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Prescription for success.

Prescription For Success

Southwest Hospital of Little Rock will celebrate its third birthday March 1. Like most three-year-olds, after a wobbly year or two, the hospital has learned to get around quite well, thank you.

This, despite the chorus of naysayers who thought another hospital couldn't cut it in the competitive Little Rock health-care market and plenty of headlines touting Southwest's red ink. "Every trend line, every statistic has moved up," says 31-year-old CEO Tim Hill. "Surgical activity, emergency's across the board. We're ahead of our five-year plan."

Losses have gone from $7.5 million in 1988 to only $2 million in 1990. And while Hill says the hospital is already "cash flowing," he adds, "we have every opportunity, a good possibility, of hitting breakeven this year."

Southwest is the first to admit it hasn't been easy.

Yes, there was a question of credibility and consistency; there were five top administrators in three years. Yes, there was a lower level of care initially; it was tough to recruit personnel, and the hospital depended heavily on temporaries.

Yes, vendor relationships suffered as payments lagged and yes, an inpatient substance abuse program was closed because it didn't meet expectations.

But no, these problems do not persist and the hospital is out to prove it - with the youngest CEO in central Arkansas.

"Every day we open the doors, we'll change an opinion," says Jim Limbird, director of marketing.

And that's what it takes to crack open Little Rock's highly competitive hospital market, a market that Limbird describes as among the toughest in the country to make a buck.

Slicing The Little Rock Pie

Can Little Rock support another hospital? Can another facility make money?

Jim Teeter of the Arkansas Hospital Association says metro area hospitals today are "still in the black, but that ink is getting grayer all the time." However, he adds, "There seems to be room for everybody."

Trying to determine the average amount of time it takes a new hospital to break even, everyone hedges because there have been so few startups in recent years.

"It's a different day and age; starting one then and now just can't be compared," says Teeter.

"Most hospitals built today are actually replacement hospitals or represent a consolidation of smaller facilities," says Cal Knight of Safecare Health Services Inc. in Seattle, Wash. Safecare financed the Southwest project and manages it today.

Knight says his company isn't concerned about the hospital not breaking even until now. "It's terrific, given the enormous capital investment that had to be made."

One industry insider says three or more years to break even is not surprising. "Southwest will have to develop a community identity and it takes that amount of time."

The ability to make money seems as tied to Medicare's reimbursement policy (the Diagnostic Related Group system was introduced in the mid-80s) and the insurance companies' cost control efforts as to competition.

"Today's a totally different climate than pre-DRG's," says Lynne Matthews of Doctors Hospital. Doctors, opened in 1975, was the new kid in town until Southwest came along.

High Tech, High Touch

Southwest CEO Hill believes the hospital's success is hinged on its "high tech, high touch" approach.

"The competency of services available in Little Rock is comparable; the difference is in how you treat somebody. We've personalized it," he says.

As proof, he offers that every patient receives a carnation and a daily newspaper, and three days a week hospital volunteers make "yogurt runs."

Emphasizing the point, on the day of Hill's interview a "Welcome Arkansas Business" sign sat on the expansive front desk.

Every patient is visited by "Dr. Pete" (Dr. Peter Thomas), a retired physician, who at almost 76, makes a wise director of medical affairs and charming goodwill ambassador.

By the way, Limbird says, "everybody's on a first-name basis here. Tim's the CEO; Harry's the maintenance man."

Another of the extras Southwest offers its guests is all the television channels of basic cable. Don't laugh: Limbird tells of one woman who convinced her husband they should have their baby at Southwest because he could watch ESPN.

Can A Hospital Have Ambience?

"We decided if we're going to do this, let's do it right," says Hill. That attitude shows in the facility and the equipment. It's been said, and it's true, that the lobby area feels more like a luxury hotel than a hospital.

The color scheme is mauve and green; the floors are faux marble, and there are brass light fixtures above the elevators. But appearances alone are not what attracts patients, doctors or administrators to a facility.

Hill acknowledges that consistency and stability have been major issues for Southwest. The first administrator left about six weeks before the hospital opened.

"It made people wonder who they'd be talking to," says Hill.

Hill is changing the trend; he served in an interim capacity for a year and was made permanent about nine months ago.

Consistency was not only an issue in administration, but in the level of care.

"People wanted to provide it, but they hadn't been together long enough," says Limbird. Temporaries and pool personnel were relied on heavily until staff could be recruited.

While these people are skilled, says Limbird, it hurts the building of routines and relationships. Today, the use of temporaries is down from close to 50 percent to less than five percent.

Southwest says it's actively nurturing relationships with doctors. One industry observer says the competition is not so much for patients as for skilled personnel.

Two of the eight Southwest board members, or 25 percent, are practicing physicians. It's the highest percentage in the city, claims Southwest, and they believe it shows their commitment to the doctors.

"Patients go to doctors; doctors go to hospitals," says Limbird.

Another initial problem was poor relationships with vendors. Management admits to being 90-120 days behind on paying accounts at one time. As cash flow improved, and CFO Ed Niday took control, Southwest says the situation reversed.

"We're as current as any hospital in the city on paying vendors," they say.

In fact, they joke their ad agency became concerned the hospital was about to jump ship when it started mailing in checks without being prompted.

Another factor in the improving profit picture is the closing over a year ago of New Beginnings, a 28-bed substance abuse program. When the wing didn't meet expectations, due in part to intense competition, Southwest converted the emphasis to a skilled nursing care facility for recuperative care.

"There's a shortage of these beds in Little Rock," says Limbird, and the new emphasis is paying off.

Tracking the Hospital's History

Rather than pump dollars and efforts into updating the old Riverview or Missouri-Pacific Hospital built in the 1920s, the decision was made in the 1980s, to transfer its certificate of need to a new facility.

"The only change was in the DBA," says Hill.

St. Louis-Little Rock Hospital Inc. still owns the hospital. However, the governing board is no longer a railroad board, but more of a community board. This change was made at the request of Safecare.

There was a $38.5 million bond issue to help finance the new hospital. Hill says the hospital's debt structure is five times the industry average now, and if that weren't the case, it would already be at breakeven.

Principal payback on the bond issue begins later this year, but those amounts are already in the forecasts, says Hill. He predicts the hospital will continue to turn out healthier financial statements.

"We're not concerned at all," says Safecare's Cal Knight.

PHOTO : YOUNG AND EAGER: Southwest Hospital CEO Tim Hill, 31, is the fifth head administrator in three years, but he says startup problems are resolved at the new hospital. The facility is headed solidly for the black sometime this year, Hill says.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:plans to reduce financial woes of Southwest Hospital of Little Rock
Author:Ford, Kelly
Publication:Arkansas Business
Date:Feb 11, 1991
Previous Article:Snacking their way through the recession.
Next Article:Industry fights back.

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