Rx for Forum: Cut costs, get more patients

By Don Shilling

A private report suggests downsizing two local hospital systems in the long term.

Forum Health needs to prepare for a future that likely doesn’t have room for all of the current hospitals in the Mahoning Valley, a consultant says.

A report released Wednesday by Chartis Group group says having two separate hospital systems, each with hospitals in Youngstown and Warren, “is likely unsustainable in the long term.” It notes that the area has an overcapacity of beds.

Forum could prepare by selling, closing or reducing services at Northside Medical Center, but the report said none of those seem feasible now.

The best option for Forum for the near term is to maintain its current hospitals but increase efficiency and patient volumes, while reducing labor costs.

Chartis, a national consulting firm that specializes in health care, was commissioned by the Ohio attorney general’s office to study Forum because it has been struggling financially.

Representatives for Forum and its competitor, Humility of Mary Health Partners, said senior officials were considering how to respond to the report.

Much attention in the report is focused on Northside because St. Elizabeth Health Center has a 32 percent market share in the Youngstown area, compared with 24 percent for Northside.

Forum is in better shape in Trumbull County. Forum’s Trumbull Memorial Hospital has 34 percent market share in the Warren area, while St. Joseph Health Center has 21 percent. Both St. E’s and St. Joseph are part of HMHP.

Chartis suggests that splitting the local market between Forum and HMHP could be examined down the road. It doesn’t provide specifics but said HMHP could become dominant in Mahoning County, while Forum does the same in Trumbull County.

The report says this option is viable because the area has an overcapacity of hospital beds, which is expected to continue. It adds that the area’s economy isn’t expected to grow in the near term.

“These factors make it difficult for local hospitals to continue to operate profitably,” it says.

Splitting the two counties between the health systems would add $150 million to Forum’s operating income over five years, the report said.

In comparison, its near-term recommendations of reducing labor costs and increasing patient volumes would produce $20 million in operating revenue over that period. Operating income is revenue derived from daily operations, minus expenses.

The report said Forum can increase its patient volume by focusing on its strengths, such as cardiology, general surgery, obstetrics and orthopedics. Forum can increase revenue by decreasing the number of area residents who go to other cities for care, taking market share from local competitors and drawing in patients from a wider geographic area, it said.

Labor costs have to be examined because salaries and benefit costs at both Northside and Trumbull Memorial are higher than national and Ohio benchmarks, the report said.

John Burant, director of the hospital division of the Service Employees International Union, noted that Trumbull Memorial’s costs were close to the benchmarks, while Northside’s were significantly higher. He said the union’s contract is the same at both hospitals and covers a total of 1,300 members.

Burant said the union is interested in investigating what is driving the higher employee costs. “We want to be responsible,” he said.

He added that union officials feel vindicated by the report because it cites other steps that Forum needs to take in addition to reducing labor costs.

If these steps don’t restore financial health, filing for bankruptcy protection would be a last resort, the report says.

Forum could use bankruptcy proceedings to reduce labor and debt costs. The report doesn’t recommend a filing, however, citing a risk that creditors could take Forum’s assets and dissolve the system.

shilling@vindy.com