above, however, the anticipated shortfall between revenues and operating costs will be substantially lower, hopefully moving toward non-existent.
The OMF Board eagerly anticipates the time when OMF fundraising, and the generosity of OMF members and other supporters, can shift from operating subsidies to facility improvements, new equipment, and new services such as transportation. For the long term, the OMF Board would also like to be able to direct ever more of its fund-raising efforts and members’ generosity to the care of un-insured and under-insured Orcas Islanders.
17. If managed by Island Hospital, will OMC’s relationship with the Orcas Emergency Medical Services (EMS) change?
With or without affiliation with Island Hospital, the relationship of local medical practices with EMS needs continuous effort by all parties, to assure the best possible coordination of services.
Island Hospital is eager to work collaboratively with OMC and Orcas EMS to maintain the best possible emergency and urgent care services for Orcas residents and visitors.
END
