Walton Rehabilitation Health System is reviewing possible alliances with other health organizations

After she suffered a stroke on June 30 while visiting her daughter in Dearing, Linda Shelton needed rehabilitation therapy for paralysis on her right side and help with her speech. She didn’t know where she could have gotten that help near her home in Granite Falls, N.C., so staying in Augusta looked like the best option.

“There’s only one choice and that’s Walton,” said her other daughter, Norma Hollar of Granite Falls.

Walton Rehabilitation Health System is also reviewing its choices after sending out 41 inquiries about a possible strategic alliance with a larger health care system, some beyond Augusta, CEO Dennis Skelley said. So far, it has heard back from 11 that are interested and Walton has asked them to prepare proposals to be reviewed by its board, Skelley said.

“The model could be as simple as a formal affiliation, it could be a joint venture or it could be an ownership change resulting from a sale,” Skelley said. “We have no preconceived decision at this point. We could also find that we choose none of the above and we remain independent. We truly are exploring.”

But it is becoming more difficult for smaller organizations like Walton to remain completely independent because of market forces in the health care industry, Skelley said. Inpatient volumes are up more than 17 percent over last year but reimbursement cuts are eating at those gains, he said. Medicare is looking to cut $123 billion over the next 10 years and much of that will be borne by the providers, which is tougher on the smaller ones, said Kathy Whitmire, managing director for HomeTown Health LLC, which represents 56 rural hospitals in Georgia.

“There’s nowhere to fill that gap,” she said. “There’s nowhere to gain revenue to make up for the losses. This is the toughest time that rural hospitals and smaller health care providers have ever had. The forecast isn’t very bright.”

Smaller providers are finding it difficult to access capital to make building improvements to aging facilities, Whitmire said. It is tough for Walton, too, despite good cash flow and a positive bottom line, Skelley said. For instance, Walton has to implement an electronic medical record but as a rehab facility is not eligible for the federal funds other hospitals and physicians can access, he said. That would be a minimum of $3 million plus another half-million a year to operate, Skelley said.

“So at this point, it is up to us to do that on our own,” he said. “While we have been doing that in pieces, we are hopeful, through this process, we might be able to find a partner who has a comprehensive electronic medical record already in place that could be incorporated into our operations.”

Future payments will be bundled, meaning a single total payments that must be shared by providers even as the patient moved from system to system, causing Walton to face negotiating for payment with other providers if it remains independent, Skelley said.

The interested parties were asked to return proposals by Aug. 17 and Walton’s board hopes to make a decision by Aug. 31, he said. If it proceeds with an affiliation or other move, the board hopes to have an agreement spelled out by Oct. 31, Skelley said. It could mean review by the Georgia Attorney General’s office, which could take another 90 days, he said.

“All said and done, before anything could be completed, it would be early 2013,” Skelley said.

It could be part of the trend of merging and affiliating in the Augusta area this year, where Augusta State and Georgia Health Sciences universities are consolidating and McDuffie Regional Medical Center was acquired by University Hospital, he said. And that could all be change for the better for the area, Skelley said.

“If a decision is made to strategically align or partner, we’re excited about what the future may hold,” he said.

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