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From
red to black ink - the "poor house" hospital
turns around
by Page Boinest Melton
Thomas J. Orsini knew right away what
was wrong with Lake Taylor Hospital when he arrived
as the CEO two years ago this month. "The problems
were right in front of me - starting with all the beds
that didn't have people in them." The hospital,
owned by the city of Norfolk, had dizzying staff turnover,
uncollected bills, and losses topping $1 million a year.
Hope seemed dim: The 111-year-old, nonprofit hospital
had an unshakable reputation as the "poor house"
hospital, caring for largely low-income and critically
ill patients. "It was the place people came to
die," recalls Dr. Claude Smith, chair of the Hospital
Authority of Norfolk, which oversees Lake Taylor.
Today, a thoroughly resuscitated Lake
Taylor bursts with signs of life. Boasting a nearly
17 percent operating margin, the hospital is now in
the black by $1 million a year. In fact, it's one of
the most profitable hospitals in the state at a time
when other hospitals are navigating financial upheaval.
Staff turnover has stabilized with a respectable 55
percent retention rate - no small feat since the facility
deals with traditional money-losing treatments for the
elderly, severely disabled children and critically injured
of all ages.
As its reputation improves, Lake Taylor is doing more
business with local hospitals to fill its 296 beds.
Lake Taylor's rags-to-riches Cinderella tale is "one
of the great success stories for the city in recent
memory," says Norfolk Mayor Paul D. Fraim. "Not
only are they making a profit, the hospital has become
a great source of pride." Not bad for a facility
once so ridden with debt that city officials considered
bulldozing it.
The mayor and others credit the turnaround
to Orsini, a 47-year-old teddy bear of a man who dispenses
hugs, morning donuts and first-name greetings to patients
and staff. Yet behind the twinkling grin there's a ruthless
devotion to the bottom line. Orsini imposed strict fiscal
discipline and checkbook-style budgeting, a novelty
to the hospital's management staff. He tracked down
outstanding accounts receivables, some 15 years old.
Orsini retooled staffing schedules to keep more nurses
and aides on board, expanded group purchasing and built
an on-site laboratory. "It was basic business management,
proprietary thinking applied to a nonprofit," says
Lake Taylor Admissions Director Kim Limbaugh, who like
most of Orsini's new hires comes from for-profit backgrounds.
Orsini's single mission is reversing a mindset that
Lake Taylor is a place where patients come to die. The
new philosophy has a simple mantra: "You come here
sick, you get better, you go home." The idea is
to move patients steadily through a "continuum"
of care toward their eventual release. In November 1999,
the hospital admitted just five new patients a month
and discharges were rare. Now Lake Taylor admits 60
new patients a month and discharges 25 a month to home
care or a lower level of care.
The new strategy helped attract a more
profitable patient mix. Like many urban hospitals, the
majority of Lake Taylor's patients include a high percentage
of Medicaid population patients - 60 percent - as opposed
to Medicare and privately insured patients, which pay
higher reimbursements for the same procedures. Orsini
won a 50 percent increase in the hospital's rock-bottom
Medicare discharge rates. Then he worked to attract
more Medicare patients, partly by focusing on rehabilitative
services. Now 20 percent of its patients are covered
by Medicare, up from just 3 percent two years ago. "We
knew what we were going to get paid for," Orsini
says. "We needed to look at admissions, because
it was like a 300-table restaurant with 150 tables taken."
A marketing campaign complements the change in the hospital's
patient mix. After a management review recommended creating
specialized "niches" to attract patients from
local hospitals, Lake Taylor added a "ventilator
weaning" program that moves ill patients off respirators
for eventual discharge. In the last year, 79 percent
of the patients in the program moved off ventilators
- a new way of thinking for the hospital that once kept
most ventilator patients indefinitely. Other new amenities
include a gym, intensive therapy programs and a furnished
apartment that helps prepare patients suffering from
strokes or injuries for life after the hospital.
