The Norman Regional Hospital Authority Board declared independence for the Norman Regional Health System, accepted a transformative plan for its future and elected a new board chair at a business meeting Monday.
Norman Regional Health System independence
The decision to remain independent halts any discussion of potentially selling Norman Regional to another healthcare system.
Douglas Cubberley, chair and attorney at Redwine and Cubberley was the only member of the board who opposed the statement for independence. He apologized to the board for authorizing the request for proposal in February but said he did so due to the hospital’s financial situation.
“I know that it created tremendous dissension for that and the manner in which it came about,” Cubberley said. “I do apologize to you all, but the fact remains, though, that I still believe that we should consider those proposals, whether we hire (Plante Moran) or someone else.”
Board member Kelley Lobb said she supported Norman Regional Health System’s independence.
“We don't have time. We have to commit to the task at hand. The task at hand is doing everything that we can to keep this healthcare system independent,” Lobb said. “I fully support this statement because if we're not all on the same board on moving in the same direction, it's going to be a mess, and we can't afford that.”
In a Facebook post on Monday night, Norman Regional Health System wrote that the decision to remain independent came after thoughtfully considering several options that would benefit its patients.
“Our number one priority is continuity of care. We remain committed to providing personalized healthcare with compassion and excellence for the residents of south central Oklahoma for many years to come.” The post read.
Appointments
During the meeting, Cubberley announced he would resign as chair, effective Monday night. He said he believed the board was fractured in light of the hospital’s financial circumstances and recommended Lobb as chair.
The board approved Cubberley’s resignation and Lobb’s appointment.
“We don’t have a lot of time; we need to build board trust. New leadership will build that trust much quicker than I ever could, if I could at all,” Cubberly said. “It's time for new eyes, for a new leader, to take over and to help this board to make the hard decisions that are coming toward us.”
Lobb said there would be a learning curve but is committed to the role.
“If it means at the end of this that Norman Regional is strong and independent, … I'm willing to do what it takes,” Lobb said.
The board also approved the resignation of Rick Wagner, former chief financial officer, and appointment of Aaron Boyd as president and CEO of Norman Regional Health System.
Transformative plan
The board also approved a proposal from Plante Moran, an audit, tax, consulting and wealth management firm headquartered in Michigan, for a transformative plan.
A presentation by Duane Fitch, Plante Moran healthcare consulting practice leader, listed significant concerns for Norman Regional Health System:
• Not meeting bond covenants for many years.
• Large operating losses that result in “significant” liquidity reductions.
• Operating losses greater than budgeted expectations.
• Uncertainty in the community about the future of the system due to financial performance.
• Large employed physician group subsidies that are difficult to absorb.
Fitch urged the board to create a cohesive plan for the community that reflects an understanding of the depth of challenges facing the Norman Regional Hospital System.
“You've got these operating losses, and you don't have a lot of time to pivot,” Fitch said. “This has got to be immediate and sustainable and thoughtful, or else someone else is going to come in here and make these calls. And I didn't hear anyone say that's what they want to have happen.”
Fitch’s presentation listed an annualized total margin improvement target of $50 million.
“Don't look at the 50 million as a cost cutting endeavor. We’ve got to grow the revenue.
"You don't have 50 million in expense to cut here,” Fitch said.
Fitch said the board would make the decisions while Plante Moran would act and make recommendations. He added the transformation process would take six weeks under different circumstances but would require urgency.
According to Fitch, Norman Regional Hospital System can not afford Plante Moran if it does not take action regarding its finances. He added this was part of the reasoning behind his trust in both Plante Moran’s process and the hospital system.
“Frankly, you can’t afford us if you don't do anything, we're paying for ourselves. Believe me, that keeps me up at night sometimes because our fee is in your hands,” Fitch said. “If you guys don't do anything, we'll all go off the cliff together. (It’s) really important that you're focused on coming out with an aligned plan that everyone is behind and that you can calm down this community.”
Fitch also suggested using financial analysts and cost accounting.
“You don't have a cost accounting system here, right? (A) $600 million healthcare system? You're making decisions on instinct and guts and judgment, and we've all paid for our judgment, but boy, judgment is a lot better with data, so we've got to figure that out,” Fitch said.
Fitch said Plante Moran projects a 3% reduction in labor-related expenses but does not “slash and burn” regarding productivity. He said he also wants to consult doctors in Plante Moran’s work to determine potential problems.
“We do a lot of work on benchmarking, a lot of work on redesigning workflow, a lot of work on our people working at the top of their license,” Fitch said. “You're in a competitive environment. We want to fight for our staff. They're the backbone here.”
Background
In February, the Norman Regional Health System announced it was issuing a request for proposal for a potential sale of the hospital or partnership opportunities with other health systems.
“While this is not a path we originally intended to consider, current financial challenges have led us to evaluate all options that could provide the necessary capital and resources to support our long-term stability and growth,” the letter read. “Unfortunately, despite record-breaking volumes in January, we did not see the dramatic financial turnaround we hoped to achieve.”
According to a report by Moody’s Ratings, a bond credit rating business, Norman Regional Health System had $328 million in outstanding debt last year. In November, Moody’s Ratings also downgraded Norman Regional Health System’s revenue bonds rating from Ba1, “stable,” to B1, or “significant credit risk.”
SMMHealth, a Catholic health system with locations in Moore, Oklahoma City and Purcell, has expressed interest in a partnership, according to the Oklahoman. The Oklahoma also wrote Jimmy Durant, director of government affairs for SSMHealth, answered the request for proposal.
“We are very interested in a partnership with Norman Regional," Durant told the Oklahoman. "Our system submitted an answer to their RFP and we will have a representative attend the board meeting Monday night. We are interested in hearing what direction Norman's board wants to go."
This story was edited by Ana Barboza and Ismael Lele. Gretchen Schultz and Avery Avery copy edited this story.
