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September 13, 2019

Amid merger mania, this rural hospital kept its independence—by becoming a neurology hub

Daily Briefing

    Despite warnings to join forces with a larger health system or face bankruptcy, Memorial Healthcare, a 161-bed rural hospital in Michigan, made the decision to stay independent—and it's since become a profitable "hub" for neurology, Jay Greene reports for Crain's Detroit Business.

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    The debate

    When Brian Long became CEO of Memorial in 2013, the hospital's board of directors was in the midst of a heated debate over the hospital's future. Some on the hospital board wanted to affiliate with a larger health system, while others wanted to stay independent, even though that could have placed the rural hospital at financial risk down the road—even bankruptcy, Greene writes. Prior to leaving, the hospital's former CEO and a consultant had warned the hospital could face bankruptcy if it did not join with a larger health system.

    Tony Young, vice chair of Memorial's board of directors and president of Young Chevrolet Cadillac, said when he joined the board in 2013, the debate had divided board members and several resigned. But Young thought remaining independent and building existing services was the way to go.

    "I started pushing the [question], what would the community gain from a merger?" Young said. "The hospital was losing a little money, but had money in the bank."

    According to Greg Bontrager, chair of Memorial's board of directors, and former president and COO of the American Cancer Society, there was talk of an equity sale of Memorial to a partnership between the University of Michigan and Sparrow Health System.

    However, a sale "didn't make sense to us business leaders on the board," Bontrager said. "Our balance sheet was strong. Some of the offers were for less money tha[n] we had in the bank. Under Brian's leadership, we thought we could make a profit on our core business and also build up two or three clinical services."

    Memorial stays independent

    Ultimately, the hospital chose to stay independent and they created a long-term strategic growth plan that evolved over a five-year period.

    The key to that growth plan, according to Long, was investing in Memorial's neurology and orthopedics program.

    "What we chose to do was to pick a service line or two that we could be world-class in and provide services not only to our community" but also to patients who'd travel to receive excellent care, Long said.

    Long attributes much of the hospital's success to a hire that predated the decision to remain independent. Back in 2010, the hospital hired Rany Aburashed to lead the hospital's neurology department. Aburashed believed that the future of health care innovation would be in neurology.

    "Dementia, Alzheimer's, [multiple sclerosis], these tough diseases are the ones that remain the final frontier. This is the future in health care with the number of baby boomers aging and the number of neurologists … needed," Aburashed said. He added, "What I was able to do at the time [was to] sell [Long] that neurology is very important in the future of health care."

    So with the decision to remain independent locked in, Memorial put Aburashed's vision to the test and challenged him to turn Memorial's neurology department into a center of excellence. According to Greene, the decision to invest in neurology "was risky for a small hospital with $104 million in annual revenue in 2013."

    From 2013 to 2016, the hospital saw revenue growth, but continued to experience operating losses, Long said.

    "We introduced investment back into the organization, income went down, but from 2016 to 2019 that investment came to fruition" and operating income steadily went into the black, Long said.

    Positive results

    Over the last eight years, Memorial has seen its neurology program grow significantly, Greene writes, with neurology visits increasing by 729% since 2011, from 1,738 to 14,424. In 2018, Memorial's neurology inpatient market share grew to 20%, up from 15% in its primary market.

    And as a result of the Memorial's investments, the hospital has seen its finances trending upward, Greene reports. 

    Long said he believed Memorial could succeed with its neurology program, but never imagined it'd be what it is today.

    "Had [someone] sat down nine years ago and said to the board, or to probably anyone else that at some point. ... We're gonna have, nine neurologist or a dozen neurologists. They would have probably asked us to see a neurologist," he said. All told, Memorial's number of employed doctors over a 10-year period increased from about 18 to 80 doctors that span a variety of specialties as well as primary care.

    Further, the hospital's growing neurology department has also spurred growth in its on-campus infusion center, which has helped boost revenue, Long said. Since 2015, Memorial's infusion center has increased treatments for multiple sclerosis by 75%, according to Jamie Ritter, director of the hospital's cancer and infusion center.

    Plans for the future

    Memorial isn't done growing, Greene writes. Because of its strong neurology program, the hospital's board last year approved a $30 million plan to develop a Neurology, Orthopedics, and Wellness (NOW) Center, which is expected to be open by mid-2020.

    According to Aburashed, the new, 104,000 square-foot building will enhance care for neurology patients by providing a number of services all within the same day.

    "Instead of patients going to the lab, imaging, physical therapy, bracing, ambulation clinic, social worker and so on, these services will be brought to the patient in the same room on the same day," he said. "We have designed the facility around at least the neurology space to provide a more holistic approach of care in one area" (Greene, Crain's Detroit Business/Modern Healthcare, 9/10).

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