Local health market growing: Area sees surge in mergers, partnerships, new projects as competitors and collaborators strive to serve

mmorgan@centredaily.comFebruary 9, 2014 

CEO Steve Brown’s Mount Nittany Medical Center sits on a hill, surrounded by a shifting landscape of health care mergers and acquisitions.

The facility has industry giants — competitors and collaborators — in its halls and operating rooms and just outside its borders.

Mount Nittany’s main medical facility in College Township has doubled in size in recent years, a tribute to the growth in health care. Mount Nittany Health now operates 15 facilities serving more than five counties.

At the same time, neighboring hospitals have forgone independence to join with larger health systems, with Geisinger Health System taking over Lewistown Hospital, Altoona Regional connecting with the University of Pittsburgh Medical Center system, and Huntingdon’s J.C. Blair Memorial Hospital is in negotiations with Pinnacle Health of Harrisburg.

Brown believes Mount Nittany’s strength comes from embracing the opportunities for collaboration while building a foundation as an independent care provider. He said the hospital remaining independent in the changing industry landscape is in the best interests of the community.

“The real message is not who you’re associated with,” Brown said. “It’s what can we do in this town? What can we do for your family?”

‘Keep up with technology’

While staying independent is important for Brown, the industry is trending in the other direction.

Large health care systems are scooping up smaller hospitals left and right, merging them into their systems. With Geisinger in Lewistown and UPMC taking over in Altoona, the market is closing in around Centre County’s leading primary provider.

As time moves forward and larger health systems gobble up more of the market share, the small independent hospitals could be in for some trouble, said Raymond Nungesser, Geisinger regional medical director.

“The smaller institutions that don’t have relationships with someone, they have been vulnerable,” he said. “When they become vulnerable, they don’t keep up with technology, so they can’t treat patients as they ought to.”

It all comes down to the size of the checkbook, Nungesser said.

Because Geisinger can bring more money into the hospital, Lewistown was able to upgrade its equipment across the board, increasing the quality of care, he said.

But he added that there is room for everyone in the central part of the state. Mount Nittany Health can still serve the majority of patients in Centre County, while Geisinger-Lewistown serves Mifflin and Juniata counties.

Geisinger also planned to open its $42 million, 80,000-square-foot addition to its Gray’s Woods facility in the first week of February. The expansion will act as an outpatient ambulatory surgery center, increasing the company’s available options locally.

The expansion project will result in four operating rooms, Geisinger reported. The center will allow Geisinger to consolidate local surgical specialties in one location, moving some services there from the system’s Scenery Park site.

‘See those consolidations’

If a hospital remains independent in the current market climate, leaders are likely at least looking to see what larger providers have to offer, said Jerry Murray, president and CEO at Altoona Regional Health System, now with UPMC.

“Everybody, especially hospitals that are 100 beds or smaller, are looking hard at developing their strategies,” he said. “We’re going to continue to see those consolidations. I doubt there’s a hospital in Pennsylvania right now that’s not considering its options.”

In both Lewistown and Altoona, the acquisition occurred in the last year.

Penn State Hershey, which has had talks with Pinnacle Health, also is looking to make a bigger splash in the Centre County market. As mergers occur all around, it’s important to listen, said Kevin Black, vice dean of the Penn State Hershey Regional Medical Campus.

“It is tremendously complicated,” he said. “There have been more discussions about relationships in the past three years than I had seen in the previous 25.”

Mount Nittany, a 260-bed facility, has been able to last and thrive in the current climate, and Brown doesn’t expect that to change.

Mount Nittany has formed relationships that have put the medical center in a solid position moving forward, Brown said, despite the industry giants moving around him.

“I don’t see any takeovers (of Mount Nittany). I don’t see any mergers,” Brown said. “But I do see the wisdom in affiliations. The longer we can stay independent, if you will, and provide the best of what they all have to offer, that’s the best situation.”

‘Ongoing growth’

The health care industry is booming.

In the past five years, Mount Nittany health system has gone from 1,376 employees to 2,120. Mount Nittany has increased its number of beds and doubled the number of combined inpatient and outpatient surgeries it completes yearly.

The $180 million in capital investments at the hospital include a new wing with patient rooms, the Lance and Ellen Shaner Cancer Pavilion and, most recently, construction of new operating rooms that are expected to be completed by March.

Off-site projects include the Sieg Neuroscience Center for sleep medicine and neurology services on Old Gatesburg Road, Ferguson Township; the Centre County Children’s Advocacy Center and expanded pediatric facility in Spring Township and a large expansion of the Mifflin County practice in Reedsville.

Mount Nittany officials also are searching for land for a new clinic in Penns Valley in the coming months. Brown said there is additional demand in that area, and the system needs a facility that is about twice the size of the current site of Penns Valley Area Family Medicine on Route 45 in Penn Township.

The health system’s revenue jumped more than 50 percent from $201 million in 2009 to $312 million in 2013. Mount Nittany officially became a health system in 2011, expanding its reach and the variety of services it offers.

“State College is a very desirable place to retire, a desirable place to raise a family,” Brown said. “The Centre Region is a great place to be. So I see that growth continuing.”

Likewise, Geisinger has increased its Centre County operating revenue by nearly 64 percent from about $47.6 million in 2009 to about $78 million in 2013. It also increased the number of employees in the county from 293 to 403 over that span.

“There’s ongoing growth and demand for our services,” Nungesser said. “We continue to recruit primary-care physicians as well as specialty physicians.”

