Attica Memorial Hospital

Bonnie Eng-Srees et al.

Audio by Paper2Audio; with some added context

Additional context

This document contributes to the growing body of literature examining hospital consolidation strategies during an era of significant shifts from fee-for-service models toward managed care and prospective payment systems. It builds upon foundational research into healthcare economics, specifically addressing how institutional mergers function as a survival mechanism in oversaturated markets facing declining inpatient demand. The analysis reflects wider industry trends where hospitals must navigate the tension between maintaining specialized, resource-intensive service lines and achieving the operational efficiencies required to offset shrinking margins. By focusing on the realignment of high-acuity departments like the Ingelson Burn Center, the work underscores the challenges of integrating disparate organizational cultures and clinical capabilities within a unified delivery system. Ultimately, this research provides empirical insight into the strategic trade-offs inherent in the transition from traditional acute care facilities to bifurcated models that emphasize distinct inpatient and ambulatory care pathways.

The Ingelson Burn Center

Introduction

Definition

alliance: In the context of healthcare, an alliance refers to a formal agreement between two or more independent healthcare organizations to collaborate, share resources, or consolidate services, often to achieve greater market share, operational efficiencies, or enhanced patient care capabilities, as opposed to a full merger or acquisition.

In late 2013, Attica Memorial Hospital purchased and absorbed its nearest competitor, Delphi Hospital, in what was termed an alliance. Attica Memorial's plans were to consolidate duplicate services and to realign remaining units. Services unique to the acquired hospital were evaluated to determine if they could survive the alliance. Services not essential to the community or that added minimum value to Attica Memorial would not be supported. The Ingelson Burn Center was a unique service line that Attica Memorial evaluated as part of this realignment.

Background

Attica Memorial and Delphi Hospitals competed for more than 40 years for patients, physicians, and favorable insurance reimbursement. They were nonprofit, acute care facilities in Norton County. They were less than a half mile apart and offered similar services, which created a fiercely competitive environment. Many Attica Memorial physicians had privileges at Delphi Hospital and could admit patients to either Physicians admit to a hospital based on their judgment about the hospital's ability to meet patient needs, the physicians' previous experiences with the hospital, and, to some extent, patient preference. The hospitals competed for resources such as staff and health plan and medical group contracts. Before Attica Memorial acquired Delphi Hospital, health plans and medical groups pitted the hospitals against each other to obtain favorable financial relationships.

Attica Memorial C.E.O Richard Ponti had formed the opinion that "Any contract rate is a good rate," even if the health plan reimbursed the hospital at the state's minimum for an open-heart procedure. When Delphi's parent organization placed the hospital for sale, Attica Memorial saw a strategic opportunity to purchase a long-time competitor and strengthen its position in the marketplace.

The initial plan of the alliance was to have both hospitals as recognizable “Center of Excellence” facilities by completely realigning the services between the two facilities. As a result, Attica Memorial transitioned into an acute care inpatient facility; Delphi became an ambulatory care outpatient pavilion. The original Attica Memorial facility became Attica Memorial East Campus (A.M.H East Campus) and Delphi was renamed Attica Memorial West Campus (A.M.H West Campus). By combining resources with Delphi Hospital, the new Attica Memorial became a stronger, more vital community resource. The new entity could expand its spectrum of patient care by offering new services, more outreach, improved access to care, and an increased focus on quality. Achieving the efficiencies promised by consolidating redundant services, however, required careful evaluation of each department and service line, transfers of personnel, and, inevitably, layoffs.

Macro Environment

Definition

fee-for-service: A healthcare payment model where providers are paid for each individual service they perform, such as a doctor's visit, a test, or a procedure, rather than a bundled payment for a course of treatment or a capitated payment for a defined population.

Before the 1980s, hospitals were unconcerned about reimbursement. They were paid fee-for-service (that is, their charges were paid at full-price, or at rates negotiated with a third-party payer). The 1980s, however, brought dramatic changes to the healthcare environment.

