The new owner of MedStar Southern Maryland Hospital Center anticipates spending $150 million in improvements and generating at least 200 new jobs within the next three years, as the Clinton hospital joins the industry trend of integration.
Michael J. Chiaramonte, president of the hospital center and now senior vice president of MedStar Health in Columbia, discussed the transition during the Greater Prince George’s Business Roundtable annual board meeting Monday. The meeting was held at the Colony South Hotel, also owned by the Chiaramonte family.
“MedStar impressed us with its commitment to the community,” Chiaramonte said, referring to MedStar’s selection from among 15 acquisition offers. The deal closed Dec. 10.
MedStar, a nonprofit regional health system with facilities in Maryland and Washington, D.C., announced its decision to purchase the 35-year-old Southern Maryland Hospital Center in late July. Southern Maryland is MedStar’s 10th hospital and seventh in the state. MedStar has about $4 billion in annual revenues, Chiaramonte said.
While the Clinton hospital has remained frugal and profitable, Chiaramonte said, the decision to sell reflects an industry trend of smaller hospitals looking to join larger organizations. He said more standalone hospitals want to belong to a system that can cover all levels of care, from primary physicians to acute care and tertiary specialty services such as oncology and neurological sciences.
Through its new ownership, patients at Southern Maryland now have greater access to tertiary services at MedStar Washington Hospital Center and MedStar Georgetown University Hospital, also in Washington. Had Southern Maryland sold to the University of Maryland Medical System, patients may have had to go to Baltimore for this care, Chiaramonte said.
He said the changing system, as a result of ongoing federal reforms, requires health care organizations to take more risks and act almost like insurance companies as they commit to taking care of a patient’s entire life, meaning they need significant populations to make the risk worthwhile.
“Obamacare is helpful in seeing that more people are insured, but less helpful in seeing that standalone hospitals remain solvent,” he said.
Chiaramonte’s assessment is echoed by his industry.
“Both government and the private sectors are creating incentives that are driving hospitals toward one another and toward their medical staffs with new global and fixed payments; new incentives for meeting quality, efficiency and patient satisfaction goals (and penalties for failing to do so); and rescinding payments for certain readmissions,” according to a statement from the American Hospital Association.
The trade group suggested that current regulatory barriers may prevent organizations from working together without mergers and acquisitions.
Some hospitals also seek to benefit from the health plans of larger organizations, such as the one provided by MedStar, said Joshua Sharfstein, secretary of the Maryland Department of Health and Mental Hygiene. He agreed that integration is a major trend in the country, even if it just involves information-sharing partnerships.
“It’s a good trend. Integration can bring a lot of value to patients because it makes it easier for patients to get their data from one system to another,” Sharfstein said.
Chiaramonte said he expects to see more of these mergers over the next five to eight years, as federal reforms kick in more fully.
As far as the MedStar acquisition contributing to limited competition among the state’s hospitals, he said, the Maryland Health Care Commission will stay on top of those issues.
As part of the sale, MedStar plans to invest $150 million in Southern Maryland improvements, such as a 100,000-square-foot outpatient pavilion, stacked parking garage, expansion of eye care and neuroscience services, 25 new emergency room bays, a new critical care unit, a new hospital front and a separate emergency room track that will handle patients suffering psychiatric problems such as drug abuse and mental disorders.
Chiaramonte estimated the improvements and new or expanded services will require 200 new permanent jobs and up to 100 construction jobs during the next three years. The hospital expects to begin seeking regulatory approval on these projects this year.
Southern Prince George’s County suffers from gaping holes in certain services, particularly primary care, because private practice physicians are more likely to move to places with smaller percentages of Medicare or Medicaid patients, he said.
“We need a coordinated plan for a health care delivery model in this county,” Chiaramonte said, adding that he hopes the MedStar deal allows for more conversations about coordinated care among county systems, such as the new regional medical center being planned by the county, state and Dimensions Healthcare. He said the organizations need to work together to see which will address which needs and avoid unnecessary duplication.
Along the same lines, several local organizations — including the Coalition for Smarter Growth, American Institute of Architects Potomac Valley and Envision Prince George’s Community Action Team for Transit-Oriented Development — have released a set of case studies to persuade the county to build a smaller regional center that can be located near a Metrorail center.
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