Tightening finances force consolidations

CHALLENGING  ENVIRONMENT: Financial pressure on health care providers has them looking more and more to consolidation as the best way to serve the public. South County Health CEO and President Louis R. Giancola, center, here with pharmacist Christine Duffy and pharmacy intern Zhaomin Cai, says the decision to end South County's homecare agency was driven by low Medicare reimbursements that are better absorbed by new operator Cathleen Naughton Associates. / PBN PHOTO/ MICHAEL SALERNO
CHALLENGING ENVIRONMENT: Financial pressure on health care providers has them looking more and more to consolidation as the best way to serve the public. South County Health CEO and President Louis R. Giancola, center, here with pharmacist Christine Duffy and pharmacy intern Zhaomin Cai, says the decision to end South County's homecare agency was driven by low Medicare reimbursements that are better absorbed by new operator Cathleen Naughton Associates. / PBN PHOTO/ MICHAEL SALERNO

The mission of South County Health, led by CEO and President Louis R. Giancola, is to best serve the community. However, as the cost of providing and the demand for long-term care rose in recent years, Giancola and South County were forced to make a difficult decision.

In July the health care provider announced that South County Quality Care, the organization’s private-duty home-care agency, would be taken over by Cathleen Naughton Associates, a nursing care agency managed by East Greenwich-based Saint Elizabeth Community, a nonprofit organization caring for the elderly and disabled.

Giancola admitted South County struggled to supply a sufficient number of long-term caregivers to meet the demand of its clients.

“We’re not able to serve the community despite tremendous efforts by leadership and staff,” said Giancola of the need for consolidation with Saint Elizabeth.

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In addition, financing long-term care has become more difficult because “Medicare payments are not keeping pace with inflation,” he said.

Historically, and as a result of the Affordable Care Act, he added, Medicare only reimburses a portion of hospital services, leaving providers to cover the remainder of the cost, financially hindering their ability to operate.

“Unless you can grow, it’s very difficult to continue to generate margins. And if you can’t generate margins, it’s very difficult to invest in capital. In some instances, the answer is to combine with a larger system,” he said.

While Giancola said South County does not have any plans for additional changes, he said these types of consolidations are widespread.

“I don’t think it’s a trend that’s coming. I think it’s a trend that’s here. … We’re in the middle of consolidation here and around the country,” said Giancola.

To Steven Horowitz, CEO and president of Saint Elizabeth Community, long-term care has to be about more than nursing homes.

“People have to diversify a bit more in the long-term care industry than they are currently. You can’t just be a nursing home today. We don’t look at it necessarily as sites, [but] as the people we serve and what their needs are,” he said.

South County employees will be given the opportunity to apply for positions at CNA, said Horowitz, and most South County employees will be kept moving forward.

He emphasized the difficulty of being a small fish in a continually growing pond, predicting more consolidations of this type in the future.

“Size matters. … People don’t like the idea of getting bigger, but sometimes you have to get bigger to better serve the client,” he said.

For example, Southcoast Health and Care New England announced their respective boards had approved a consolidation, which is now before regulators. Lawrence + Memorial Hospital, which acquired Westerly Hospital in 2013, is looking to merge with Yale-New Haven Health System. And an affiliation between Home Care & Hospice of New England and Massachusetts-based HopeHealth became effective Jan. 1.

According to Diana Franchitto, CEO and president of the new HopeHealth, which is headquartered in Providence, the entity is New England’s largest nonprofit hospice and palliative care provider, with $75 million in annual revenue. She agrees the consolidation trend is driven by financial need.

“All health care organizations are facing continued reimbursement pressure, while facing the need to significantly invest in technology and the recruitment of a highly competent and trained workforce,” she said.

Rhode Island Health Care Association board member John Gage, also the chief operating officer for Health Concepts Ltd., said the trend is financially beneficial.

“For the first time we’ve got hospitals, nursing homes and home-care alliances aligned … [with] a reduction in rehospitalizations, little impact on nursing home occupancy and fewer hospital referrals, which is ultimately best for patients who want to return home.”

Albert Charbonneau, Rhode Island Business Group on Health executive director and retired hospital executive, acknowledges consolidation can cut cost, but far too often that premise is unchallenged.

“Consolidation is sold with a lot of promise, ‘If we can get bigger we can be better and cheaper.’ We need to do good due diligence on the reasons why,” consolidation is the path taken, he said. “We never look back to see if they’ve accomplished what they’re going to, and you get some degree of buyer’s remorse. Two hospitals come together and, before you know it, they’re spending more on overhead and the people who looked to the merger for results are seeing more cost.” •

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