Affiliation could mean money for hospital

Carson-Tahoe Hospital is trying a different approach with its third affiliation attempt.

"The first time we jumped right to Washoe (Health Systems) and said, 'What can you provide for us?'" said Steve Smith, hospital chief executive officer. "We got sidetracked before. We tried to run when we were crawling. We went to the table and said, 'Give us everything you've got and we'll keep what we've got.' We learned that maybe we are going to have to give something, too."

A wiser, affiliation-minded hospital is looking again toward finding a partner, but not with any of its Washoe County counterparts.

"We have tremendous capital needs and to do everything we want to do, we have to have access to capital growth," Smith said. "We don't have $63 million for construction, so we need to go out and get a big brother." Neither St. Mary's nor Washoe "has the capital to do what we need right now."

The health-care industry is in a state of flux with rising labor costs and cuts to Medicare reimbursements, among other changes that worry hospital officials.

While the city-owned hospital is profitable now, that could change at any moment. Smith said the hospital is in a good financial position to look for its "big brother" now before profits turn or competition comes into the market and dilutes the patient base.

"Doing nothing is the worst thing we could do," he said. "We're a rapidly growing area. If you can't make (an affiliation) work here, you can't make it work anywhere."

Smith estimates the hospital to be worth at least $75 million, and while selling the hospital in the search for a new partner is the least likely option, it's not out of the question.

He said the most likely partnership would be a lease of the county-owned hospital. Under one scenario Smith presented, a partner would take direction from the trustees, pay the city a lease for the facility and manage it.

Other options include selling half of the hospital, with the other half being in city control. A partner must be willing to honor all employee contracts for at least a year to be considered.

Hospital officials hope by affiliating a new partner will have access to some of the funds needed to begin to chip away at a $63 million improvement plan.

Presumably, affiliation with a larger company would allow the hospital access to expanded medical services and potentially lower the cost of health care.

Hospital trustees will decide today whether to begin shopping for a partner.

Trustees recently approved $80,000 to hire a Kaufman, Hall and Associates to help them affiliate as well as to determine how much the hospital is worth.

The search for a partner could take up to a year, but by August the hospital hopes to have found a partner from one of at least 10 companies. They are also planning town hall meetings as the process proceeds to hear what Carson City residents think of the hospital's affiliation attempt.

Typically, an affiliation is an operating agreement between health care providers that excludes either a merger or exchange of assets, although the proposal before trustees doesn't eliminate either a merger or change of ownership.

In 1999 the hospital hired Alan Yordy, an Oregon-based health care consultant, to advise on affiliation talks between Carson-Tahoe, Washoe Health Systems of Reno and Lake Tahoe-based Barton Memorial Hospital.

Barton already has a strong position in the Carson Valley, where about 30 percent of Carson-Tahoe's business is generated.

That move came one year after hospital trustees refused to sign a letter of intent to affiliate with Washoe Health Systems. November talks between the three area health providers ended with the affiliation of Barton and Washoe, leaving Carson-Tahoe officials to mull their standing as the area's primary health care provider.