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Citizens hires consultant for advice about hospital's future; sale not likely

By JR Ortega
Aug. 11, 2012 at 3:11 a.m.
Updated Aug. 12, 2012 at 3:12 a.m.

Rumors are ciculating that citizens is for sale

Three options

Citizens Medical Center is waiting to receive a consultant's report on how the hospital can improve its operations.

Adam Higman, a consultant and manager of Soyring Consulting in Florida, explains why a hospital such as Citizens would chose each of three possible option:

Citizens Medical Center has operated as the county hospital since 1956 and receives no tax revenue. The hospital employs more than 1,350 employees and is a not-for-profit, community-owned hospital. A hospital may not choose to affiliate or do anything major to its operation after a firm's findings. This is likely to happen if a hospital is already stable and is just checking its options.

Selling a public hospital, like Citizens, can be difficult, but isn't impossible. The hospital gives up all control of the facility. Smaller county hospitals, smaller than Citizens' 344-bed facility, typically sell when there is a strong downturn in the local economy and the hospital administration is not prepared to handle that type of situation. If a hospital sells, the complete makeup of that facility changes, beginning at the top with management. Most senior leadership is replaced because the facility was likely mismanaged in the first place, Higman said.

Joining a larger medical institution is a growing trend. Hospitals affiliate to become stronger financially and to gain better negotiating power. Affiliating also helps brand a not-so-well-known hospital, which can help them gain better access to physician groups and other area health care providers. Both hospitals strengthen from affiliations, which Higman called a "win-win situation."

Citizens Board Members

Donald Day

Joe Bland

Luis Guerra

Jennifer Hartman

Paul Holm

Andrew Charles Clemmons

The next Citizens Board Meeting is 7:30 a.m. Aug. 21 at Citizens Medical Center, 2701 Hospital Drive.

A consultant is studying the future of Citizens Medical Center as its board tries to figure out a changing health care industry.

The board hired the firm last month to analyze the operations of the county-owned hospital. The firm's findings could range from continuing as a stand-alone hospital to affiliating with a larger medical institution or even selling.

However, a sale is the least-likely scenario, Victoria County Judge Donald Pozzi said this week.

The board can recommend a sale, but only the county commissioners can take such an action.

"We need to know where we are," Pozzi said about where the hospital stands during such an industry-transitioning period. "The status of health care has certainly changed dramatically over the years."

This isn't the first time the hospital board has met to review its operation. Other past strategic planning sessions have led to notable changes; the most recent was the construction of Citizens Healthplex in 2001.



'All things are possible'

Three people know best the ins and outs of Citizens Medical Center: Pozzi, Citizens Chief Executive Officer David Brown and hospital board Chairman Donald Day.

Pozzi and Brown both have a more than 20-year history and have each heard a buzz in the community about the hospital being sold.

"Is the hospital for sale? It's very simple - no," Pozzi said. "But all things are possible."

The buzz started soon after the New York City-based consulting firm, Cain Brothers, was hired.

On July 11, two Cain Brothers consultants, Daniel M. Cain and Timothy P. Schier, spent about two hours with board members in a closed special session. The firm was hired at the July 24 open special session meeting.

Day insists discussion is still premature, and more won't be known until the firm hands down a recommendation report. A date for receiving the report has not been set.

"I don't even know what all the options are," Day said. "I have no idea where we're going to wind up."

Brown said he was confident in any options the board faces because he knows the decision made will be in the best interest of the people, hospital and county.

Brown is a product of a similar strategic planning session decision back in 1982.

At that time, Citizens was named Citizens Memorial Hospital and had affiliated itself with Methodist Hospital Health Care System Inc., bringing in Brown as the hospital's leader.

Methodist managed the hospital and helped Citizens with higher collections in Medicare and Medicaid cases in particular, according to Advocate archives.

At that time, the board chose to review its operation after the resignation of administrator A.D. Hethcock.

Brown said he does not plan to retire or resign.

"This is not what is precipitating" this study, he said.

An affiliation, Brown said, such as the Methodist one, could be beneficial today.

Brown agreed with Pozzi that the unlikely scenario is selling the hospital, but that decision is still up to his board to take to the commissioners, he said.

"This hospital is pretty darn special," Brown said. "It's their job to make this evaluation. Whatever happens, the hospital is going to continue being successful."



Citizens' possible future

The Supreme Court's decision to uphold the Affordable Care Act is one of the key health care industry changes, which sparked the board's interest in re-evaluating the hospital's current operation.

Because Citizens is a public hospital, it has a higher load of indigent patients than Victoria County's for-profit hospital, DeTar Healthcare Systems.

Caring primarily for the indigent can be a problem when it boils down to payment and Medicaid reimbursement. Industry changes brought about by health care reform should be considered in this strategic planning session, Day said.

"This care for the indigent is of vital importance to the community," Day said.

Citizens is one of about nine Texas public hospitals that does not receive tax revenue. However, the other public hospitals have fewer than 25 beds, while Citizens has about 344 beds.

The trend now is most unaffiliated hospitals are choosing to join larger medical institutions, said Adam Higman, of Soyring Consulting in Florida. Of course, some shut down or sell, but those typically have bad financial circumstances because a downturn in the community's economy.

"What's happening is hospitals are being squeezed everywhere, not just in Texas," Higman said.

Citizens' decision to examine its operation is not only common, but smart.

"Everyone is preparing financially," Higman said.

Pozzi, Brown and Day stressed the financial strength and performance of Citizens, which has consistently been recognized for its quality of care.

"We're a great hospital. That has been documented over and over and over," Pozzi said. "My No. 1 priority is going to continue to be to do what is best for the citizens of this community."

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