2 Definitions

Definition 1: managed care organizations (M.C.O's): Organizations that provide health insurance and healthcare services through a network of contracted or employed physicians, hospitals, and other providers, with the goal of controlling costs and ensuring quality of care through utilization review, preventive care, and defined provider networks.

Definition 2: Diagnosis-Related Groups (D.R.G's): A U.S. hospital inpatient classification system that groups similar medical diagnoses and treatments together, used for Medicare and Medicaid reimbursement. Hospitals are paid a fixed amount for each D.R.G, regardless of the actual length of stay or services provided, incentivizing efficiency.

These changes were driven by the large increases in the cost of healthcare due to increased costs of pharmaceuticals, aging of the population, advancements in medical technology, shortages of nurses, increases in the number of sicker patients, and large amounts of federal and state money pouring into the healthcare system. In California, this led to development of managed care organizations (M.C.O's). M.C.O's monitor hospital services closely to control costs. Health maintenance organizations (H.M.O's) dictated lengths-of-stay and reimbursement rates for hospitals. This made maintaining or expanding market share in Norton County extremely difficult. In response, demand for healthcare services shifted dramatically from inpatient to outpatient settings. This resulted in too many hospital beds for the declining number of inpatients. At the same time, the federal government attempted to contain and reduce costs by reimbursing hospitals under the federal inpatient prospective payment system (I.P.P.S) diagnosis-related groups (D.R.G's) rates. Reimbursement from health plans and Medicare and Medicaid declined substantially.

Hospitals saw revenue shrink on lower reimbursement and discounted fee-for-service rates. This made it difficult to cover costs.

Competitive Environment

In Norton County, competition was fierce for market share because there were too many hospitals within a small geographic area. There are 7 hospitals in a 5-mile radius of Attica Memorial. All of them competed for patients, physicians, and health plan contracts. In a 10-mile radius, Attica Memorial's competition increased to 16 hospitals. The managed care penetration in Norton County was approximately 52%—almost double the national average of 28%—thereby creating concerns about managing risk and contract liability.

Definition

California Senate bill 1953 (S.B 1953): A California state law mandating that all hospital buildings in the state must be retrofitted to meet specific seismic safety codes by the year 2020, requiring significant capital investment and potentially leading to service disruptions or closures for non-compliant facilities.

There were too many hospital beds in 2015, and the number was increasing. The hospital average daily census in the state was 59%; Norton County's hospitals' average daily census was slightly lower at 53%. Another external threat to hospitals was California Senate bill 1953 (S.B 1953). This legislation mandated retrofitting existing hospitals to current building seismic safety codes by the year 2020 and would require significant capital expenditures and interruption of services at many hospitals. In addition, the healthcare market was experiencing a nursing shortage, thereby increasing costs and competition for nursing staff.

Analysis of the Ingelson Burn Center

Nature of Burn Injuries

Burn injuries are unique. Burn is a service line unlike obstetrics, for instance. Obstetricians can estimate how many deliveries they will perform in a given time based on patient base.

Burns are caused by fire, sun, chemicals, heated objects, heated fluids, and electricity. Burns are diagnosed as minor (needing non-emergent care) or major (needing life-saving emergency care). Burns are staged depending on damage to body tissue as first, second, or third degree.

Burn Statistics

In the United States, approximately 2.4 million burn injuries are reported per year. Medical professionals treat approximately 486,000 of these injuries; 40,000 are hospitalized. Of those hospitalized, 20,000 have major burns involving at least 25% of their body surface. Approximately 4,500 burn patients die, and approximately 1 million sustain substantial or permanent disabilities.

Children age newborn to 2 years are the most frequently admitted patients for emergency treatment of burns. Most burns for these children occur in the kitchen. The next most common area is the bathroom, where they are scalded by hot water. Scalds are the leading cause of accidental death in the home for children from birth to age 4 and are 40% of the burn injuries for children to age 14 (C.D.C, 2015).

