April 3, 2009 Greetings Nobles of the Sphinx Shrine, I am writing this note to keep all of our Nobles informed of the actions being taking by Imperial and the Board of Directors Shriners Hospitals for Children. There are many discussions floating about regarding closing Hospitals, moving them or reorganizing them into a little different function as we know them today. Please, I must emphasize, all this information is simply informative and not fact by any stretch of the imagination! This information is presented by the Chairman of the Board to let the Nobility know that they are working hard to find ways to keep our Hospitals or ways to relieve our financial burden to keep most of the Hospitals running. There are and will be a number of suggestions presented at the Imperial Session in San Antonio this July. If you have any thoughts please express them to your Imperial Representatives so they can vote with an informative approach. The Representatives are: Dick Cassada, Potentate, David McDonough, Chief Rabban, Ray Basley, Assistant Rabban and Bill Logvin, Imperial Representative. Until the Imperial Session has ended and the official information is out, I will continue to put out these reports on what is happening. You may read many publications, such as the local newspapers etc. that will tend to support the doom and gloom of the closings. Please don’t treat these articles as the true facts. The fact of the matter is, we will not know the final answer until the Imperial Session has ended and the vote is counted. No matter what the vote is, the decision made will not have a final impact on our Hospitals for 3, 4 maybe 5 years from now. Please read the mailing from our Chairman of the Board, Ralph Semb, for details on what is on the table right now. Thank you for taking the time to read this and I assure you that as details are made available to me I will pass them along to the Nobility of Sphinx Shrine. Yours in the Faith,
Dick Cassada, Potentate/CEO
Sphinx Shriner
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March 31, 2009
To: Richard Cassada
Sphinx Temple
Hi Ill. Sir Dick
I said that you would be receiving a number of updates as we process each of these. They will give you the reasons for some of the options etc. This one is for questions regarding those hospitals chosen.
Why the Hospitals under Option 2 were Chosen
The financial crisis facing the organization requires us to consider dramatic measures to meet a growing gap between operating revenues and expenses. Based on the assessment of headquarters staff and other professional input from across the system, it is apparent that no single action represents a viable solution to meet this ongoing problem. Option 2 calls for the cessation of hospital activities coupled with dramatic cost reductions in Headquarters, Research, and Employee Benefits. At the same time, a balance is struck by significantly increasing revenues generated through future philanthropic endeavor and implementation of third party pay. This balanced approach moves us down the path to financial stability. Failure to take appropriate action will mean the certain demise of Shriners Hospitals for Children in approximately 5-7 years. Meeting this challenge requires bold leadership.
In evaluating the hospitals, a number of objective criteria were identified to assess each facility. While operational efficiency is important to an organization, there are strategic factors that must take precedence.
The criteria used included a list of performance measures, hospital specific information and market-related factors. A 5-point Likert Scale was utilized, with 1 indicating a superior ranking to 5 indicating the lowest ranking. The measures chosen were:
- Hospital Infrastructure:
The condition of the physical plant and the requirement for future investment in capital infrastructure; - Physician Recruitment Potential:
The ability to recruit physicians to a given hospital; - Academic Model Potential:
The ability to achieve relevance given proximity and relationship to pediatric specialty teaching programs; - Average Daily Census:
The average number of patients in beds during any 24-hour period throughout the year; - FTE Per Adjusted Patient Day:
The number of Full Time Equivalent employees needed to staff the hospital, adjusted for outpatient activity and patient acuity; - Expenses Per Adjusted Patient Day: The cost to operate a hospital on any given day, adjusted for outpatient activity and patient acuity;
- Geographic and Demographic Optimization:
The impact of market geography coupled with the future population demographics of the region.
In addition to these seven criteria, staff looked at performance metrics used on a daily basis to further refine the analysis. These included but were not limited to performance on the system-wide dashboard and Key Volumes reports, budgetary performance, and suggestions from the Joint Boards. With regard to this last element, staff received guidance from the Joint Boards to exclude the facilities in Canada, Mexico and Honolulu due to their international reach. Also upon recommendation of the Joint Boards, staff excluded the Twin Cities facility from consideration at this time, due to ongoing talks with the University of Minnesota and Fairview Health System. It is the desire of the Joint Boards to allow these talks to progress to a point where a more reasonable assessment can be made of this future opportunity. Staff also received guidance from the Joint Boards on maintaining services to the various regions of the United States. The Joint Boards felt that a lack of presence in any portion of the country could adversely affect Shrine membership and potential donations to the organization.
Based on these criteria and subsequent guidance from the Joint Boards the following hospitals were chosen for cessation of services.
1. ERIE:
This hospital has consistently struggled to maintain patient volumes since the departure of its previous medical staff almost two years ago. Furthermore, the hospital’s patient population is heavily constituted with patients requiring minimal surgical intervention but long term rehabilitation.
- Location: The hospital is isolated from any Academic Medical Center which would provide subspecialties in Pediatrics or a pediatric intensive care unit.
- Medical Staff: Extensive recruiting efforts have been underway for open medical staff positions for the last three years. At present, part-time and retired medical staff supplement a 0.8 FTE physician.
- Financial Targets: The hospital does not meet established targets for staffing, expense per unit of service, and nursing hours per patient day. This is all due to an average daily census of less than 6 patients.
