Why It’s Time for Laurel Regional Hospital to Change
Recently, the board of directors of Dimensions Healthcare System (DHS) made a decision to change the delivery of health care at Laurel Regional Hospital (LRH). The change from an acute care hospital to an ambulatory care center aligns with changes taking place in the health care industry nationwide.
For more than 10 years, LRH has operated at a deficit. This year, that operating deficit has increased dramatically. Currently, the daily loss at LRH averages nearly $50,000 with a yearly loss anticipated to be between $15 and $20 million.
No business could survive these losses for long. Even worse, current projections showed losses reaching nearly $22 million in the coming years. No community wants to lose a full-service hospital; however, since 2010, more than 300 hospitals nationally have been closed or have been operating in persistent danger of closing, according to a study by iVantage Health Analytics.
A major factor in these closings has been a nationwide reduction in inpatient hospital admissions. This reduction is in line with the health care industry’s focus on improving outpatient preventive care to enhance population health and reduce unnecessary hospital admissions. Consequently, fewer people are being hospitalized. This has contributed to a nearly 30% reduction in inpatient admissions at LRH since 2005. There are other factors as well. For example, less than 10% of the population in the hospital’s service area actually uses the facility. The remaining 90-plus% seek hospital care elsewhere. Personal choice, physicians referring their patients elsewhere and more specialized care at other nearby competing facilities have been contributing factors. These reduced inpatient volumes are not sustainable.
Dimensions Healthcare System is a private, nonprofit corporation. As the governing body of the organization, it is the responsibility of the board of directors to make decisions that result in the financial viability of the entire corporation.
Therefore, we retained a highly-respected health care consulting firm to independently and objectively advise management and the board on the best approach to eliminating the mounting losses while providing health care services that best meet the needs of the community in the current health care environment.
As a part of this process, we explored a range of options. With the exception of the ambulatory care center coupled with a state-of-the-art emergency room, all of the options failed to be financially viable. The “least” expensive option was projected to lose $7 to $9 million annually.
On the other hand, the proposed ambulatory care center is projected to perform at better than break-even annually. We believe an investment of $24 million in this new ambulatory care center will better serve the Laurel community and align with the new health care environment while achieving financial sustainability.
DHS has received state and county financial support for a number of years. As good stewards of the public’s money, we had little choice than to address the increasing financial losses.
We recognize that not all will agree with our decision. However, this was in no sense of the word a political decision, but rather an objective business decision that saves literally tens of millions of dollars and provides quality health care services in a better and financially sustainable way.
Our hope is that this decision will be viewed by the employees, community, elected officials and other stakeholders as a prudent and necessary business decision that is intended to better serve the Laurel community, Prince George’s County and the state of Maryland.
— The Executive Committee of the Dimensions Healthcare System Board of Directors: Philip Nichols, Chairman; Tawanna Gaines, Vice Chairman;
Barbara Frush, Member; Andrea Harrison, Member;
Bradford Seamon, Member; Benjamin Stallings, M.D., Member