Burn Center Background

In 2003, Dr. Craig Ingelson felt there was a need to provide his unique standard and continuum of care to burn victims in three large counties by establishing a burn center in Norton County. It would serve as a regional center of excellence by using the same coordinated approach to the acute, surgical, and rehabilitative continuum of burn services he provided at Ingelson Burn Center, 50 miles from Delphi Hospital. In 2007, Ingelson and Delphi Hospital established the Ingelson Burn Center as a state-of-the-art, licensed 6-bed inpatient unit coupled with a dedicated outpatient burn center adjacent to the hospital. Dr. Ingelson was named medical director. The Ingelson Burn Center of Norton County earned a reputation for excellent care and superior outcomes achieved by a highly motivated and trained team. The burn center received referrals from other hospitals, employers, insurance companies, and fire departments for both acute inpatient care and continuing outpatient reconstructive surgery and therapy.

Patient Care

Patients arriving at the emergency department of Ingelson Burn Center are met by a team of emergency medicine physicians, nurses, and emergency medical technicians, all of whom are trained in burn care. They conduct a preliminary assessment and perform emergency treatment. The emergency team is in contact with the burn surgeons headed by Ingelson, and they relay information regarding the patient's injuries. The patient is admitted to the inpatient burn unit in which the patient's injuries are monitored for 48 to 72 hours post admission. Burn care specialists coordinate care.

Staff

The burn team includes plastic surgeons; neurologists; psychologists; infectious disease physicians; neonatologists; pulmonologists; ophthalmologists; nurses; occupational, physical, recreational, respiratory, and speech therapists; and case managers.

Staff are trained in current treatment protocols for burn care and receive continuing education. In addition, all staff is A.C.L.S (advanced cardiac life support) certified and A.B.L.S (advanced burn life support) trained.

Nurse staffing in the inpatient burn center is based on the ratio recommended for a critical or intensive care patient. All specialists are trained in emergent, acute, immediate, and progressive treatment of burn injuries and are assigned as-needed after an evaluation of patient needs. The burn center has four full-time scheduled R.N staff, one part-time, and one per diem nurse. Normally, the patient-staff ratio is 1:1, 2:1, and 3:1, respectively, based on patient classification and patient care needs.

Staffing is continuously assessed and adjusted based on patient census and condition, staff experience and training, technology used, and supervision needed. Policy requires not fewer than two nursing personnel physically present in the unit when a patient is present, and at least one of the nursing staff members is an R.N.

On average, 20% of Ingelson's patients are children. To serve this special population, the burn center has a bilingual licensed clinical social worker on staff who is approved by state children's services. The social worker provides recreational therapy and works with the children and their families to address concerns and fears in dealing with their burn injuries.

Communication among the burn team and a patient's employer, insurer, and medical management representative is critical to delivering quality care. To maintain continuous flow of communication among members of the team, the burn center coordinated weekly patient care conferences moderated by the case manager. The purpose of the conferences is to discuss and evaluate inpatient and outpatient cases to ensure a full continuum of patient care.

Quality/Image

Ingelson is a nationally recognized plastic surgeon, who graduated from Emory University and the University of Tennessee Medical School. He is board certified in general surgery and plastic surgery. Ingelson has a unique method of treating burns, based on extensive use of surgery when he debrides and grafts burn patients. His method is less painful than traditional debridement and grafting. He combines a large burn and reconstruction surgical practice with an aesthetic (cosmetic) surgical practice. The Ingelson Burn Center of Norton County has earned a reputation for excellent care and superior outcomes from a highly skilled and patient-focused team.

License Requirements

A hospital burn unit must comply with the California State Code of Regulations for both state operations codes and state building codes.

