February 25, 2004
Aspen Valley Hospital is a community gem. Nestled away from traffic on the edge of Aspen, it is a community hospital with top-notch doctors, impressive facilities and world-class patient care.
Yet all is not well at AVH.
The hospital has been overcrowded and poorly run for many years. Departments are crammed for space, staff members maneuver through cluttered working areas and a national regulatory organization recently went so far as to mandate immediate changes to the hospital’s crowded operating area, saying it is safe but substandard.
To add to the problems, the hospital has been run with appalling inefficiency in the last decade. AVH’s financial committee recently announced that the hospital finished 2003 with a budget shortfall of $300,000 ” a figure that would have been closer to $3 million if not for the hospital’s public mill levy.
In 2003, it cost nearly $47.8 million to run AVH, but operating revenue came to just $44.6 million. Property tax revenues of $2.9 million represent only 6.5 percent of total revenue ” outpatient revenues are by far the biggest portion ” but the tax was crucial last year.
This shortfall is the result of inefficient administration and management, say hospital officials. Take the hospital’s billing practices: Over the last few years, more than $2.5 million in hospital expenses have not even been billed.
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These problems have fallen squarely on the shoulders of AVH’s new hospital board. In May 2002, a record number of hospital district voters chose John Jellinek, Elaine Gerson and John Sarpa to join Bob D’Alessio and Morris Cohen on the board. The new board has taken both the issues raised in the campaign and the record turnout as a clear mandate for change.
The key player in this situation is board President John Sarpa, a shrewd businessman from Washington, D.C., who is determined to wrest the hospital from financial trouble and bring it worldwide recognition.
“We’ve got a hospital that’s in real trouble,” Sarpa said last week. “We’re doing everything we can to help change that.”
After a 16-month lull following the election, during which the new board members familiarized themselves with the hospital’s situation, the board has begun to act decisively and aggressively.
The first signs of upheaval came in early December, when the board decided to close a midvalley indigent-care center, directing funds instead to a larger, better-equipped clinic for the poor in Glenwood Springs. The decision was contentious, made to the dismay of several high-ranking doctors including Scott Gallagher, the head of the emergency room, and Dr. Claudia Nelson, the chief of physicians.
Dr. Nelson, who supported the closure, directed her complaints at the board’s handling of the affair, claiming that the decision was made hastily and without proper consultation with the hospital’s staff.
The Basalt closure was the first push of a snowball that would gather mass and momentum through the winter. On Jan. 5, CEO Randy Middlebrook resigned at the request of the board. Shortly thereafter, the board began revising a master plan that called for $40 million in renovations, and revealed that it was considering scrapping renovations in order to build an entirely new facility.
The most far-reaching changes have become public only in the last week. Interim CEO Bob Karp announced the hiring of an independent financial expert from Denver, Jim Carris, to help recommend efficiency changes, including the possibility of staff pay cuts. The board announced plans to seek a rural “critical access” hospital designation to secure possible federal funding. Then The Aspen Times revealed that the board is pursuing affiliation with a major New York hospital in hopes of establishing AVH as a “destination” orthopedic center.
This whirlwind of change has many people’s heads spinning. Some complain about a perceived lack of openness on the part of the board, leading to uneasiness and confusion among hospital staff and the public at large. This article is an attempt to address the confusion by collecting the available information and documenting what the AVH board is currently doing to address the two key issues: Overcrowding and financial inefficiency.
In 2002, the Joint Committee on Accreditation of Hospital Organizations, an independent organization that evaluates and accredits more than 16,000 U.S. health-care organizations, stated that AVH’s operating area must be improved by May 2005.
The operating rooms are just one of many trouble spots.
The postnatal department crams incubators next to each other, medical record attendants work in a fortress of stacked files and cabinets, and the oncology department shares a space with same-day surgery, causing chemotherapy patients and arthroscopy knee patients to receive treatment within a few feet of one another.
On June 9, 2003, in a public meeting, the hospital board asked officials of the Aspen Valley Medical Foundation, an independent organization that supports the hospital, if it could raise $4 million for immediate renovations to address overcrowding. The answer came back that not only was the $4 million possible, but up to $30 million for long-term renovations could be raised by the foundation.
The board accepted and immediately authorized essential changes, including expansion to the hospital’s operating area. That was the easy part. The big issue was how to spend $30 million on long-term changes. A provisional master plan created under expelled CEO Middlebrook had called for long-term renovations to the existing hospital, but now was under scrutiny.
Recently, board members wondered whether it might be more efficient to scrap the 30-year-old hospital and build a new one on a different site. The current AVH facility, after all, was designed in the 1970s as a small community hospital and is a difficult building on which to make additions.
Several different sites have been considered, including two near the intersection of Brush Creek Road and Highway 82. It is unknown, however, whether land at Aspen Mass or Cozy Point, the two properties being considered, would even be an affordable option. To further complicate things, the hospital, in preparation for renovations and development, recently sought and received annexation into the city of Aspen, which has an urban land-use code better suited to a hospital.
Although the AVH board is considering sites in the unincorporated county, it’s unclear whether county commissioners would support the construction of a hospital. The commissioners have designated an “urban growth boundary” around Aspen, and they’re unlikely to support a massive project outside that boundary.
“We have clear policies about the urban growth boundaries,” commissioner Jack Hatfield told Sarpa at a Feb. 17 meeting. “Building a large hospital at Brush Creek Road would be totally incongruent with our thinking.”
Regardless, immediate renovations continue unhindered. A decision whether or not to relocate the hospital will likely come soon. Millions of dollars in renovations would be wasted if the hospital ends up moving to a new site.