- Demographics and Geography: The pediatric population is trending in a downward direction. There are two large health care systems in Erie; none has a major pediatric specialty or subspecialty program. Erie is a post industrial city with limited growth potential.
- Opportunities for Transition: The current patient population can be accommodated in SHC-Philadelphia and Lexington.
2. SPOKANE:
This five-story hospital has a history of not realizing a significant volume of inpatients. Its average daily census has never been over ten in the last four years. This is due to several factors. The first was an extended period of time with only two admitting physicians. The second is the changing medical/surgical practice of ambulatory care. Third, historically, Spokane has demonstrated a trend of minimal surgical interventions and more outpatient rehabilitation services.
- Location: Though located in the shadow of Sacred Heart Medical Center (which has a new Children’s Hospital) and directly across the street from Deaconess Hospital, the patient population has not grown correspondingly.
- Medical Staff: There are three full-time pediatric orthopedic surgeons. There are a sufficient number of physicians, but not enough patients despite organized attempts to increase referrals.
- Financial Targets: The hospital does not meet established targets for staffing, expense per unit of service, and nursing hours per patient day due to a very low inpatient daily census.
- Demographic and Geography: Although the pediatric population is growing in the Pacific Northwest that growth is not being experienced in Eastern Washington. The topography and the climate in winter are constraints to the transport of patients by Shriners and the convenience of access by families outside a fifty mile radius.
- Opportunities for Transition: Available capacity at Salt Lake City and, at the conclusion of the building project, in Portland will easily accommodate Spokane’s current patient population.
3. SPRINGFIELD:
This hospital has been unable, for some years, to establish an inpatient service that will generate a sustained average daily census of greater than ten. Were it not for its treatment of patients from Cyprus and Puerto Rico, its inpatient population would be in the very low single digits.
- Marketing: Despite a significant marketing campaign to raise awareness of the hospital and generate surgical referrals, little change in surgical volume has occurred.
- Location: This is a post-industrial region with little or no future growth potential. The pediatric population is declining.
- Medical Staff: The medical staff has three full time pediatric orthopedic surgeons who have been there for a long time. Recruiting replacements would be very difficult due to the lack of a significant academic affiliation. There are a sufficient number of physicians, but not enough patients despite organized attempts to increase referrals.
- Financial Targets: The hospital does not meet the established target for staffing. Expense per unit of service is on target due to a large volume of outpatient encounters.
- Demographics and Geography: The pediatric population of western New England is trending down. The hospital is 35 minutes north of Connecticut Children’s Hospital and 90 minutes from Boston Children’s, both having significant pediatric orthopedic service.
4. GREENVILLE:
This hospital, much like the others, has a long history of a low average daily census. The hospital has a relatively small patient base, given its lack of outreach activity.
- Location: The hospital is located in the Piedmont area of Western South Carolina, which has a small pediatric population that is relatively static.
- Medical Staff: There are four pediatric orthopedic surgeons, but not enough patients despite organized attempts to increase referrals.
- Financial Targets: The hospital has not met its staffing target and expenses are high relative to case mix. Nursing hours per patient day are continuously above standard. All this is explainable by the low average daily census.
- Demographic and Geography: The growth in population is oriented to retirement age adults.
- Opportunities for Transition: The Lexington and Tampa hospitals, as well as other providers in Virginia, North Carolina, and Georgia could easily absorb the current patient population.
5. SHREVEPORT:
It should be noted that this hospital is efficiently run with just two full time pediatric orthopedic surgeons. However, there are a number of important strategic factors that affected the recommendation.
- Medical Staff: The two physicians are aging. Recruitment of medical professionals has a history of being difficult due to unwillingness to relocate to the area, and the weak academic standing of the hospital’s affiliated medical school and medical center.
- Financial Targets: This hospital meets all standards of cost effectiveness.
- Demographic and Geography: The region is experiencing a pattern of declining birth rates over the last ten-years. Further, when the transition of the Panamanian patients to the Tampa Hospital is complete, inpatient census is likely to decrease.
- Opportunities for Transition: Patients served by this hospital can be accommodated in the SHC-St. Louis and Houston Hospitals.
In summary, we have excess physical capacity in our hospital system. Already faced with deficit spending, we have limited opportunity to effect a major reconfiguration of the system. Our approach, therefore, was to concentrate opportunities within existing markets.
The hospitals described above all reside in small to medium sized metropolitan centers as defined by the US Census Bureau and the Department of Labor. Our current business model is outdated, based upon decisions dating back to 1922. Location is a critical element to the long-term success of a highly specialized pediatric hospital system and practice.
Centers of population density offer:
- major hubs of transportation,
- a larger pool of potential patients,
- the ability to generate higher referral volumes,
- proximity to full service pediatric facilities, with access to critical care, pediatric subspecialties, and advanced diagnostic imaging resources, and greater potential for affiliation with academic medical institutions.
Option 2 retains the unique character of Shriners Hospitals for Children, while demonstrating our stated commitment to financial stewardship.
Please Keep these reports so that you can review them on a regular basis and in fact, give us more ideas if you have them.
Yours in the faith,
Ralph W. Semb,
President and Chief Executive Officer,
Shriners Hospitals for Children