State Operations Codes California State Department of Licensing, regulations require that a burn center is a dedicated, closed unit. To treat severe burns, beds must be licensed to treat only burn patients. In addition, the diminished immune response of burn patients requires that the unit be isolated. A burn unit

- is defined as an intensive care unit (I.C.U) with services and staff specializing in burn treatment, used solely to treat burns or similar/related conditions.

- must be configured to prevent through traffic.

- must have a minimum of 4 beds and no more than 12.

- must treat at least 50 burn patients per year.

State Building Codes According to the architecture firm with which Attica Memorial has a contract, a burn center is defined in the state building code as a unit that meets requirements for operation of an intensive care unit, and has space for rehabilitation and respiratory care services.

The code does not state that any referenced areas may be shared, but only that the design guidelines for a burn center must comply with requirements needed for an intensive care unit, rehabilitation unit, and respiratory care service. Given the unique nature of the treatment and potential for airborne contamination in a burn center, the architects believe it is the intention of the code to designate this department to function as a stand-alone department or unit. In the past, the state health and licensing office categorized the Ingelson Burn Center as a separate unit for treatment of burn patients.

Burn center regulations parallel state building codes for operation of an intensive care unit. The following summarize key requirements pursuant to the state building code:

- At least one negative pressure isolation room provided for patients with an airborne communicable disease

- A nursing station with a control desk, charting space, lockable medicine cabinet, refrigerator, and hand washing fixture

- At least 132 square feet of floor space per bed with no dimension less than 11 feet, at least 4 feet of clearance around the bed, and at least 8 feet between beds

- Twenty-four-hour coordination and physical space requirements for respiratory and rehabilitation care

Physician and Nursing Supervision

There are specific California state operation codes and regulations for supervision of a burn center. The state code requires that Attica Memorial provide medical and nursing staff with significant burn care experience and training as follows:

- Two board certified or eligible surgeons experienced in burn treatment shall be responsible for supervising and performing burn care.

- Continuous in-house physician coverage is required.

- A registered nurse with at least 6 months' experience in treating burn patients and with evidence of burn care continuing education shall be responsible for nursing care and management in the burn center.

- A registered nurse with at least 3 months' experience in treating burn patients shall be on duty each shift.

Members of the medical and nursing staff at Attica Memorial and Delphi Hospitals were interviewed to determine their level of experience and interest in treating burn patients. The interviews found that many R.N's trained in burn care had resigned from Delphi Hospital. It was the judgment of the Attica Memorial intensive care unit (I.C.U) and critical care unit (C.C.U) leadership that Attica Memorial staff did not have the competencies in burn treatment to provide the level of care.

State Children Services Impact

California State Children Services (S.C.S) regulates treatment of children age birth to 21 years with disabilities resulting from congenital anomalies or severe debilitating injury who are Medicaid beneficiaries. S.C.S certification is vital to operation of the burn center. According to the director of business development for Ingelson, S.C.S patients are 74% of pediatric inpatient burn volume and 26% of all pediatric outpatient visits in 2014.

For the first and second quarters of calendar year 2015, 59% of inpatients and 31% of outpatients were S.C.S.

S.C.S Certification Requirements

S.C.S guidelines provide for specialized care of pediatric patients and for adults with delayed mental development in an acute care environment. These guidelines consist of policies and procedures designed to support the psychosocial and emotional well-being of pediatric patients. S.C.S certification requirements have very little effect on the normal operations of a burn unit. The following are S.C.S requirements:

• Pediatric playroom and age-appropriate toys

• Increased security provisions for pediatric patients

• Specialized pediatric burn intake and admission nursing protocols

- Cribs and crib nets functional 24 hours

• Pediatric crash carts, thermometers, scales, B.P cuffs, and so forth

• Pediatric physical therapy available 24 hours

• Child life therapist available 24 hours

S.C.S Current State

The Ingelson Burn Center applied for S.C.S certification 3 years ago, but was granted only provisional status because the burn center had not fulfilled all requirements of the Department of Health Services. The provisional status expires October 31, 2016. If provisional status expired without immediate written notification to S.C.S regarding the future of the center, the burn center would no longer be reimbursed for treating the largest percentage of its pediatric patients. Recertification was unlikely if provisional status lapsed.