After Middlebrook resigned, Dr. Bob Karp, a semi-retired cardiovascular surgeon, was appointed interim CEO and told to start fixing the hospital’s financial crisis. Dr. Karp, a deliberate, measured man, seems a good fit for the position. He talks of hospital matters with the authority of a doctor making a diagnosis, which in a sense he is.
To push the metaphor a touch further, one of Karp’s first moves in diagnosing the hospital was to make a referral. Due to his inexperience as an administrator, Karp brought in a specialist ” Carris, an independent financial expert with a solid community hospital background. Carris has assumed the title of interim chief operations officer and will spend 14 days a month for the next three months determining how to improve hospital efficiency.
Although Carris is yet to make any final recommendations, the hospital has already begun pursuing ways to cut costs. New billing software is being considered to help ensure expenses are charged and collected. Dr. Karp is renegotiating contracts with several AVH’s physicians in an effort to cut the hospital’s costs. And Carris asked the hospital to consider varying employees’ hours in accordance with Aspen’s seasons, which would mean shorter hours in the spring and fall. In other words, a de facto pay cut for many employees.
These are some of the changes being considered on the ground. Yet the most far-reaching changes involve the hospital’s role in the community and beyond. In a sense, the board is moving in opposite directions, working to designate AVH as a provincial hospital while simultaneously moving to gain it recognition on the world stage.
The first is to apply for designation as an isolated rural hospital to receive more federal money. The second is to negotiate with a major New York hospital in hopes of establishing AVH as a world-wide “destination” orthopedic center.
Under new congressional legislation, the federal government must support isolated, rural hospitals deemed to offer critical medical access. While most hospitals receive only partial reimbursement for treating Medicare patients, so-called “critical access hospitals” receive total reimbursement.
Approximately 23 percent of AVH’s patients are billed through Medicare. Had the hospital received full reimbursement for these patients in 2002, it would have saved $2.5 million, according to the hospital’s chief financial officer, Verna Bartlett.
AVH, with its top-notch doctors and cosmopolitan patient base, doesn’t fit the traditional mold of critical-access hospitals, which often offer the only medical facilities available to remote communities. Yet because of AVH’s orientation toward outpatients (32,000 outpatients last year, compared to 1,900 who stay overnight), the hospital fits the most important “critical access” requirement ” it does not fill more than 25 beds per night except in times of emergency. Currently, AVH fills an average of only 14 beds a night.
The critical-access designation would help replenish hospital coffers, but the current board sees it as a short-term solution. For the long term, they have bigger plans. At the board’s behest, Dr. Karp is negotiating a three-way partnership between AVH, the Orthopaedic Associates of Aspen and Glenwood Springs, and the Hospital for Special Surgery (HSS), a Manhattan hospital specializing in muscular and skeletal care with world-renowned orthopedists.
The agreement, if it goes through, would essentially work in three stages. The first would be a mentoring program, in which HSS staff would train Aspen nurses, administrators and physiotherapists. Another facet would be the sharing of research and techniques between doctors. The third and most important would be the formal “branding” of HSS for Aspen’s facility, a process whereby the New York hospital’s name recognition could be used to attract patients to Aspen.
“This would be huge for us,” said AVH board member John Jellinek, who had his hip replaced at the New York hospital. “HSS performs over 16,000 orthopedic operations a year. They are the best. They’d help bring patients and experience to our hospital.”
It is a coy move on the part of the board, which sees an opportunity after the recent shakeup at the Steadman-Hawkins orthopedic clinic in Vail, a destination clinic that attracts patients from around the world. Dr. Hawkins left Vail recently for a satellite practice in South Carolina, and Dr. Steadman is nearing retirement age. The board hopes Aspen can be the new mountain destination for elective surgeries.
The negotiations are sensitive, however, and so far the surgeons at Aspen Orthopaedic Associates, who are integral to the deal, have expressed only hesitant support. Aspen’s surgeons are themselves well-respected and there is already disgruntlement that the hospital has never actively marketed its own surgeons. A state-of-the-art athletic rehab and training center at the hospital was promised to Aspen orthopedists, but never delivered.
Dr. Karp is working to reassure Aspen’s surgeons that if the move goes through, Orthopaedic Associates would maintain its name and professional autonomy.
“Along with the orthopedists, I would be offended if [these negotiations] were perceived by anyone to be because of an inadequacy on the part of our surgeons,” Dr. Karp said. “We are playing to our strengths here.”
If the move goes through as planned, AVH would most likely have to relinquish critical-access status. But Jellinek says the designation would mean the loss of pennies compared to the income brought in via the HSS name. He estimates it could total $10 million per year.
As in any time of upheaval, there is great uncertainty at AVH. Hospital sources report that morale is low, and there are serious trust issues with a board so aggressively pursuing change. Recently, there was a move among hospital staff to recall the entire hospital board, although it never seriously threatened the board.
To some, Sarpa and his colleagues are sharp and talented business people, the first board in years willing to take responsibility and fix under-acknowledged problems. To others, they are rash and arbitrary tyrants bent on change and unwilling to heed the voices of dissenting physicians and staff.
Certainly, the current board members are an involved and active group. Under their leadership, AVH is in the midst of serious change. A move to a new site and the possibility of opening a destination orthopedic clinic are the proposals currently on the table. Yet none of these proposals are certain, and the personalities behind them could shift as well. With a publicly elected board, an interim CEO, an interim operations officer and a new CEO on the way, it seems the only certainty at AVH is change.
Eben Harrell’s e-mail address is firstname.lastname@example.org