Huntsville Hospital/Athens-Limestone Hospital Agreement

Participating Organizations

  • Athens-Limestone Hospital, Athens, AL

Please note that all data below was derived from the collaboration's nomination for the Collaboration Prize. None of the submitted data were independently verified for accuracy.

Formation

  • Administrative Consolidation to share, exchange, or provide back office services such as accounting, IT, human resources
  • An alliance or similar collaborative structure through which members retain structural autonomy and have defined roles and responsibilities to achieve specific social goals or purposes
Multi-County
Health
Other
2007
  • Achieve administrative efficiencies
  • Maximize financial resources
  • Address unmet and/or escalating community need
  • Financial problems / pressures within one or more of the partnering organizations
  • High / increasing costs
  • Board member(s)
  • Executive Director(s) / CEO(s) / President(s)
2
No
  • To draft the governing agreement or provide other legal advice
  • To facilitate negotiations or discussions that led to the formation of the collaboration

Huntsville Hospital and Athens-Limestone Hospital are both members of the HealthGroup of Alabama - a collaboration of public local hospitals that work together to achieve the economies of scale to benefit all member hospitals.

In 2007, the hospitals embarked on a process to forge a formal affiliation that would prove beneficial for patients in both communities. Each hospital sought to strengthen their individual commitments to community-based, not-for-profit healthcare through this affiliation. The collaboration was designed to reduce costs while continuing to provide quality healthcare for residents in both service communities.

A unique element to this collaboration involved the financial challenges facing Athens-Limestone at the time. The hospital was in jeopardy of violating their bond covenants and Huntsville Hospital was in a position to offer a specific collaboration strategy allowing Athens-Limestone to restructure their debt.

Management

Board of Directors with representatives from each founding partner

Athens-Limestone Hospital maintains its own identity and mission while continuing to be governed by the Health Care Authority of Athens and Limestone County. Preserving local autonomy was crucial for the Athens-Limestone board and leadership structure. However, Huntsville Hospital's board does serve in an advisory capacity. In that role, Huntsville Hospital consulted in the hiring of top Athens-Limestone management. Candidates interview with both boards; Huntsville Hospital provides recommendations to the Athens-Limestone board but the ultimate hiring decision remains with the Athens-Limestone board.

Huntsville Hospital is ultimately responsible for the management and operational oversight of Athens-Limestone. The collaboration involves regular planning sessions involving representative of both organizations. An open dialogue is maintained between board members from each hospital and both organizations share and consolidate financial information.

Each organization and their respective management and medical teams share ideas that have led to improvements in financial management and quality of care.

Challenges

  • Creating a shared culture
  • Accepting change

Huntsville Hospital and Athens-Limestone were proactive in anticipating resistance to change and the possible slow development of trust between the two boards, management and staff. Meetings were held at Athens-Limestone to ensure that Huntsville Hospital board members and staff were on-site to foster face-to-face relationships, which cultivated trust and helped promote the mutual benefit of the new collaboration. Additionally, once the collaboration was solidified, Huntsville Hospital moved quickly to establish an efficient supply chain so that Athens-Limestone could realize quick cost savings and experience some immediate benefits of working closely with the larger organization.

Impact

  • Financial savings - Joint purchasing
  • Reduction in overall cost per unit of service - Reduction in overall cost per unit of service
  • Enhanced ability to manage reporting, documentation, billing - Enhanced ability to manage reporting, documentation, billing
  • Able to serve a greater geographic area
  • Retained programs / services in the community

The collaboration has resulted in the reduction of supply and medical costs through joint purchasing, shared medical expertise, joint partnerships for new and expanded services and a strengthened financial position for Athens-Limestone.

In the two years since the collaboration began, Athens-Limestone has turned their financial situation around by making all of their bond payments and has been able to avoid exercising the line of credit it now has available through its relationship with Huntsville Hospital.

Through the partnership, Athens-Limestone has been able to retain and improve upon their operations in the community providing critical services and quality care at lower costs. The hospital has also been able to offer programs and secure equipment previously unavailable to them. For example, as Huntsville Hospital has upgraded their IT and imaging technologies, Athens-Limestone has "inherited" Huntsville Hospital's expensive outgoing equipment that the smaller hospital couldn't afford in the marketplace.

From Hunstville Hospital's perspective, this collaboration has allowed the hospital to better serve everyone in the region, particularly in Madison and western Madison County. Together, the hospitals are building a regional healthcare system that is seamless and more efficient.

Model

In order to provide high quality care to those we serve, Huntsville Hospital and Athens-Limestone entered into an agreement that was mutually beneficial while preserving the autonomy of both entities. Seeking ways to capitalize on each other's strengths, the collaboration is unique from other hospital partnerships in that Huntsville Hospital and Athens-Limestone have been proactive in anticipating challenges - especially on important issue such as preserving and improving service quality.

While Athens-Limestone is able to take advantage of Huntsville Hospital's experience and size in terms of greater buying ability and access to a larger network of specialists, Huntsville Hospital has benefited from an expanded network of professionals by inviting Athens-Limestone staff members with superior experience in Quality and completing successful Joint Commission surveys to share their expertise with the Huntsville Hospital staff.

In this particular instance, a smaller organization was able to bolster its success by tapping into a larger organization's purchasing power, access to capital and better rates on capital. Yet, as Huntsville Hospital and Athens-Limestone Hospital can attest, the size and scope of an institution does not determine its ability to bring something new to light that benefits all.