Even if provisional status were renewed after October 31, 2016, S.C.S cannot be applied to the burn center at Attica Memorial East Campus since S.C.S status is not transferable from one facility to another. Applying for S.C.S accreditation is an extensive process that can take more than 2 years. Without S.C.S, the burn center could not treat pediatric patients and would have to transfer them to University Hospital, 5 miles to the south. University Hospital treats pediatric burn patients under its S.C.S medical center umbrella status; however, the medical center is applying for S.C.S certification specifically to treat pediatric burn patients, which would be a threat to Attica Memorial's ability to capture this important burn population.

Facility Constraints

Based on findings regarding the licensing and regulatory requirements of operating a burn center, the burn unit must be located near critical or intensive care because of the severity of burn injuries and complications that could arise. Because infection is so threatening to a burn victim, both positive and negative pressure rooms are required for the most critical patients. Children typically comprise 50% of burn patients.

To treat pediatric burn inpatients, S.C.S requires a playroom in the burn unit. The playroom is where parents visit their children, adolescents visit their friends, and staff or social workers perform play and recreational therapy with children. According to the burn center business director, the existing playroom is too small (190 square feet) and must be expanded by 5%.

A hydrotherapy room is a critical element in treatment of severe burns. Hydrotherapy cleanses and disinfects the burn, allows dressings to be removed, and performs gentle skin debridement.

Hyperbaric oxygen therapy (H.B.O) is the second critical element in treating burns. H.B.O is a process that places patients in an environment in which they breathe, and their burns are surrounded by, a high concentration of oxygen at two to three times atmospheric pressure. H.B.O has proven effective in promoting rapid healing.

Equally important is the third element—the outpatient burn clinic, located near Delphi Hospital. At the outpatient burn clinic, patient progress is continually monitored and modified when appropriate, not only by the physicians, psychologist, and nurses, but also by the therapists and the burn case manager.

Capacity Analysis

Based on the licensing and regulatory requirements for a burn center, a capacity analysis was conducted to integrate a dedicated burn unit into the Attica Memorial East Campus physical plant. The current East Campus I.C.U/C.C.U space is a potential location for the burn center. Two capital build-out scenarios were considered: (1) integration of a burn unit into current I.C.U/C.C.U configuration, and (2) expansion of inpatient space through a full unit build-out. Based on I.C.U/C.C.U post-campus integration capacity constraints and state operations and building codes, it was found to be infeasible to integrate a burn unit into the I.C.U/C.C.U. Therefore, a new unit would have to be built to accommodate. The architecture firm estimated the total cost for a dedicated six-bed burn unit would be approximately $3,386,461; a dedicated four-bed burn unit would cost approximately $3,176,657. It was much less costly to move. the burn unit to the Attica Memorial rehabilitation space: approximately 1,552,154 dollars for four beds, or approximately 1,730,510 dollars for six beds (see Table 17.1).

Table 17.1 summary: The Burn Center Net Margin decreased from 653,971.29 dollars in FY 2015 to 491,091.95 dollars in FY 2016, driven by an increase in variable expenses from 2,040,509.26 dollars to 2,210,353.71 dollars, while net revenues remained nearly flat at approximately 4 million dollars. Payback periods for capital expenses vary by location and bed count. For a move to Present Rehabilitation Space at Attica Memorial East, the payback period for 6 beds increases from 2.65 years in FY 2015 to 3.52 years in FY 2016, and for 4 beds, it increases from 2.37 to 3.16 years. For a move to Attica Memorial East full build-out Expansion, where capital expenses are significantly higher, the payback periods are longer, reaching 6.90 years for 6 beds and 6.47 years for 4 beds by FY 2016.

