MONDAY 03-25-2013

Mar 25, 2013 -- 8:05am

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FD5 folks are funny. They lose the fire equipment levy last November, but lease the new fire truck anyway.

From the Trib article: "Since a 1980 levy passed, the district has financed other equipment purchases from within its budget. That approach has caused the district to fall behind in updating."

Note to FD5 - if you have a budget and are falling behind in updating, that means you have too many employees to fit the budget. These are math problems, not levy problems.

The World of Asante and Ashland Community Hospital under ObamaCare

By Dennis Powers

On November 15, 2012, Ashland Community Hospital (“ACH”) and Asante Rogue Regional Medical Center (“Asante”) announced ACH’s agreement to “partner” with Asante. Due to a controversial, Ashland-liberal political environment, ACH’s first choice of Dignity Health--the San Francisco-based, fifth largest hospital system in the U.S.--was forced to withdraw its offer. With Providence and Asante both in the final “pool”, Asante was the pick for cash-strapped ACH to go through the process in its search for a savor. Later, the Ashland City Council on February 19, 2013, approved Asante’s letter of intent to affiliate with ACH. (It owns the facilities that are operated under a lease.)   

Asante's proposed takeover, however, is as important to its future as to the much smaller ACH’s survival. Owing to its being part of a widespread, financially stronger chain, Providence did not have as much risk as Asante--although Asante has twice the bed-capacity as Providence in Medford--and both facing ObamaCare’s controversial boot.

Asante assures itself of one less Rogue Valley competitor and increases its patient base during a time when the new “Affordable Care Act” presses down on the healthcare industry. When Dignity backed away, ACH with its continuing financial deficits had little choice. ACH and Asante entered negotiations and with the city council’s approval of the letter of intent, it’s hoped that all documentation will be approved within “60 - 90” days from then.

Owing to lower Medicare reimbursements, high Medicare/Medicaid payor mix, less economies of scale, adverse regulations, and uncompensated care, ACH has had declining revenues and reserves for the past few years. (In October 2012, ACH had four to six month's worth of operating cash left, according to its CEO; it lost $2.5 million in its last fiscal year). Asante produced $515 million in revenue during fiscal 2012 from its Medford, Grants Pass, and ancillary healthcare operations. In the year ending Sept. 30th, its net assets grew nearly 25 percent to $475 million.

ObamaCare and Medicare regulations are the prime culprit for this negative environment. Upheld by the Supreme Court in its 5-4 controversial decision, the law’s objective is to expand health care coverage to some 30 million people by 2019. Unfortunately, the provisions to force this greater good are flawed. Hospitals will no longer be reimbursed per service provided, but on the basis of the overall health of the population they treat. For example, reimbursements can be withheld if a patient returns to the same provider for treatment again for the same problem within a short time period--regardless of fault or severity of condition. As hospitals must absorb more of the financial risk of care, the size of an organization becomes quite important.

A larger system adding on a smaller hospital is presumably going to realize cost savings by reducing overhead (i.e., personnel and/or data systems that can be combined). Some leverage is gained in negotiating with suppliers and third-party payers. However, experts maintain that Asante--a not-for-profit operation--is not a prime takeover target as for-profit, stock traded entities, should it fall into financial problems. It’s believed that the debt Asante will incur from the acquisition can be erased by economies of scale and reduced overhead. Asante's pending acquisition is definitely a harbinger of the future. Becker's Hospital Review has detailed more than 80 mergers and acquisitions of hospitals in the past three months and this is accelerating.

Under ObamaCare, one-half of its funding is coming from Medicare cuts over time, when practitioners already are having cash flow problems from previous cuts and regulations. Doctors and hospitals must utilize very expensive databanks and software tools to prove the required quality of care--and pay to maintain those expensive databanks. Smaller healthcare systems may not be big enough to take on these risks, and, consequently, the pressure for takeovers.

Asante’s agreement--subject to final “legalese” and the city council--provides for the following major concepts: If Asante fails to operate ACH as a general hospital in the first 3 years, the assets revert back to the city and Asante pays $8 million as a penalty; should this happen in the next 12 years (15 year total agreement), Asante then must pay $4 million to the city but retain the assets. Asante also has contracted to make $10 million in capital improvements in ACH during the next three years.

Sounds good. The question is what happens if Asante runs into unanticipated financial problems, insolvency, or bankruptcy. This doesn’t mean that its separate subsidiary, ACH, would be shut down--but it is a factor to consider. What happens to ACH if Asante were taken over? Would the acquirer feel that it should continue Ashland’s 24-hour care facility that’s so close to Asante’s in Medford--and regardless of any penalty? 

Asante will have a larger, competitive share of the market in the Valley, but the question becomes just what is the future for smaller hospitals under ObamaCare? Given the merger going through, Asante would become a major factor in providing for this area’s health care in a nine-county region of 600,000 residents. However, five counties (Curry, Del Norte, Douglas, Klamath and Siskiyou) have their own community hospital. Although Jackson and Josephine counties are, of course, Asante’s prime markets, patients served by the smaller hospitals come to Medford.

The questions: Would they “affiliate” with Asante, Dignity, or some other larger entity? Will ACH be able to stem its financial bleeding under Asante? Will the system be able to adequately handle the large increase of patients, residents or not, who want medical care--and will get it? Who knows.

See “Asante: Ashland Community Hospital to Partner with Asante,” at, 

ACH and Asante; Stiles, Greg, “Vital Signs: Asante examines big picture for smaller hospitals,” Mail Tribune, February 3, 2013, at Smaller Hospitals in Today's Time

Also Stiles, Greg, “Vital Signs for Asante: Ashland hospital acquisition, federal health care act impact financial prognosis for Asante,” Mail Tribune, February 03, 2013, at ObamaCare and Southern Oregon.


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