Forum works on plan of action

Forum is looking into building a for-profit, joint venture hospital.
By WILLIAM K. ALCORN
VINDICATOR STAFF WRITER
YOUNGSTOWN -- Forum Health, facing unprecedented multiyear operating losses, has turned to Wellspring Partners, a national consulting firm, for a quick financial turnaround.
Forum Health is not filing for bankruptcy, officials say, nor is it planning to close its nonprofit health care facilities.
However, it is in significant financial trouble, reporting an operating loss of $21 to $22 million in Fiscal Year 2005, and anticipating even more losses in 2006, according to Moody's Investors Service.
N. Kristopher Hoce, Forum Health president and chief executive officer, said the health care system cannot continue to sustain operating losses, and the health system's board of directors plan to implement operational changes recommended by Wellspring this year.
Focus of turnaround
Wellspring, which Hoce said has led at least 100 health care business turnarounds, analyzed Forum departments last fall, and is in the process of helping Forum to develop a plan of action.
Hoce said Wellspring focused in several areas, including:
ULabor: As it applies to staffing and how resources are allocated.
UNonlabor items: Where and how Forum buys supplies; technology; more efficient ways to do things.
URevenue cycles: Ensuring Forum is paid for everything it's entitled to, and in a timely fashion.
UMedical management: Looks at how clinical resources are used and whether the system is as efficient as it can be in terms of delivering care.
After the analysis, Wellspring was hired for the implementation phase.
Already, Forum Health nonunion employees have had their annual merit pay increases frozen for 2006, according to John Gonda, Forum spokesman.
And indications are that Forum will seek concessions, possibly in the area of step increases, from the 80 percent of its employees, who are union members.
According to a report by Moody's, which last week lowered Forum Health Ohio's bond rating from Baa2 to Baa3, union concessions are "critical to the system's long-term viability."
Lowering the bond rating will make it more expensive to borrow money.
Also, according to a case study posted on Wellspring's Web site, the firm helped a regional medical center achieve a one-year turnaround, cutting costs by, among other things, "severely" curtailing the use of agency labor and improving productivity. The client increased revenue by renegotiating contracts and strategically instituting price increases.
Challenges
Hoce said major financial "challenges" facing Forum Health include high-cost unionized employees; degradation of revenue, led by decreasing reimbursements for services; depressed local economic conditions, which lead to more people without insurance or underinsured who seek treatment in the emergency room; and competition from free-standing diagnostic centers, surgery centers and therapy centers.
Because of that competition, Forum has been involved in several feasibility studies about building a for-profit joint venture hospital with local physicians and investors.
"The dilemma we face is that the revenue base has been eroded from so many different sources that our high-cost position is exposed.
"In the past, we've been able to find ways to bolster the revenue and adjust programs accordingly. But we've been hit on so many revenue fronts, that the high-cost position is making us extremely vulnerable.
"We can't continue to be in a position where there is not enough money to invest in new technology, facilities, programs and services," Hoce said.
Right investments
While the financial picture is admittedly not good, there were some sparks of good news for Forum in 2005. One was the unexpected success of its new Women's and Infants' Pavilion at Beeghly Medical Park in Boardman.
The facility, which opened in May 2005, fueled an increase in the number of births at Forum Health from 135 to 200 a month.
That unanticipated success caused Forum Health to reconsider its five-year plan and ask itself if it is investing in the right places, from a demographics perspective, officials said.
Health care, like any product and service, is affected heavily by access and convenience, Hoce said.
As a result, the West Addition to Northside Medical Center, a large piece of the Forum Promise, a five-year capital program, has been delayed. However, work on several projects at Trumbull Memorial Hospital in Warren, which total $17 million, continued, officials said.
There are multiple opportunities, including at Northside Medical Center, further south in Mahoning County, and there is still room for some expansion at Beeghly," said John Gonda, Forum spokesman.
Working with unions
While Forum is facing serious financial problems, officials say most hospitals are facing the same things to one degree or another.
The health care industry in general is going through tough times. A good percentage of hospitals do not make money from operations. The major source of income -- 63 percent -- is from government sources, such as Medicare, Medicaid and workers' compensation. But over the past seven to 10 years, reimbursements have not kept pace with general inflation, and certainly not with medical inflation, Forum officials said.
Gonda said Forum is meeting with union officials to discuss the financial situation and the options available to address those challenges.
"We have asked our unions to provide us with any suggestions or feedback they may have. ... our intent is always to continue working very closely with our union leadership," Gonda said.
Forum's goals, Hoce said, is to have a health care system that provides the safety net this community needs; that focuses on prevention and looks at access and conveniences; and that provides the array of clinical services that respond to the vast majority of needs.
"We want to do that in a fashion where we can provide good employment for 5,000 people and be able to reinvest in technology and facilities, so that our children and their children will have a health system that is locally owned and responsive to what this community is about," he said.
alcorn@vindy.com