Physician Relations

Ingelson is medical director of the Ingelson Burn Center. He does not, however, admit patients at Delphi Hospital. Ingelson and his burn surgeons are only on site for complex and acute burn patients; otherwise, Dr. Fred Peace is the local burn physician who manages burn cases that come through the Ingelson Burn Center. Peace reviews the burn cases with Ingelson to confirm a treatment plan. All phases of inpatient care are coordinated on the same unit and are supervised by Ingelson and his team. Nurses, therapists, and other allied health professionals have been trained to treat burn injuries and related issues. After discharge from inpatient status, care continues at the outpatient burn clinic. There, physicians and staff who know the case work with patients and their families to achieve maximum physical and emotional recovery.

Edward Totino, former C.E.O of Delphi Hospital, stated that Ingelson is an extraordinary physician entitled to special treatment. Whenever Ingelson was needed at Delphi, the hospital provided limousine service for his trip to the burn center. Totino gave a firm warning that if Attica Memorial did not treat Ingelson well, Ingelson would leave and establish a burn center elsewhere. A burn center without Ingelson would no longer be a center of excellence in Norton County. Therefore, burn patients would use burn centers that were not as effective. In addition, the hospital would lose a vital source of revenue generated by the Ingelson Burn Center (see Table 17.2).

Table 17.2 summary: Financial impacts and capital expenses for the Ingelson Burn Center, including the loss of State Children Services. For FY 2016, the loss of contribution margin was 242,407 dollars and 35 cents, and lost savings were 215,642 dollars, resulting in a net margin of 26,765 dollars and 35 cents. Capital expenses for an expansion at Attica Memorial East increased from 1.73 million dollars for 6 beds to 3.39 million dollars, and from 1.55 million dollars for 4 beds to 3.18 million dollars. Consequently, the payback period in years increased for both options, rising from 64.65 to 126.52 years for 6 beds and from 57.99 to 118.69 years for 4 beds.

Physician Politics

When Attica Memorial C.E.O Rick Ponti surveyed physicians with admitting privileges at both Attica Memorial East and West Campuses, those who knew of Ingelson had negative comments about him. They said Ingelson is a "Diva Physician." They disliked the fact that administration gave Ingelson special treatment and treated him better than other physicians. Attica Memorial East Campus physicians had mixed feelings about bringing the Ingelson Burn Center to their facility. Some were indifferent to the burn program; however, there was a lack of support from the general and plastic surgeons interviewed. They did not like Ingelson's practice of reserving large blocks of O.R time each week because the time was typically underutilized (see Table 17.3).

: Table 17.3 summary: The annual financial impact of underutilizing blocked operation room time is 404,866 dollars and 80 cents. This is based on a total of 1,420 inpatient cases with a net revenue per case of 24,294 dollars and 54 cents and an average contribution margin per case of 7,785 dollars and 90 cents. The loss is calculated from one hour of underutilized room time per week over 52 weeks per year.

Ingelson met with Ponti and his executive team to tour the East Campus. It was noted that Ingelson's choice of where to place the burn unit would be extremely expensive to build if regulatory requirements were met. Building a dedicated unit would require removing structures and shifting services. Ingelson's request to convert the R.N's' rest area to the burn pediatrics playroom was not well received by Debra Walker, V.P of Patient Care. Similarly, converting the physician workout room to hyperbaric use was not well received by physicians.

Note: According to Jamie Patel in the Surgical Services Department at AHM West Campus, Dr. Ingelson on average underutilizes his operating room time by 3 hours each week. Assuming that the average inpatient surgery takes 3 hours and the operating room time is near or at capacity, the underutilization of operating room will impact 1 surgery per week.

Community Impact

Ingelson's dedication to superior patient care, continuing education, and community outreach, has earned the burn center the respect and support of local fire departments. Interviews with local firefighters show support for the Ingelson Burn Center. One firefighter had been treated at Ingelson and was extremely satisfied with the outcome. A local fire department spokesperson stated they preferred treatment at Ingelson to that at University Hospital. The firefighters stated in their memorandum of understanding that if they were ever badly burned, they would prefer to be treated at Ingelson rather than other burn centers.

