After spending two years jockeying to be acquired by one of the U.S.’s largest for-profit hospital operators, Bristol Hospital now thinks it can buck a national and statewide trend by remaining an independent community healthcare provider.
But that doesn’t mean the 154-bed, $138 million hospital will move forward without a dance partner.
A key piece of the hospital’s strategy, CEO Kurt Barwis said in a recent interview, is building out its fledgling partnership with Yale New Haven Health System, which could eventually include membership in a statewide integrated healthcare network Yale hopes to launch by the end of 2016.
Even with a prestigious partner, however, the road to independence won’t be easily traveled.
In the short term, declining Medicare reimbursement rates and the threat of state funding cuts and higher taxes could derail Bristol’s pledge to maintain local ownership. Long term, Bristol Hospital faces continued pressure to align with growing systems that are expected to lead the charge in moving away from fee-for-service towards population health payer arrangements.
Despite the challenges, Barwis said many opportunities exist for the hospital to remain financially viable without the help of a larger capital partner.
“The bottom line is we are not out in a process of seeking partners,” Barwis said.
Performing under pressure
Bristol was among the quintet of Connecticut hospitals seeking to be acquired by Texas-based Tenet Healthcare, until the for-profit hospital company abruptly abandoned its deals earlier this year over concerns about the state’s regulatory and oversight demands.
Besides its arrangement with Yale, it will be crucial for Bristol Hospital to continue to deliver relatively low-cost and high-quality services, Barwis said.
The hospital will also have to rely more heavily on its foundation. Tenet promised to offer Bristol $45 million for capital improvements; in some years the hospital struggles to allocate $5 million for facility, technology and other upgrades.
Bristol’s foundation currently has about $18 million in total assets, but Barwis said management hopes to grow it through a new fundraising campaign.
“It’s going to have to play much more of a central role in helping us achieve our capital needs and organizations goals,” Barwis said.
Already, the foundation is raising money to pay for a recently purchased da Vinci surgical robot, which a Yale physician will use to perform urological surgeries at Bristol, as part of the hospital’s partnership agreement.
Fundraising wouldn’t necessarily be aimed at growing the foundation’s endowment, which is invested in the market, but at specific community needs that could show a stronger financial return, such as revamped medical surgical units and inpatient rooms, Barwis said.
Bristol board chairman John Leone said the hospital is talking with fundraising consultants about revamping the foundation’s board.
Leone is hopeful about a renewed fundraising effort, but he said he is also realistic about his expectations.
“I’m not going to say we’re going to raise the kind of money that Tenet could have done,” Leone said.
A new ACO
Bristol’s partnership with Yale, for which it pays an undisclosed fee, currently includes collaboration on certain clinical service lines — like urology and cancer — as well as supply purchasing, but it could evolve into something larger.
Yale New Haven Health System is currently developing an accountable care organization (ACO) called Total Health.
Thought of as an alternative to fee-for-service health care, ACOs are designed to improve health outcomes and lower healthcare costs by incentivizing doctors to keep patients healthy rather than simply provide sick care. ACOs contract with insurers to financially reward doctors and hospitals for hitting performance metrics.
Barwis hopes that being a part of an ACO with a prestigious healthcare institution like Yale will improve both Bristol’s quality of care and bring in more revenue than it costs to be a member.
“We hope it grows our bottom line,” he said.
Vincent Petrini, Yale New Haven Health’s senior vice president for public affairs, said the network, which could launch in the next 12 to 18 months, would seek to forge agreements with commercial and government payers, but he declined to give specifics on which hospitals and other providers might be a part of it.
“We’re still having those conversations,” Petrini said. “We expect the network would be broad.”
Yale has various relationships with hospitals around the state, ranging from staffing in local cancer centers to full ownership of hospitals in New Haven, Bridgeport and Greenwich. Barwis said Yale’s acceptance of Bristol as a network partner reflects well on the hospital’s financial management and quality of care.
Bristol Hospital has delivered modest but steady margins over the past five years and recently saw a sizable spike in patient revenue. It curtailed its employee pension program in 2008, which lowered its unfunded pension liability to approximately $27 million, Barwis said.
As a result, he said markets have been receptive to refinancing and offering additional debt for capital projects, though the timeline for such initiatives will move at a slower pace without Tenet’s financial support.
He said the hospital could refinance its $35 million in debt and borrow another $15 million at any point, but it’s waiting to see — and actively trying to influence — how the state budget shakes out.
Gov. Dannel P. Malloy has proposed Medicaid reimbursement cuts and a hospital tax increase that Barwis said would equate to an $11 million hit to Bristol over a two-year period.
It’s enough to make the hospital default on its bond covenants and face the risk of closure within five years, Barwis said.
If the legislature’s budget removes the cuts and tax increase, Bristol will move ahead with its borrowing plan. But if the cuts go through, all bets are off, he said. Combined with federal Medicare reimbursement cuts set to hit in October, the impact will simply be too steep to manage, Barwis said. “Also remember that I have to provide safe care,” he added.
That’s something Bristol has been pretty good at in recent years — and at a relatively low cost.
The hospital’s number of serious safety events — mistakes or deviations from care standards that lead to harm or death — has fallen steadily since Oct. 2013. Bristol also has one of the lowest Medicaid reimbursements per case in the state.
That’s why Barwis and Leone are puzzled that the proposed state budget cuts would hit Bristol hardest of any hospital — nearly 4 percent of its operating budget.
“The goal is to make [lawmakers] aware that they’ve gone too far,” Leone said. “This hospital is a great facility. Where are the in this area going to go to the hospital if this place shuts down?”n
