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Southern Regional looks toward future after bond issue

By Joel Hall

jhall@news-daily.com

Southern Regional Medical Center, a major employer and provider of medical services to the Southern Crescent, faced closure late last year when it nearly defaulted on a $40.2 million loan. With the Clayton County Board of Commissioners backing its bond, and a new management team, a sense of normalcy may be slowly returning to the hospital.

Clint Matthews, president and CEO of the hospital since December of last year, is faced with the task keeping the hospital solvent. He said while the medical facility has eliminated overlapping duties since he took over, reduced the number of outside contract workers, and cut down the average length of stay for patients, the hospital is making capital improvements and expanding its services.

Change at the top

Amid concerns over the hospital's financial stability, Ed Bonn, its former president and CEO, announced his resignation at the end of December. Matthews, managing director of FTI Healthcare - a Brentwood, Tenn.-based health care management company - took over the position on Dec. 20.

Matthews said the hospital has had to become more efficient, but he believes it is moving in the right direction.

"The hospital had some financial issues and problems, so the hospital engaged us to put the hospital on better footing," Matthews said. "I think we are working to maximize our efficiencies and that is what everyone should be doing. We have deleted a few positions as we have discovered that they are not needed. There are not going to be layoffs."

The hospital currently employs 2,224 people, 556 of which are credentialed physicians. Ron Dodson, chairman of the hospital's board of directors, said the hospital's employees have regained their composure since January, when the Clayton County Board of Commissioners voted to help the hospital refinance its $40.2 million bond using the county's bond rating.

"There was a lot of anticipation from the employees about what would happen," said Dodson, who has served on the hospital board for 14 years. "Those issues have been calmed and we have had employee meetings to assure everybody that everything is going to be OK. They feel more confident now that we're moving in the right direction."

Dodson described FTI Healthcare as a "turn-around organization" and said that since January, the new management has reduced the average length of stay for patients from as many as six days to four and a half days, allowing the hospital to see more patients and avoid diverting patients to other hospitals, which, he said, can decrease a patient's life expectancy.

"If a hospital is at capacity, the hospital goes on diversion, so they inform EMS workers they can't bring their patients here," he said. "In the past, it's been a big problem, but since getting our bed-stay down, we have not had that problem with diversion. It can make a difference between life and death.

"There have been significant savings put in place since they [FTI Healthcare] took over the hospital," he added. "We're not going to see a bottom line immediately, but in the future, they look like they are doing some things that are going to do a financial turn-around for the hospital."

County oversight

On Jan. 6, the Clayton County Commission agreed to guarantee a bond on which the hospital which was in danger defaulting at the end of last year. As a part of the agreement, the commission voted to appoint county Finance Director Angela Jackson and Commissioner Wole Ralph to the hospital's board of directors to provide additional oversight.

As of Friday, though, the hospital and SunTrust Banks, Inc., which holds the bond, had yet to finalize their new agreement and Jackson and Ralph had yet to sit in on a hospital board of directors meeting. Matthews said the hospital is waiting for the bond arrangements to be settled before inviting Jackson and Ralph to the meetings.

"It will probably be final around the end of March," he said.

County commissioners, however, have expressed differing opinions about the hospital's transparency.

Clayton County Commission Chairman Eldrin Bell believes the hospital is not making enough of an effort to communicate its financial situation to the county.

"In good faith, once we vote on something, it is effected at that moment," he said. "I expected Mr. Ralph to be put on that board immediately once that vote passed. They have not done that. For the sake of getting them up to speed and transparency, I think they should have been brought on immediately."

Bell said he believes the hospital is "using" the bond settlement issue to "hold up" the county's oversight of hospital finances.

Ralph, chairman of the Board of Commissioners' Finance Committee, believes the hospital has "taken several steps" to be transparent with the county. He believes the delay is a result of the bank's processes.

"The agreement was that Angela Jackson and I would join the hospital board once the financing agreement was changed," he said. "That just hasn't happened yet. I think once they finalize the agreement with SunTrust, they will be able to keep us further abreast of what they are doing. A lot of those considerations depend on what the final agreement looks like."

Bell said that thus far, he is "disappointed" with the information he has been able to receive about the hospital's finances. He said since the county is backing the hospital, he would like to receive monthly and quarterly reports about its finances.

"They worried the board members daily before they got it [the commission's vote to back the hospital] and right now, I haven't heard anything," Bell said. "I want the hospital to have a different attitude about the public, because it is the public that is standing firmly behind their resources."

Ralph believes there is no "cause for alarm" and that the hospital is committed to staying financially healthy.

"We're all trying to grapple with the challenges of this economy and the poor state of financing health in this country," he said. "There are several counties in the area that are engaged in the same kind of relationship with their hospital. We don't pay a cent of that obligation unless the hospital ceases to exist.

"After selling all the equipment, and if they could still not repay the bond, that is the scenario in which the county would have to pay," Ralph said. "I think that they are committed to not being in that scenario. I think the hospital will continue to prosper and the county will be glad it made this move."

Day-to-day operations

While management has changed, the hospital has continued to function as normal, according to hospital officials.

In fiscal year 2008, the hospital spent $9.3 million on capital improvements, which included equipment purchases, hospital renovations, new facilities and software enhancements.

Melody Mena, managing director of surgical services, said Southern Regional continues to handle more than 13,000 surgeries a year and has seen a recent increase in brain and spinal surgeries being done at the hospital.

"We changed some leadership in the way that we run our business, but as far as patient care, that has never been compromised," she said. "We have 2,200 employees. They didn't go anywhere. These nurses are the same caring nurses that were here a year ago. Physicians are still sending their patients here for complex surgeries."

Mena described Southern Regional as "the mothership" of a health care triangle composed of Southern Regional, Henry Medical Center, and Piedmont Fayette Hospital and that "none of these hospitals can afford to fail right now."

She said Southern Regional has invested in several improvements in the last year to cut costs and attract patients, such as a new bariatrics center and digital records system to cut paper waste.

In addition, the hospital made a $3 million investment in its new Spivey Station Surgery Center. Expected to open to patients on March 30, the center will offer imaging and surgical services under one roof, shortening the length of time between diagnosis and treatment, according to Mena.

"To wait five to six weeks to find out if you have breast cancer is horrible," she said. "We have taken a process that would have taken five to six weeks and reduced it to one day. That patient will know when they leave the center whether they have breast cancer or not."

The hospital's future

According to Dodson, Southern Regional, as a nonprofit organization, depends to some degree on city, county, and state funding to offset its cost. He believes the future of the hospital is bright, but said there is a possibility its nonprofit status may eventually change.

"I feel like the future of the hospital is good, but at the same time, I also feel like the community hospitals throughout the state and nation will be a thing of the past," Dodson said. "In the future, it is probably going to be large, for-profit hospitals which are going to be controlling the nation's health care."

Dodson said that in the last five years, community hospitals in Spalding, Rockdale, south Fulton, and Greene counties have been purchased by larger, for-profit hospitals.

He said Southern Regional has already been approached by for-profit hospitals, but said the hospital would hold out as long as possible.

"At this time it's no, but who knows what the future holds," he said.