The progressive group health-care consultants claimed that burn units should admit 100 patients annually for 3 consecutive years to maintain the appropriate level of proficiency. Based on Norton County statistics, University Hospital admitted approximately 384 burn patients from 2008 to 2014 and its burn center was meeting American Burn Association's standards. The Ingelson Burn Center had approximately 279 admissions for the same period. In addition, 85% of the burns treated in Norton County were 0%–20% burns and not considered "severe." Lower severity burns can be treated in nondedicated inpatient units and emergency departments. These statistics suggest there might not be enough projected demand for two burn centers in Norton County.

Dr. Matthew Suess, Medical Director of Norton County's Health Care Department, stated that a preliminary study of burn treatment in Norton County indicated University Hospital provided more than adequate coverage for the county. Suess did not support continuation of the Ingelson Burn Center and did not support Dr. Ingelson's method of treating burns with extensive plastic surgery. Suess stated that low volume of burn cases made it unnecessary for Norton County to have two burn treatment programs. He said the county would not be negatively affected if University Hospital were the sole provider for burn treatment.

Opportunity for Market Growth

Ingelson Burn Center's status as a center of excellence had the potential to brand Attica Memorial and increase volume. As part of its continuum of care, Ingelson provided outreach and educational services to pre-hospital personnel (for example, emergency medical technicians), emergency department staff, schools, employers, and insurance carriers. The center hosted educational seminars, participated in community and employer health fairs, and provided in-service training that utilized materials on burn safety, first aid for burn injuries, and breakthrough treatment of burn injuries and similar information. In addition to hosting burn education seminars, Ingelson held an annual burn survivors' reunion for former and current patients and their families and friends.

Opportunities for market growth could be dimmed, however, by competition from University Hospital's burn center. University Hospital had a Level 1 trauma center designation and reported treating 123 inpatient burn cases in 2015. Without Level 1 trauma center designation, Ingelson was limited to receiving only burn patients and was unable to treat patients. with combinations of burn and non-burn injuries. According to Norton County Emergency Medical Services, in the past 3 years burn volume had trended down from 23% to 15% of all emergencies.

Treating workers' compensation patients was likely to be limited because patients must either predesignate a program or wait 30 days post-admission to transfer to a different burn center. In an interview, Dr. David Carpenter, owner of a large medical group that had a contract with Attica Memorial, stated his medical group would not use Ingelson for workers' compensation patients because of its high costs. Ingelson's use of plastic surgery to treat burns had impressive outcomes, but costs were high. Carpenter referred his group's workers' compensation patients to University Hospital because it had good outcomes and costs were within the norm.

Profitability

Based on financial data provided by Delphi Hospital's decision support system and factoring in the impact on inpatient surgery, the Ingelson Burn Center's net margin in F.Y 2015 was 653,971 dollars. Net margin in F.Y 2016 decreased to 404,867 dollars (see Table 17.1).

If Ingelson were moved to Attica Memorial East Campus, the capital expense for a full build-out expansion of six beds was $3,386,461, based on both F.Y 2015 or F.Y 2016 financials. The payback for this capital investment was 5.18 years based on F.Y 2015 patient volume and revenue, or 6.9 years based on F.Y 2016.

If the burn program were moved into the current rehabilitation space at Attica Memorial East Campus, the capital expense could be reduced to $1,730,510 for six beds, with payback of the full build-out expansion in 2.65 years based on F.Y 2015, or 3.52 years based on F.Y 2016 (see Table 17.1).

