Case Study: East Chestnut Regional Health System
Sample Paper
Within the last ten years, East Chestnut Regional Health System (ECRH) was formed by merging three organizations: East River Medical Center, Northern Mountain Hospital Consortium, and Archway Hospital.
East River Medical Center (ERMC)
ERMC is the anchor hospital for the system. The medical center resides along the east side of the Chestnut River. Historically, ERMC was recognized as the location of choice for medical care. However, this reputation has deteriorated over the last 3 to 5 years. As the city of Chestnut has grown, ERMC has found itself on the edge of an urban blight.
Safety concerns patients, visitors, and physicians who use and serve the medical center.
The technology offered at the medical center has been maintained at an excellent level of proficiency. At the same time, the medical staff is aging, with the average age of the physicians being 57. There are younger primary care physicians who serve the specialists, but the specialists are also aging. ERMC boasts a Level 1 Trauma Center with air service. The total number of licensed beds for ERMC is 550. On any given day, the occupancy rate is 300 heads on the beds.
Northern Mountain Hospital Consortium (NMHC)
NMHC was initially formed in response to the migration of patients to Chestnut. Due to the relatively aggressive strategies carried out by the hospitals in Chestnut, these rural hospitals decided to create a consortium of rural hospitals so that they could gain economies of scale in several areas, which include group purchasing, benefit administration, and physician and staff recruitment.
Additionally, they worked together to stem any further deterioration of their market share. Patients were selecting to go to the larger community for services and leaving the smaller communities that collared the Chestnut metropolitan area. NMHC represented individual hospitals in four counties that circled Chestnut County: Walnut,
- Butternut, Oak, and Maple. Walnut and Butternut Counties had good employment with Oak and Maple Counties being mostly rural.
- In each county, the inpatient facilities averaged about 20 years of age. The upkeep of these facilities has been sketchy.
No facility needs any major upgrades, but modernization is needed. The state does not have a Certificate of Need (CON) process. The medical staff makeup varies each location. The hospitals in Oak and Maple Counties are critical access hospitals. Further details will be provided regarding these organizations later in the case study.
Archway Hospital (AH)
AH is located directly in the community of Chestnut. It fully resides in the urban area of the community. The hospital has 200 registered beds, but on any given day, there are only 50 to 75 patients in this facility. This hospital was a Doctor of Osteopathy (DO) hospital; therefore, most physicians working out of this facility were DOs.
The payer mix for this hospital was heavily burdened with Medicare and Medicaid. This payer mix composed nearly 85% of the reimbursement. The facility is aging and needs considerable repairs. It is questionable if it will be worth the investment in this facility.
Leadership And Organizational Culture
The original merger that created the East Chestnut Regional Health System (ECRH) occurred 10 years ago. This merger was between ERMC and AH. AH had a rather dynamic leader who was about 57 years old at the time of the merger.
After the merger, the AH CEO became the new President and Chief Executive Officer of ECRH. Since this CEO had only worked in a smaller organization, he had not experienced the cultural changes and demands that occur after the merging of a large organization. Additionally, he began to change the organization’s culture such that decisions were made on a decentralized basis. He trusted the management team at AH to do the right things and make the right decisions with inadequate supervision.
However, the Chief Operating Officer (COO) put in charge was originally from AH but left 2 years after the merger with a new COO being put in place. This COO developed a rather poor reputation and was known to want to build his own empire at AH and be dishonest sometimes. This reputation created a culture within the traditional AH that lacked a cohesive team effort to create a system. This positioning of the COO was left unattended by the President and CEO of ECRH since he was actively pursuing the acquisition of NMHC.
The hospitals of NMHC were doing okay, but those in the consortium realized that their ability to stand alone was becoming difficult in today’s market. When the leadership of the consortium assessed the call as to a partnership, they decided that ECRH would be the best choice. The other option was to develop a for-profit hospital in Chestnut. The leadershi