Lenoir Memorial Hospital is looking for a financial partner.
Hospital officials announced on Wednesday they are searching for a strategic partnership with another hospital, health system or hospital company.
They believe a financial arrangement with another medical entity will strengthen and enhance healthcare services and better meet the needs of the community for the long term, according to a press release.
Officials say the right strategic partner is an organization that shares the hospital’s vision to grow services, protect what it has built and ensure that the community has access to affordable, high-quality healthcare for years to come.
LMH has been doing business in Lenoir County for a century, said Gary Black, LMH’s president and CEO.
“We are a strong and profitable organization today, but the world of healthcare delivery is changing, so we are taking proactive steps to ensure continued growth and success to protect access to care close to home,” he said.
Recently, Lenoir Memorial hired an outside hospital consulting firm, Sg2, that spent a year learning about the organization, the way it operates, its finances and its culture. The firm conducted studies inside the hospital and in the community, projecting the future financial status of LMH.
The firm found that in order to continue the 100-year legacy into the future, the hospital should consider partnering with another organization.
Their projections found the hospital’s operating losses would continue to worsen each year, with about a $9 million annual cash, or operating, shortfall by 2017. Black said the loss would not affect LMH’s reserve funds.
Even with an enhancement and expansion of services to surrounding counties to generate additional money, there would still be that kind of loss, he said.
“When we looked at that, there was some opportunity to reduce that $9 million shortfall from the additional revenues that could be generated,” Black said. “However, the costs associated with providing those additional services would mean that the actual improvement would be very little.”
The loss, over time, wouldn’t be sustainable, he said.
Black said partnering with a larger healthcare organization will mean lower purchasing costs and better negotiating with insurance company rates. A larger healthcare group could also provide experience, expertise and resources with regulatory agencies, quality and patient satisfaction.
“All of those things, they have a great many more resources already available and working on those issues than community hospitals,” he said. “They also have more resources to do some expansion that is more difficult for us to do.”
The Lenoir Memorial board is directing the partner review process with another outside firm, Juniper Advisory, a Chicago-based financial advisory group for nonprofit community hospitals.
The company offers a systematic approach, considering all options and types of partnerships to meet the needs of LMH, hospital officials said.
The LMH board is in the process of generating several objectives that will guide its selection of a partner. These criteria will be identified and discussed by the board, then finalized over the next several months.
Confidential discussions with a number of potential partners will begin in spring 2014, with the process expected to take 12-21 months to complete once those discussions have begun, as a variety of partnership models will be explored.
Ray Collier, chairman of the LMH Board of Directors, said now is the time to look for a partner, while the hospital is financially thriving.
“We recognize that the way healthcare is provided today — where it is offered, how it is paid for, how it is measured — is changing dramatically,” Collier said. “Reimbursement for care is declining, the care itself is shifting to more convenient outpatient settings, and more emphasis is being placed on keeping people healthy, not just treating them when they are sick. Hospitals and health systems, as well as physicians, are partnering in order to meet these new demands.”
Since 2008, there have been 274 hospital mergers and acquisition transactions affecting 439 hospitals — up nearly 22 percent over the previous four-year span. The number of hospital deals doubled to 105 in 2012 from 50 in 2009.
A recent national survey of healthcare leaders found 75 percent were already pursuing a partnership or considering aligning their organization with another.
Consulting firm Booz & Company predicts that 1,000 of the nation’s roughly 5,000 hospitals could seek out mergers in the next five to seven years.
In North Carolina, 22 out of more than 120 hospitals remain independent, according to the North Carolina Hospital Association. The rest have affiliated into 19 larger systems.
Lenoir County is one of 38 tier one counties, the poorest counties in the state. Of those, 27 have hospitals, three of which are independent.
As the hospital goes through the search and decision process, staff members, physicians and patients can expect no disruptions in the day-to-day operations or the way in which the hospital currently provides care, Black said.
“We’re very early on in this process — far too early to speculate on what or with whom this partnership might be — but we are determined to be transparent throughout the process and wanted to inform the community as soon as possible of this decision,” Black said. “We’re committed to communicating in a very proactive and deliberate way throughout this search. When we do have something we can share, we will.”
Margaret Fisher can be reached at 252-559-1082 or Margaret.Fisher@Kinston.com. Follow her on Twitter @MargaretFishr .