A Magazine about the Hudson Valley’s local economy, published by Hudson Valley Current.

How smaller hospitals survive (or not) Modern medicine’s drive for bigger not always better

by: Paul Smart

Thirty years ago, hospitals in the Hudson Valley and Catskills were much different than what we have today. In addition to city hospitals in our county seats, including two or more in Kingston and Poughkeepsie, there were small community hospitals in Catskill and Hudson, Newburgh and Ellenville, Margaretville and the small Catskills towns of Cobleskill, Delhi, Oneonta and Stamford. All had proud histories involving community-minded doctors looking to expand their practices to meet the needs of the new home towns, or enterprising community groups grown tired of having to rely on other hospitals a long drive away.

Things started to change, as if a generational shift had occurred. Greene County’s hospital founded as the 20th century started and one of the prides of the area, closed its doors. The Delaware County hospitals, excepting Margaretville, consolidated under the mantle of the Mary Imogene Bassett Hospital in Cooperstown, forming the Bassett Medical Center group of practices and small hospitals. All have been heavily supported by the Clark family of Singer Sewing Machines fame, and still part-owners of their town’s Baseball Hall of Fame. Kingston’s hospitals started running into financial straits. Vassar, in Poughkeepsie, looked to grow. St. Luke’s, in Newburgh, began looking for white knights.

“Ellenville Hospital was forced into bankruptcy in 1999. That’s when I first got involved,” said Steven Kelley, that old community hospital’s CEO and President ever since, as an example of changes that have rocked the world of rural and small city hospitals since the late 1980s. “They owed $379,000 to Kingston Hospital and I represented the latter in Kingston bankruptcy court. Ownership and management was turned over to Westchester Medical, which was also running Kingston Hospital and Margaretville.”

By the early 2000s, Kelley continued, new problems arose. By 2003 he was sent down to Ellenville by Kingston Hospital to take over as manager, and within months another bankruptcy was in order. As he explained things, Westchester Medical was “jettisoning risk,” facing a situation where they’d eventually go partly private for funding purposes, where before they’d been owned outright by Westchester County. Kingston, too, had enough of its own problems and didn’t want to maintain its stake in the southern Ulster hospital.

“I worked out a deal and we became a private hospital,” Kelley said.

His story, it turns out, was quite unique compared to other hospitals.

Margaretville, founded by an enterprising doctor in his own home a century ago, tried growing to accommodate new equipment and other needs by building a nursing home. But finally, they joined Kingston, and stayed. Catskill closed. Northern Dutchess Hospital, in wealthy Rhinebeck, joined forces with Vassar’s new consortium, currently called HealthQuest, and doubled the number of its beds over 15 years from under 50 to over 100. In Kingston, Assemblyman Kevin Cahill helped pull in millions to achieve a merger between Benedictine and Kingston hospitals, which were then swallowed by a resuscitated (and newly privatized) Westchester Medical Center.

“Down in Ellenville we struggled. I created a reorganization plan for bankruptcy that was complicated, with little chance for success, but that allowed us to get out of our dealings with Westchester, the county legislature passed on ownership of the facility to us, and I then went to the feds to have our status changed to Critical Access Hospital,” Kelley continued. “Plus we started cutting our losses year to year… from $6.8 million to $1.95 million in one year.

The conversion from a PPS or Prospective Payment System method of Medicare reimbursement in which payments are made based on a predetermined, fixed amount to Critical Access, which allowed for a 100 percent reimbursal rate, Kelley added, was all he needed to push for successful independence.

“Given that 40 percent of our income mix comes from Medicare, that gave us enough of a leg up to survive,” Kelley said of his stewardship at what is now called, a decade later, Ellenville Regional Hospital. “We’ve created efficiencies in every department, halving the length of stay in our emergency room while doubling our volumes everywhere.”

Helping things have been general shifts in medical treatment, starting with big shifts in anesthesia and surgical procedures that have cut into the need for overnight stays, and hence hospital beds. Plus a push to “partner with everybody.”

“We’ve had to change the paradigm from being a competitor to becoming a customer that needs help to survive,” Kelley added. “Remember that the first rule of business is to take care of your customers. We work with Health Alliance, HealthQuest, everyone…”

Kelley went on to speak about other smaller hospitals in the Hudson Valley and Catskills, most of whose leading managers he’s known for years, but all of which now handle their media relations through their larger medical groups, be they in Westchester or part of the fast-growing HealthQuest network. He gave a shout out to Denise George at Northern Dutchess Hospital, who has helped fuel growth by playing off the attractions of the hospital’s location for recruitment purposes, drawing top staff from elsewhere. Ditto Sharon Hospital, in north east Connecticut by servicing the wealthy eastern Dutchess County area, and the new stability at Bassett’s various hospitals, nursing homes and clinics, buoyed by both the Cooperstown-based hospital’s reputation as a medical school, and Bill Streck’s reputation as a manager who was brought back after retirement to keep his achievements moving forward.

Management, the CEO/President at Ellenville Regional said, is a key component of a modern small hospital’s survival. He pointed to the 19 CEOs who came in and left at St. Luke’s in Newburgh as it joined with a similar small hospital in Cornwall-on-Hudson and eventually settled into the larger embrace of The Bronx’s huge Montefiore system. And the ways new affiliation with Albany Medical Center helped Columbia Memorial, in Hudson, start reopening offices at the old medical center site in Catskill, builds hope that Greene County might again host its own hospital.

Yes, the beginnings of our small rural and small city hospitals here and elsewhere in the United States were noble, altruistic, and community-minded. But so are the advances that have allowed today’s surviving small hospitals to not only survive but thrive within today’s high tech world of medicine, be it through mergers and consolidations into larger, more stable and deep-pocketed networks, or the sharing of services and “paradigm changes” Kelley’s utilized in Ellenville.

Only rarely can you lean on a community for the majority of a hospital’s financial support, he said. The stakes are too high, and the pressures on many rural towns and villages too great. The future holds new financing packages, Kelley said, based on political protocols that keep shifting attention from urban to rural needs, as well as whatever winds are blowing through our insurance packages, private and public.

The key is to calculate what works, then work it.