County approves St. Luke’s affiliation with Carolinas HealthCare

Published 4:21 pm Thursday, June 5, 2008

After months of meetings, questions, reviews and more discussions, the Board of Trustees of St. Luke&squo;s Hospital selected Carolinas HealthCare System (CHS) of Charlotte for management services.

Several members of St. Luke&squo;s Hospital board presented their decision to the Polk County Board of Commissioners for approval during last night&squo;s meeting.

Polk commissioners approved unanimously a resolution authorizing the affiliation. The resolution specifically directs Polk County Manager Ryan Whitson to amend the Polk County lease with St. Luke&squo;s Hospital to include a management agreement with Carolinas Healthcare, Inc.

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CHS will manage St. Luke&squo;s for $500,000 per year with St. Luke&squo;s netting at least $16,000 per year through cost savings.

The financial strength and support offered by CHS is expected to provide a significant long-term benefit to St. Luke&squo;s Hospital, which has faced financial challenges in recent years. In 2004, the hospital asked the county for $1 million to help offset operating losses. The hospital said at the time it was losing $2 million annually from unreimbursed services provided for indigent care.

In 2005, St. Luke&squo;s obtained Critical Access Hospital status, which allowed it to receive cost-based reimbursement from Medicare. The status change improved the hospital&squo;s financial performance. But hospital president Cameron Highsmith noted that St. Luke&squo;s faced more funding needs for much needed capital improvements. The St. Luke&squo;s building in Columbus opened in 1972 and the normal life span of a hospital is 30 years, said Highsmith.

Facing significant costs to meet long-term facility needs,&bsp; the St. Luke&squo;s Hospital Board of Directors agreed last year to begin discussions with several potential partners for affiliation.

During its May meeting this year, the full board of trustees for St. Luke&squo;s unanimously accepted the recommendation of its affiliation task force to proceed with the management services agreement with CHS because of its track record, experience and success in helping other rural hospitals.

The partnership with CHS is expected not only to help St. Luke&squo;s expand and upgrade its facilities, but also to provide management and planning expertise.

The management services agreement for the affiliation states that CHS will prepare a detailed Management Action Plan within 150 days after the agreement takes effect on July 1.

For patients and the community, it will be business as usual, Cameron Highsmith, St. Luke&squo;s chief executive officer, said during a recent meeting with hospital management staff. The relationship with CHS will benefit St. Luke&squo;s to include specialized management expertise, experience with developing strong community-based clinical services, and participation in revenue and purchasing contracts. Like most hospitals struggling to provide specialized care 24/7, St. Luke&squo;s is too small to have any significant leverage during contract negotiations with insurance carriers and suppliers.

The St. Luke&squo;s board says it selected CHS because of its size and strength as well as its success as a not-for-profit provider. CHS is the largest non-profit hospital manager in the country and the third largest public system in the nation, with 22 facilities in North and South Carolina.

St. Luke&squo;s officials explained the Management Services Agreement to commissioners at Monday&squo;s meeting. The agreement has a term of 10 years with the option of renewals.

After opening comments by St. Luke&squo;s board chair BG &dquo;Woody&dquo; Woodham, former board chair Dr. Hobart Rogers outlined the background need for St. Luke&squo;s to consider some type of affiliation arrangement with a larger healthcare provider. Then, current vice chair Susan McHugh delineated the process the board followed and the guidelines for consideration. Chief financial officer Robert Cress provided information on the cost and benefit of the contract before Woodham thanked the commissioners for the opportunity to present the information.

It was a challenging process, according to McHugh. Over an 18-month period, the task force studied proposals, met extensively to review and evaluate information, and shared references from other hospitals working with CHS. She presented to the commissioners a long list of criteria the task force followed as it considered proposals from Mission Hospital, Spartanburg Regional, Greenville Hospital and CHS.

One of the deciding factors, she said, was CHS&squo;s emphasis on local health care delivery that will allow St. Luke&squo;s to maintain existing referral patterns with neighboring tertiary care centers.

The Board of Trustees for St. Luke&squo;s Hospital says it is committed to the future of St. Luke&squo;s as a community hospital capable of meeting the needs of friends and neighbors in Polk County and the surrounding area. There is no sell out, no merger, no consolidation nor transfer of assets, but CHS will share management action plans that will bring us to a positive bottom line, Highsmith said during a management meeting.

St. Luke&squo;s Hospital will benefit greatly from a close relationship with CHS, Highsmith said, and will continue to maintain positive relationships with Spartanburg Regional Healthcare System and Mission Hospitals.