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Consultant tells IRMC it must change to survive


The accelerated time frame of Indian River Medical Center’s examination of its own future made for some painful moments last week as the collaborative committee charged with that study endured two rigorous public critiques in a 48-hour time span.

The admonitions ranged from hyperlocal, as when Hospital District trustee Michael Weiss told a taxpayer group’s luncheon on Wednesday that the emergency room on his last two visits was “dirty”; to the assessment of nationally-known healthcare consultant Jamie Orlikoff, who flew in from Seattle to speak to IRMC leaders on Friday.

Orlikoff said IRMC was in no-man’s-land now, under taxpayer ownership through the Hospital District but leased to a private not-for-profit corporation, and warned that this public-private hybrid is utterly unworkable and must be dismantled immediately for the hospital to survive.

Through both meetings, the collaborative committee held its collective head up high, soldiering on through what could well become an even harsher, more polarizing assessment.

The Indian River Hospital District was formed in the 1950s to help run what was then a privately-owned hospital. As the hospital grew, the District took it over, then decided it was too much to manage, and leased the hospital to a separate non-profit corporation – a neither-here-nor-there governing scenario that Orlikoff equated to “being a little bit pregnant.”

The lease made both entities subject to Government-in-the-Sunshine laws, a situation that in Orlikoff’s view, handicaps hospital management.

“When people are watching, it’s hard to say ‘what the hell is going on?’” said Orlikoff, in a data-dense, humor-packed session that lasted more than three hours in a meeting room at the county administration building.

At the same time, he said, no prospective buyer or even association would want to touch such a complicated scenario as it stands now. He impersonated the newcomer’s reaction: “Wait a minute – that structure is insane.”

“Do you have the ability to join a system with your current structure? No. I don’t see how,” he said.

The search for a new hospital CEO is also affected by the ambivalent structure of the public Hospital District overseeing a hospital with private corporate management.

Because the hospital is taxpayer owned, a separation of District and hospital – enabling the hospital to be bought by a private or non-profit hospital group – would require a public vote, Orlikoff said.

Remaining independent, on the other hand, would require raising operational funding through some combination of philanthropy and higher taxes, the latter a suggestion that drew a room’s worth of eyerolls.

“You’d have to have a community that says, I want my own medical facility and I want it bad to enough that I want higher taxes,” says Orlikoff.

Orlikoff told the group Friday that these days District-owned hospitals fail at a higher rate than any other type of hospital.

“The field is going through a period of revolutionary change, which is putting tremendous pressure on the traditional business model and in fact is encouraging some people to question whether or not there will be hospitals in this country at all, whether hospitals are like community stables of the 1850s. Because of technology and economic change, they may not be necessary going forward.”

He pointed out that there are 20 percent fewer hospitals now than in 1980, even though the population has grown by 30 million.

Orlikoff was equally forceful about the need to act fast, as he factored in the strategy of the incoming Steward Health System, the Massachusetts-based chain which is acquiring IRMC’s competitor, Sebastian River Medical Center.

“I can promise you they are going to start recruiting physicians as soon as they get here,” he said. Independent physicians – those not already in the employment of the hospital – are a source of revenue because they can choose where to send patients.

Faces brightened when Orlikoff said that just since the day before, six clients had contacted him about the Vero hospital possibly going on the market.

“You’re leapfrog potential,” he said, referring to the strategy of healthcare systems wanting to get into the market here. “You give them a beachhead, and you can write your own ticket. That’s still a possibility. But that possibility won’t be there in two to five years – the market won’t be there.”

“I really doubt you’ll be able to stand alone,” Orlikoff said. “If you cannot aggressively identify and prosecute the strategy necessary to remain independent, you have to look at yourself in the mirror and say, ‘We are a decaying asset, and we’re never going to be worth more than we are today.’ Because if I’m a big system and I can’t get you, there are other ways to get into the market.  Once I do that, you have no value.”
Any course of action approved by the collaborative committee would have to win the approval of all three boards involved with the hospital before going to a public vote. Those boards include the Hospital District, IRMH Inc., the non-profit corporation that manages the hospital, and the Hospital Foundation.

The District Board would have veto power.

“The District could stop a direction, but it couldn’t move forward without the involvement of the hospital and the foundation,” said District trustee Allen Jones, a member of the collaborative committee.

As Orlikoff pointed out, the entity with the power to “destroy something has all the power.” At the same time, of the three boards, the District’s may prove the most fractious.

Witness the Indian River Taxpayers’ Association luncheon Wednesday, two days before Orlikoff spoke. With retiring IRMC CEO Jeff Susi in the audience, Hospital District vice-chair Weiss and former District Trustee Val Zudans, an ophthalmologist, were relentless in their criticism of hospital management.

“We have an obligation to make sure healthcare is going to be provided in this county,” said Weiss. “We’re at a point where the hospital is in dire straits. We should consider bankruptcy. What happens in bankruptcy? We try to have a new company come in to be much more patient-centric and try to rebuild the confidence in the community. We have to go back to being a community hospital and not have any ideas of grandeur.”

Weiss noted that he had once unsuccessfully requested a forensic audit of the hospital. But as he himself pointed out, any action requires the support of four of the seven board members.

On the current board, Weiss would likely not find himself with majority support on many of the criticisms he voiced Wednesday.

Nevertheless, Marybeth Cunningham, who chairs the District Board, expressed a hope for board unity.

“We look forward to the support of Dr. Zudans and Dr. Weiss,” she said. “I think we’re all on the same page.”