Efficiencies Achieved

After signing a collaborative agreement in 2007, in 2008 Huntsville Hospital and Athens-Limestone Hospital tackled a variety of issues such as identifying ways to reduce supply and equipment costs through joint purchasing, as well as sharing expertise in medical and non-medical areas. The winners in this new endeavor have been the patients at both hospitals. Working together, the hospitals have improved the care and the service provided for both communities and are making consistent and steady progress in implementing meaningful cost savings.

While Huntsville Hospital has assumed all the liability for the debt and other expenses for the facility, the Athens-Limestone Health Care Authority remained in place to ensure consistency of care and operations. In 2008, Athens then CEO Cary Payne quantified the benefit of working together, stating, “As a direct result of coordinated efforts and interaction with Huntsville Hospital’s executive staff, Athens-Limestone Hospital reduced costs by nearly $400,000 in 2008 with projections to exceed $600,000 [in savings] in 2009.”

Mr. Payne’s projections were actually low; in 2009, according to Board Chairman Jim Moffatt, Athens-Limestone reduced total costs by approximately $750,000 due to its affiliation with Huntsville Hospital.

Beyond savings from joint purchasing and shared services, affiliating with Huntsville Hospital allowed Athens-Limestone to take advantage of Huntsville's better credit rating to refinance $18 million in old debt. Restructuring the debt allowed Athens to continue to operate as a not-for-profit hospital and prevent being sold to for-profit entities. This has strengthened the not-for-profit hospital system and benefits the people of North Alabama in two significant ways: the continued commitment to provide services to all people, regardless of their ability to pay, and the breadth of services offered by both hospitals.

Unlike for-profit health systems, locally-owned hospitals provide services that may or may not be profitable for the hospital. Tracy Doughty, Huntsville Hospital Vice President of Operations (Emergency and Trauma Services) explains, “You do not often see trauma or pediatric surgery at for-profit hospitals, because the level of care needed does not generate revenue.” For example, Huntsville Hospital offers victims of cardiac arrest a treatment that induces hypothermia – cooling the body and reducing potential brain damage and tissue loss. When a patient needs this procedure, the medical staff uses a disposable kit that costs approximately $1,400. These vital kits are not reimbursable through insurance, so Huntsville Hospital loses that money each time a kit is used – a small price to pay compared to the quality of life preserved.

Evolution

The management structure clearly defined by the affiliation has been instrumental in the success of the collaborative effort and of each hospital. In essence, Athens remains autonomous in its operations and decision-making while benefiting from the larger hospital’s management experience, consolidated operations (such as internal laundry and bio-waste disposal services, rather than engaging in outside contractual relationships) and business development services (such as physician recruitment).

Huntsville Hospital, meanwhile, has a vested interest in Athens’ continued success, as it has taken on the liability of Athens’ debt. On the management side, Huntsville Hospital maintains an ongoing dialogue with Athens’ management team and monitors activity closely, taking actionable steps if called upon or if deemed appropriate by Huntsville Hospital key personnel.

The Model of Proven Success Inspires a Regional Movement of Collaborative Agreements

As a result of this successful collaboration, Huntsville Hospital has replicated partnerships with other small non-profit hospitals, further strengthening health care services for all people in North Alabama.

Effective November 1, 2010, Huntsville Hospital entered into a similar collaboration with 185-bed Helen Keller Hospital in Sheffield and 25-bed Red Bay Hospital in Franklin County. Huntsville Hospital CEO David Spillers said $2 million to $3 million in potential cost savings a year have already been identified. The initial term of the contract is five years, and the contract can be renewed every five years with a cap at 50 years.

Helen Keller Hospital ended its fiscal year on September 30th more than half a million dollars in the red, according to officials at the health care facility in Sheffield. Chief Executive Officer Bill Anderson estimated Keller would fall below budgeted revenue by $600,000 to $700,000. However, Anderson expects Keller to end FY2011 with a profit of $200,000, excess revenue that is likely to result from Keller's affiliation with Huntsville Hospital. Initially, Anderson said he expected the hospital to realize a savings from the agreement of between $300,000 and $500,000. But, after an intense review of the economics of the partnership, he has revised that figure estimating the hospital could save as much as $1 million to $1.2 million annually.

Additionally, it was announced November 2, 2010 that Decatur General Hospital, a 273–bed facility located in Decatur, Alabama, had entered into an affiliation agreement with Huntsville Hospital.

The success of the Huntsville/Athens Collaboration was key to establishing this partnership, as Decatur General Chief Executive Officer Dean Griffin asked Athens-Limestone board Chairman Jim Moffatt about their partnership with Huntsville Hospital as part of his hospital’s process in considering their own collaboration. "He met with our board and medical staff and all of the comments were very positive," Griffin said.

This initial affiliation is for three years at which time either entity can renew the agreement for another ten years or end the affiliation. Although different from the Huntsville Hospital partnerships with Athens-Limestone and Helen Keller, Board Chairman Nick Roth said the three-year affiliation is best for Decatur General. “It lets us step into the water up to our ankles to see if (Decatur General) likes it instead of going head first,” Roth said.

The affiliation between Athens-Limestone Hospital and Huntsville Hospital has sparked a regional movement of collaboration between the non-profit hospitals of North Alabama. The agreement and those it has inspired have been successful because each are unique and based on the fiscal and operational needs and readiness of each entity.

The true value of the Huntsville Hospital/Athens-Limestone Hospital collaboration, and why it should be awarded the 2011 Collaboration Prize, is found in the successful model of communication it demonstrates – a model of listening to each others’ needs, capitalizing on each others’ strengths and evaluating what will truly benefit each organization and ultimately the entire region of not-for-profit health care for the people of North Alabama.

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