By Edward Martin
Ten years ago, Robert Morrison, CEO of Randolph Hospital in Asheboro, was singing the praises of independence in a state dominated by giant health care systems (“Safety in numbers,” March 2006). The rewards were great, he said, but “you work without a net financially.” Now, after sealing a 10-year management agreement with Greensboro-based Cone Health, Randolph has a net of sorts, along with a loss of some independence.
While operating and joint-purchasing agreements among hospitals are sweeping North Carolina health care, Randolph’s deal has a dose of the unusual. Only about 18 single-hospital systems remain in a state with more than 130 medical centers, says Julie Henry, vice president of communications at the N.C. Hospital Association. “You hear a lot about the little guys being gobbled up by the big guys, but it’s about staying viable.”
The twist in Randolph’s case is that it will be managed for an undisclosed fee by Cone, a six-hospital system that in turn operates under a 2012 management agreement with Charlotte-based Carolinas HealthCare System. Randolph Hospital spokeswoman April Thornton says management teams from the two bigger systems planned to descend on the 145-bed hospital late last month.
Multiple layers of management advice are unusual. Cone and Randolph remain locally owned and governed, and Thornton and Cone spokesman Doug Allred say each packs its own expertise. Randolph remains a strong community hospital, with virtually all types of care except heart and brain surgery. But community health care is increasingly focusing on wellness, prevention and outreach, while larger systems can help cut costs by mass purchasing and spotting best clinical practices. “We’re good at that, but Cone Health is a national leader in it,” Thornton says.
The agreement also is structured to minimize managerial overlap and friction. Several of Randolph’s top executives, including CEO Steve Eblin, will become Cone employees.
Randolph remains “financially strong, but like a lot of smaller hospitals, we just don’t have the size and scale to negotiate with insurance providers for supplies and so forth,” Thornton says. She doesn’t reveal Randolph’s budget but says the Cone agreement will help assuage some of the fears former CEO Morrison carried with him into retirement five years ago. “We always set the budget to achieve a 3-5% operating margin,” she says, “and I can tell you we haven’t been meeting that.”