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Wishard considers new hospital

September 17, 2007

Matt Gutwein and Lisa Harris drive into work each morning knowing that their hospital, Wishard Health Services, will lose half a million dollars that day.

But they're OK with that. In fact, they're laying a plan to keep it up for the next 20 years.

Looming large on their to-do list: building a new hospital.

An entirely new facility is only one option among many. But Gutwein acknowledged that to continue Wishard's recent success at cost-cutting and efficiency gains, it must build a facility that requires less maintenance and is designed for more efficient care giving.

"Of course, we'll build a new Wishard hospital at some point. Because every hospital wears out," said Gutwein, CEO of the Health and Hospital Corporation of Marion County, the tax-subsidized entity that owns Wishard. "But do you do that five years from now, 15 years from now, 30 years from now?"

It's clear Wishard needs a new facility right away, said local health care experts. It operates from an amalgamation of 15 buildings, the average age of which is 55 years. The oldest dates to World War I.

Older hospitals are more difficult to wire for today's computer technology and, because they pack two patients per room, require patients to be moved around more often to receive care.

Also, older buildings' heating and cooling systems are energy-inefficient compared with modern hospitals.

"Do you feel the temperature difference?" said Harris, turning from one cool hallway to a markedly warmer one as she walked through Wishard earlier this month. Harris is CEO of Wishard and its chief medical officer.

The challenge for Wishard, of course, is money. A new hospital the size of Wishard---which has 1.4 million square feet at its downtown campus at 10th Street and Indiana Avenue--would likely cost more than $500 million, said Don Altemeyer, principal of BSA LifeStructures, an Indianapolis-based health care architecture firm.

"This is a project that we need," he said, adding, "They are our lifeline facility for a lot of people."

Wishard's health care business always will lose money because its mission is to care for the indigent of Indianapolis. Just 9 percent of Wishard's patients, who made 1.2 million visits last year, paid with private insurance in 2006.

On average, public hospitals similar to Wishard had nearly 20 percent of their patients pay with private insurance, according to a 2004 survey by the National Association of Public Hospitals and Health Systems.

More than a third of Wishard's patients were uninsured. And nearly half paid for their care through Medicaid or Medicare, which many hospitals say does not cover their costs.

But Medicare does cover costs at Wishard, Gutwein said. That's because the hospital has been relentless at cutting costs since the Health and Hospital Corp. sustained a $77 million deficit in 2002. It posted surpluses greater than $20 million each of the last two years. This year, it's on pace for a surplus of $7 million.

While Wishard loses money, the Health and Hospital Corp. makes up for it with $45 million in local property tax revenue, about $90 million in federal funds for hospitals that serve a "disproportionate share" of indigent patients, and a few other sources.

Since Gutwein became CEO in December 2002, Health and Hospital started running a network of 24 long-term-care facilities, which bring in additional revenue. He also beefed up the corporation's grants team, which Gutwein calls "an army" that "scours the federal registry for new sources of money."

On top of that, Gutwein and Harris have made sure Wishard is more effective collecting whatever it can from its patients.

Because their work has paid off, Wishard is looking at what it can afford to do on a variety of fronts, including attracting physicians, boosting health in the broader community and, yes, building new facilities.

Wishard's options include an entirely new facility on a new site, slowly replacing old buildings with new ones on its current site, doing a combination of replacement and renovation, or simply trying to renovate its buildings as long as it can.

Gutwein said Wishard's leaders have reached no conclusions and declined to say when they would.

If Wishard were to build an entirely new building, it would need to run an annual surplus of at least 4 percent, or about $16 million, estimated Lynne Fagnani, senior vice president at the National Association of Public Hospitals. Otherwise, Wishard wouldn't have enough cash flow to pay interest on the public bonds it would sell to finance a new building.

"There's no question you need to make the investment. The question is, can you get your bottom line in shape to repay debt service?" Fagnani said. Even then, a financially healthy public hospital can be tripped up if the Medicare and Medicaid programs, or local governments, suddenly cut back payments.

Gutwein said Health and Hospital is looking at funding options. The only one it's not considering: asking for a hike in property taxes.

If Wishard built a new facility, it would need to stay downtown because Wishard's physicians come primarily from the Indiana University School of Medicine, which is on the campus of IUPUI.

Gutwein, in an e-mail, said Wishard is committed to staying on the IUPUI campus and near the medical school.

"That location, in my judgment, would be in the best interest of our patients, our physicians and staff, the School of Medicine and the life-sciences initiatives," he wrote.

Healthier finances

While Wishard's patient revenue has risen 23 percent since 2003, its expenses are also rising as it provides more care. Expenses at the hospital have jumped about 15 percent in the same period.

So Wishard has worked to save money wherever it can.

It trimmed staff by 600 people through attrition and a few pink slips. That saved about $20 million a year.

It has added more positions back as its finances have improved. It now employs nearly 3,400 full-time-equivalent workers. It also boasts an active physician staff of 981.

Wishard formed teams in various departments to find ways to save money. The team in the medical-surgical section found it was ordering four kinds of cups for its staff and patients to use. So Wishard cut out two varieties. That saved $78,000 a year.

The orthopedic surgeons working at Wishard did something similar. They reviewed the many brands of otherwise identical implants they stocked and decided on one departmental favorite for each kind of implant. That saved Wishard from spending to stock a favorite for each surgeon.

General surgeons also pitched in. They juggled their surgery schedules more to reduce down time and squeeze in more procedures. In addition, the surgeons made sure to start their first surgeries on time, at 7:30 a.m., and Wishard's staff changes over an operating room in 30 minutes, versus 90 minutes before.

"We have so much energy [in the staff]," said Harris, sitting in her fourth-floor office, her white lab coat draped over her desk chair. Harris, who spent her entire career at Wishard before becoming CEO, still sees patients one afternoon a week.

Wishard has added 50 inpatient beds in the last four years and has gradually bumped up its bed occupancy to 98 percent. Most hospitals have occupancy rates around 80 percent, Gutwein said.

Wishard has spent almost no time this year "on diversion," a state where its beds are full and it has to divert ambulances to other hospitals.

"It's like stuffing more people in the Volkswagen," Gutwein said.

Dr. Kirsten Kaisner-Duncan, Wishard's chief of medicine, said the many changes went down well with staff because Harris did an excellent job of communicating. At monthly meetings of department chiefs and quarterly employee meetings, Harris informed Wishard's staff of the hospital's challenges and management's plan for meeting them.

"What kept the morale up, actually, was her communication. There was a degree of transparency," Kaisner-Duncan said. "We felt like we were being given the facts and we were being given a game plan. We knew that if we didn't tighten our belts, there wouldn't be the means to support the [hospital's] mission."

Now that the means are there, Wishard's leaders have spent the last 18 months crafting a plan to make sure it is never in such dire financial straits again.

The plan has several goals, which Gutwein and Harris say all link together: Deliver the best care, improve community health, engage employees, attract and keep physicians, strengthen learning and research, pursue focused growth, improve overall performance.

For instance, Wishard has started to buy up housing facilities and provide space for homeless patients. It's cheaper to pay for housing and provide regular care to these patients, instead of treating them when they come into Wishard's emergency room with a crisis.

A final goal reads, "Provide a modern care environment." That's where the discussion of a new building comes in.

"We're not sitting around thinking about, 'Gee, let's build a new hospital,'" Gutwein said. However, he added, "It's a mind-set of the organization to get out ahead of the problem."

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