Moving the Ingelson Burn Center to the East Campus, whether into a new building or into existing rehabilitation space, however, meant that loss of S.C.S certification had to be considered. Because S.C.S status would not transfer to the A.M.H East Campus, the financial health of the program would quickly worsen. According to the financial analysis for F.Y 2015, the S.C.S contribution to margin that would be lost was $242,407. The lost savings for surgery call coverage was $147,869, and the lost savings for a blood bank technician was $67,773; therefore, the total net margin was only $26,765. Without S.C.S certification, the payback of the capital investment in the burn program for a full build-out expansion for six beds was 126.52 years; if the program moved to the A.M.H East Campus rehabilitation space, the payback for six beds was 64.65 years. The dramatic financial impact of the loss of S.C.S status could make it financially untenable for the hospital to support such a unique program (see Table 17.2).

The practice of reserving large blocks of O.R time for the Ingelson Burn Center physicians would dramatically affect the Attica Memorial Surgical Services if the burn center moved to A.M.H East Campus. The Ingelson group currently scheduled two 4 one half hour O.R time blocks per week at the West Campus in anticipation of as-needed surgery. Attica Memorial's surgical services coordinator stated it was standard practice at East Campus to release O.R time 72 hours in advance. The Ingelson group, however, released its block O.R time only 14 hours in advance—at 5 PM the day prior to block time that had no scheduled surgeries. The surgical services coordinator stated late cancellations by the Ingelson group results in idle O.R time and affects O.R scheduling and, therefore, hospital revenue.

Attica Memorial East Campus O.R suites are being utilized at or near capacity and constraints on O.R scheduling are anticipated when services from the West Campus are integrated. In addition, interviews with Attica Memorial West Campus Surgical Services staff revealed that the Ingelson group was currently under-utilizing its block schedule by 3 hours each week, which affected inpatient surgery at the Attica Memorial East Campus facility. The practice of reserving large blocks of O.R time might reduce Attica Memorial East Campus surgical services revenue by 404,867 dollars (see Table 17.3). When the capital expenditure for a new, six-bed, dedicated burn unit at the East Campus of 1,730,510 dollars (using rehabilitation space), or 3,386,461 dollars for the full build-out, was added to a decrease in the overall inpatient surgery contribution margins (see Table 17.2), the burn program would have a negative impact on the East Campus balance sheet.

Ease to Implement

The proposal to close the Ingelson Burn Center was met with great resentment by the former Delphi Hospital's staff and administration. Delphi's former C.E.O believed Ingelson's burn treatment methods and outcomes were far superior to competitors that used medical residents to treat burn patients. In addition, with provisional S.C.S status, Attica Memorial West Campus could increase volume and surpass University Hospital, its nearest competitor. The alliance's plan for an East Campus acute care facility and a West Campus ambulatory care facility would, however, require moving Ingelson to the East Campus and building a new intensive care burn unit and hyperbaric facilities.

Establishing the burn center at the East Campus would require investment to train emergency clinical and critical care staff in emergency burn care. In addition, during the transition, burn staff would train the East Campus clinical staff that will be providing burn treatment. Furthermore, some current Ingelson nurses stated they preferred to not work with Ingelson and burn patients, and wanted to transition out of the burn unit.

Organizational Effectiveness

Ingelson had a history of high nursing staff turnover because, as one burn nurse stated, working with Ingelson could be challenging. This turnover added to costs because nursing staff had to be recruited and trained.

The Ingelson Burn Center Decision

After Ponti reviewed the burn center analysis, he knew a decision as to the fate of the program had to be made. In order to clearly delineate the implications of whichever course was taken with the burn center, Ponti had to take a number of issues into consideration. In deciding, Ponti knew that the community impacts and emotional issues could not be overlooked, but that the financials were vital to the decision about whether to continue the burn center. Three alternatives resulted from the analysis: (1) Status quo, the Ingelson Burn Center remains at Attica Memorial West Campus, the former Delphi Hospital; (2) Relocation—the Ingelson Burn Center moves to Attica Memorial East Campus; (3) Termination—Attica Memorial closes the Ingelson Burn Center.