‘Competition is a good thing’

Growth and increases from both providers creates an increased level of overlapping services, generating additional competition.

Brown said the new Geisinger facility likely will cut into Mount Nittany’s outpatient surgery numbers by about 13 percent, based on the number of procedures done each year at his hospital by Geisinger doctors. But he is convinced Mount Nittany will be able to make up the surgeries with the use of other doctors.

“We’ve been working to line up our Plan B to backfill for that with other surgeons,” Brown said.

But both Geisinger and Mount Nittany officials said the added competition likely will be a plus for the level of care in the community, giving residents more choices.

“I think a level of competition is a good thing,” Brown said. “Without any kind of competition, you could be lackadaisical and when that happens, the care goes in another direction.”

Penn State Hershey and HealthSouth have also experienced growth in recent years.

Hershey’s State College operation has gone from 56 total faculty and staff in 2010 to 168 in 2013 and leaders are expecting to grow to 187 in 2014. Seven local Hershey Medical Center locations incorporate more than 20 services.

HealthSouth Nittany Valley, in Pleasant Gap, has seen growth in both employees and discharges over previous years, Chief Operating Officer and Administrator Susan Hartman said. The parent company has 103 hospitals nationally.

Between 2012 and 2013, the staff increased by 17 to 157 and inpatient discharges increased by 195 to 1,229.

The number of discharges represents double-digit growth for the second consecutive year.

“To have additional growth of 16 percent over the previous year is really phenomenal,” Hartman said.

‘We need hospital beds’

While there is competition for some shared services, the distinct nature of each of the area’s major medical providers creates an atmosphere where there is more collaboration than division.

For Geisinger, Nungesser said that working with Mount Nittany Health is a must because the Danville-based system does not have any inpatient hospital beds in the county.

“We need hospital beds, so we need Mount Nittany to be a strong hospital,” Nungesser said. “Geisinger views Mount Nittany as our hospital.”

A large number of Geisinger physicians work in Mount Nittany, and the hospital sends Geisinger some outpatient referrals.

Penn State Hershey also works closely with Mount Nittany, with a growing residency program for some medical students.

The University Park Regional Medical Campus, which will have 24 students next year, offers real-world experience and helps Mount Nittany and other facilities find more primary-care physicians — because residents usually stay where they train, Black said.

“That represents the consummate win-win situation,” Black said. “It’s a good learning opportunity for our students, and contributes to us supporting the health care needs of central Pennsylvania.”

Brown said Penn State represents one of the biggest partnerships that Mount Nittany has, and those types of relationships give the College Township hospital the stability needed to stay independent.

HealthSouth also fits into the picture as a downstream provider for the region’s inpatient and outpatient facilities, including Mount Nittany, Geisinger and Hershey. Ninety percent of HealthSouth’s patients come through referrals from acute-level medical centers.

Hartman said the coordination among the different facilities has been going well, and she doesn’t expect that to change.

“In our community, right now, from my perspective, everybody is working well together,” she said. “Right now, everyone is supportive of the rehabilitation provider as part of the overall process of care.”

She said the industry as a whole, and rehabilitation providers specifically, need to be aware of changes in the health care landscape and what is happening locally. Penn State making changes to its health-insurance plan for employees could have a ripple effect.

The trend of larger health systems scooping up additional territory is also something to be aware of, Hartman said.

“Our role has always been to work with whatever entity is in each community we serve,” she said. “Over time, we would just hope to be part of the collaboration and cooperation that is happening. I see no reason that shouldn’t continue.”

Affordable Care Act

Local providers naturally are paying attention to new regulations coming down from the federal and state levels.

The biggest of the new laws that impacts medical facilities is the Affordable Care Act, which is being implemented over several years.

Brown said Mount Nittany leaders have positioned themselves to be ready for any ramifications that come with the legislation.

Hospitals are now penalized if patients are readmitted within 30 days for the same medical issue, which is designed to offer incentives for doctors to correct issues the first time.

Geisinger now has a policy to see patients with as quick a turnaround time as possible so any additional problems are detected quickly and addressed, without unnecessary hospitalizations, said Matt Nussbaum, associate vice president for clinic operations in the community practice.

“Medicare has now recognized that readmission rates are too high,” he said. “And if they’re too high, maybe some things are not being done the right way.”

Of the ACA, HealthSouth’s Hartman said: “We’re implementing it as we have to. The requirements haven’t been too taxing so far.”

Hartman said HealthSouth is concerned about a potential change in federal guidelines for reimbursement. Currently, she said, 60 percent of a facility’s work must fall within 13 categories, such as stroke rehabilitation. That could jump to 75 percent.

“Acute-case decisions shouldn’t be made by placing you in a diagnostics bucket,” she said. “That could create access concerns.”

Hartman said health officials are also political lobbyists, meeting often with elected officials at the state and federal level.

“I never thought I would be visiting Washington routinely,” she said. “And as soon as you leave the office, somebody else is coming in. Everybody’s asking for the same thing: Don’t cut me.”

Despite all the prognosticating and precautions, a level of uncertainty prevails.

Medical providers must be nimble enough to adjust to the ever-changing landscape of the industry, Murray said.

“No one knows where this is really going. Two to three years down the road is like a lifetime, it feels like,” he said. “The whole health care industry is undergoing an overhaul.

“And we certainly needed one.”

Executive Editor Chip Minemyer contributed to this report.

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