A year ago, Bob Lincoln began to have what he calls “heart throbs.”
The resident of Joy, Ill., was rushed to Mercer County Hospital in nearby Aledo and airlifted to the Quad-Cities for treatment. A doctor met him on the helicopter pad, and he was on the operating table within minutes of his arrival.
Lincoln believes he is alive today because of the series of quick actions that began in Aledo, which is seven miles from his tiny hometown and 30 miles from the Quad-Cities.
“You bet I want a local hospital,” he said. “That saved my life.”
For Lincoln, local means the Mercer County Hospital, which was in financial straits until 2009 when the county government and Genesis Health System reached a management agreement. This year, Mercer County leaders reported an almost-$1.2 million turnaround with a positive bottom line of $465,000. In the previous year, the hospital in Aledo had recorded a $700,000 loss.
Lincoln and some others in Mercer County think the alliance is best for the community. Stuart Coulter, for example, appreciates the fact that his doctor with the Genesis Heart Institute in Davenport is about an hour closer to his residence in Joy than a similar hospital facility in Peoria, Ill.
Before reaching its arrangement with Genesis, Mercer County had one from 2004 to ’06 with Quorum Health Resources of Brentwood, Tenn. Quorum provides management, consulting and educational services to its members. Most of Mercer County’s patients in need of a high level of care were referred to Peoria for treatment at that time.
The Genesis-Mercer County Hospital pact is not the only example of a large Quad-City hospital system aligning with a smaller hospital in the outlying region.
Most recently, Genesis came to a three-year management agreement with the Jackson County Regional Health Center of Maquoketa, Iowa, that took effect July 1. It already had affiliations dating to the 1990s with Illini Hospital in Silvis, Ill., (now known as Genesis Medical Center, Illini Campus) and DeWitt (Iowa) Community Hospital (now known as Genesis Medical Center-DeWitt).
Trinity Regional Health System affiliated during July 2009 with Unity HealthCare of Muscatine, Iowa, a step beyond a management agreement between the two that began in 2008.
Rick Seidler, the chief executive officer of Trinity Regional Health System, came to the Quad-Cities from Allen Memorial Hospital in Waterloo, Iowa. Both Trinity and Allen are senior affiliates of the Iowa Health System, based in Des Moines.
While in Waterloo, Seidler, who took the Trinity reins June 1, forged management agreements between Allen and smaller hospitals in Grundy Center and Sumner, Iowa.
It makes sense for the Muscatine hospital to align with a larger partner, he said, and Trinity has installed its own chief executive officer — Jim Hayes — to run Unity.
Such affiliations should come as no surprise at this time of national health-care reform.
The health-care sector is poised for significant activity in terms of mergers and acquisitions, according to hospital executives and a firm called mergermarket that generates information used by financial institutions to originate deals. A recently released survey predicts that government health-care reform initiatives will drive most of the new hospital activity.
There are very few independent hospitals left in Iowa. The biggest hospitals in the state are already aligned, said Kirk Norris, the president and chief executive officer of the Iowa Hospital Association in Des Moines. Some hospitals in mid-size markets are looking at their options, he added.
“It’s almost impossible to be a small hospital today and make it in the world of health care,” said Doug Cropper, the president and chief executive officer of Genesis Health System.
But in Illinois, almost half of the state’s 215 hospitals still operate independently, said Danny Chun, a spokesman for the Illinois Hospital Association in Naperville. Chun has seen some merger activity around the state, however, with three recent examples in Bloomington/Normal and in the Chicago suburbs.
Larger hospital systems such as those in the Quad-Cities can offer the smaller organizations a deep talent pool of physicians, help with information technology and many basic savings that result from economies of scale.
Health-care providers are trying to prepare for the future by creating the kind of relationships that will help them succeed in five or 10 years, Cropper said. This is illustrated by the agreement between Genesis and the Jackson County hospital in Maquoketa.
To provide the highest sort of quality care, a hospital has to invest in information technology, he said, an expense that may be beyond the reach of smaller operations. In the case of Jackson County, the new agreement with Genesis will help it apply for federal aid to improve its level of technology.
One aspect of the economy that also is driving mergers and acquisitions is critical access hospitals, such as those in Grundy Center and Sumner, Iowa, that Seidler helped align with Iowa Health System’s Allen Memorial in Waterloo.
“Critical access” is a term that describes hospitals believed to be critical to a rural population. If that hospital would disappear, for example, residents would have to travel too far for their primary health-care needs.
Such facilities receive favorable Medicare reimbursements, or 101 percent of costs.
About three-fourths of Iowa’s hospitals are in the critical access category, according to Norris, of the Iowa Hospital Association. The hospitals in both Aledo and Maquoketa qualify for the designation.
Genesis and its governing board are interested in future affiliations with health-care providers basically fitting inside a circle that represents a one-hour-drive radius around the Quad-Cities, Cropper said.
The Trinity organization is about the right size now, Seidler said, with its four hospital campuses in Bettendorf, Moline, Rock Island and Muscatine.
Trinity highly respects the doctor/patient relationship, he said, and is most interested in collaborative efforts with others. The CEO thinks that patients generally do not pick the hospital they will use so much as they choose a specific doctor instead.
“People don’t move to town and see a hospital billboard and say, ‘Oh, I’ll go there,’” he said. “People just don’t pick hospitals first; they pick doctors.”
Still, the conventional wisdom among health-care providers is that hospitals need to get bigger.
“There is much discussion in Iowa in how to cooperate with one another,” Norris said. “Even traditional competitors are talking about cooperation.”
Among the few independently operated hospitals in the region are those in Geneseo and Kewanee, Ill., about 25 and 50 miles, respectively, outside the Quad-Cities.
Hammond-Henry Hospital in Geneseo launched work this year on a $21 million addition, including the construction of more long-term care rooms, an operating room and a rehabilitative/therapy department.
The hospital is a nonprofit operation run by its governing board and chief executive officer Brad Solberg.
Solberg said the future of Hammond-Henry will include affiliations as health-care reforms evolve to focus on patient care. Collaboration will be rewarded, he predicted.
“You are not going to be able to operate alone anymore,” he said.
Eight of the hospital’s primary-care physicians actually are employed by Trinity Regional Health System. Also, Hammond-Henry recently entered an agreement with Genesis Health System regarding an ambulance. That collaboration helps improve transfer times, Solberg said.
The new Kewanee Hospital opened in 2008 at a cost of $26 million. But in July, the hospital — a critical access facility since 2003 —closed its Family Birthing Center, citing a lack of support from the state for Medicaid patients, said Gary Pheiffer, the chairman of the hospital board. The hospital lost $2 million on the birthing center over a three-year period, and 73 percent of the 188 babies born there were to mothers who relied on Medicaid.
Kewanee Hospital has no affiliation agreements at this time and is not considering any merger or acquisition transactions, chief executive officer Margaret Gustafson said.
She added that hospitals do face transformational change, and Kewanee’s leaders are studying the effect of health-care reform.
“We know we cannot go backwards,” she said. “We know that we cannot stand still. Our hospital, like our community, is on a journey. As we adapt and grow, we will utilize our defining statement to guide our process and to ensure that changes are focused and responsible.”
Hammond-Henry will stand on its own for the next few years, Solberg said.
“But we won’t be an island,” he added. “Whatever those relationships look like, we’ll evaluate what’s best for our patients.”