Lake Taylor's "niche" strategy makes sense
because local hospitals need some place to send patients
who no longer need acute care but who aren't ready to
go home. "The pressure is on all hospitals to move
patients through as quickly as they can, which creates
a market niche for sub-acute providers," says Robert
Hurley, an associate professor of health care at Virginia
Commonwealth University's Medical College of Virginia
who studies the health care market. Local hospital systems,
like Bon Secours Hampton Roads, are referring more patients
because they see results. "Lake Taylor's successful
turnaround is directly attributed to their clinical
excellence in respiratory therapy and ventilator management,"
says Dr. Stephen Moore, the system's executive vice
president for care delivery. "Those programs have
exceeded our expectations in successfully weaning ventilator-dependent
patients."
That Lake Taylor found a profitable
game plan is somewhat of a novelty. Health care is reeling
from the impact of the Balanced Budget Act of 1997,
which cut Medicare reimbursements and piles on problems
for hospitals buffeted by rising drug and labor costs.
Operating profit margins are flattening out at U.S.
hospitals, to 3.69 percent on average, says Illinois-based
Solucient, a health care market research and intelligence
firm. "A margin of 3 percent or 4 percent really
isn't sustainable longer term," says Solucient
President Gregg Bennett. In Virginia, operating margins
are even slimmer, a "worrisomely thin" 2 percent,
says Chris Bailey, senior vice president of the Virginia
Hospital and Healthcare Association. "Virginia
hospitals and health care systems on average have seen
substantial declines in financial health." Lake
Taylor, he says, is "certainly going against the
trend."
Bucking the profit trend, Orsini also works to keep
the best of his staff happy and involved while hospitals
nationwide face serious staff shortages. Even in the
belt-tightening, Lake Taylor added more than 30 full-time
staff jobs, increased flexible scheduling, allowed staff
to work in areas they chose and created a mentoring
program. The changes help address a critical labor issue
for long-term care facilities: They are challenging
places to work because patients often face long recoveries.
"Sometimes you have to wait a long time for someone
to take a step, to feed themselves," says Jan Johnson,
executive director of the Virginia Nurses Association.
Staff in such facilities "need a certain mindset
to deal with that."
Orsini credits the success to the hospital's staff and
to the autonomy he enjoys as an administrator in a stand-alone
hospital - an increasing rarity in the move toward health
systems. Having worked most of his 22-year career in
Hampton Roads for the Arkansas-based Beverly Enterprises
Inc., the nation's largest nursing home chain, Orsini
relishes his freedom from highly structured corporate
settings. He meets regularly with staff members for
feedback and personally recruits people he wants working
for him. Running an independent hospital gives him some
space. "I am able to make changes. If I want to
zig, I zig - I don't need three levels of OK to make
it happen."
Look for more zigs as Lake Taylor heads
into its third year with Orsini at the helm. With land
available on the Norfolk site, he envisions building
assisted- and independent-living facilities. He hopes
to start at-home care services, because now other hospitals
provide follow-up home visits to patients discharged
from Lake Taylor. He wants a separate unit for severely
disabled young adults and will ask the General Assembly
to approve a new state Medicaid designation to help
pay for it. And the hospital will keep working on its
image - not surprising for Orsini, who twinned an undergraduate
degree in journalism and public relations from Temple
University with graduate work in public administration
at Penn State. While Lake Taylor is a local success
story, few outside of Norfolk are familiar with the
turnaround. This month the hospital changed its name
to Lake Taylor Transitional Care Hospital to stress
the new "get-well" philosophy and to avoid
confusion for patients looking for an emergency room,
which it doesn't have.
Whatever changes Orsini pursues, expect him to emphasize
maintaining a healthy bottom line, because that's what
was ailing Lake Taylor in the first place. After all,
the Orsini credo of "you come here sick, you get
better," doesn't just apply to patients - it's
working for his hospital as well.
Return
to Virginia Business - November 2001
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