A for-profit Forum: What’s the prognosis?

By GRACE WYLER

gwyler@vindy.com

youngstown

The pending sale of Forum Health to one of the nation’s largest health-care corporations could reshape health care in the Mahoning Valley as the formerly nonprofit hospital system shifts to for-profit status.

A wholly owned subsidiary of Community Health Systems, a Fortune 500 company based in Franklin, Tenn., nearly has completed a $120 million purchase of Forum, which has been in bankruptcy since March 2009.

The U.S. Bankruptcy Court endorsed the sale Tuesday. The state attorney general’s office must review the proposed purchase to determine if it is in the community’s best interest.

If the deal is approved, Forum’s three major facilities — Northside Medical Center in Youngstown, Trumbull Memorial Hospital in Warren and Hillside Rehabilitation Center in Howland — will join CHS’ network of more than 120 investor-owned hospitals nationwide.

The CHS purchase is likely to benefit the hospital and the community, at least initially, said Bill Ryan, director of the Center for Health Affairs, a hospital trade association based in Cleveland.

“In the short term, the sale will keep an important medical institution open in Youngstown,” he said. “You probably won’t see a big difference in hospital operations, except the for-profit will infuse some capital into the hospitals.”

CHS has pledged to invest at least $80 million in the system over five years and has said it will continue to provide charity care at all three facilities.

But the shift away from Forum’s nonprofit mission to for-profit ownership will change the way that the hospital system is run, according to several industry experts.

While nonprofit hospitals are obligated to respond to the community’s needs in exchange for their tax- exempt status, for-profit hospitals primarily are driven by the needs of the parent company and its investors, said John Callender, chief financial officer for the Ohio Hospital Association.

“It is a different culture,” he said. “CHS will probably do good for the community, but it will do it with making a profit for their stockholders in mind.”

In light of Forum’s financial difficulties, CHS likely will take a hard look at operations and management to find ways to ensure profitability.

For-profit hospitals tend to operate more efficiently and be more conscious of costs than their nonprofit counterparts, said Paula Song, an assistant professor at the Ohio State University’s College of Health Policy.

“A primary concern is going to be profit margins,” she said. “[CHS] will probably make some substantial changes operationally.”

CHS would not comment on whether the company would make any operational or management changes at Forum, except to say that the hospital system will be purchased by the Youngstown Ohio Hospital Co., a wholly owned subsidiary of CHS.

Under CHS, the “nature of the hospital will change over a four- to five-year period,” Ryan said.

The Youngstown Ohio Hospital Co. likely will have limited control over hospital operations, serving a mainly advisory role, Ryan said. CHS will have ultimate authority over hospital operations, he added, and will probably implement aggressive cost-controlling measures to meet profitability standards.

The hospitals likely will focus on attracting patients with higher-paying insurance plans and could scale back on charity care over time, Ryan said.

CHS also may start to scale back or eliminate Forum’s less-profitable services, such as behavioral health care, burn units and trauma centers, while expanding profit generators, such as surgical operations and radiology, he said.

“A for-profit isn’t going to try to be all things for all people,” Ryan said. “Over time, they do tend to narrow their focus and hone in on a core set of services that the community needs and that they can make money on.”

In spite of fears that a for-profit system would eliminate charity care or essential services, there are no documented differences between the quality of care or services provided by a nonprofit health system and those of a for-profit system, said Alwyn Cassil of the Center for Studying Health Policy Change, a nonpartisan think tank in Washington, D.C.

The majority of community hospitals in the country are nonprofit, with for-profit hospitals concentrated primarily in growing suburban and rural communities in the Sun Belt.

But CHS’ purchase of Forum is part of the recent expansion of for-profit hospital companies into urban markets in the Midwest and Northeast, including Boston, Chicago and Detroit.

The market dynamics of these areas have changed, Cassil said.

Health-care reform is expected to extend coverage to million of uninsured Americans. At the same time, nonprofit urban hospitals have struggled to raise capital in the economic downturn and are reaching out to for-profit companies for funding.

“For-profit companies are seeing business opportunities in more urban markets,” Cassil said. “They are making a bet that they may be able to do well in these markets down the road.”