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Hospital eyes more Hi-Line acquisitions

by Kianna Gardner
Daily Inter Lake | July 5, 2020 1:00 AM

For several months now, Kalispell Regional Healthcare has been quietly pursuing partnerships with other health-care facilities throughout Northwest Montana and along the state’s Hi-Line in hopes of forming a large, regional health network — an expansion officials say is still slowly underway despite being in the throes of a global pandemic.

Details of this expansion were outlined in an acquisition proposal that was recently submitted to the Toole County Commissioners, who, at the start of 2019, had put out a request for proposals (RFP) for an entity to purchase several county-owned health-care facilities in Shelby.

Kalispell Regional submitted a proposal, as did Benefis Health System in Great Falls. The commissioners unanimously accepted Kalispell Regional’s multi-million dollar offer to purchase and eventually expand and improve the Marias Medical Center, Marias Care Center, Heritage Center and Brittan House.

According to the 66-page acquisition proposal, partnering with the facilities in Shelby is hopefully a major step toward a more integrated regional system that may one day also include the Northern Rockies Medical Center in Cut Bank and Pondera Medical Center in Conrad, among others.

The proposal states these medical centers are “exploring a deeper relationship with Kalispell Regional.” Cindy Morrison, chief transformation officer for Kalispell Regional, said health-care officials in Cut Bank and Conrad signed non-binding letters of intent to look into the possibility of merging with the Kalispell Regional System.

“Some of these discussions have already been happening for some time now, but before those talks even started we [Kalispell Regional] had already established working relationships with some of these clinics and centers,” Morrison said. “The organization has a new direction, which is to become a fully integrated operation.”

According to the acquisition proposal, officials believe an expanded integrated network will offer “a unique opportunity to plan, share knowledge and resources, to enhance clinical services, create sustainability plans, advance patient experience and work on quality goals” and “allows the collective organization to approach care management in new and unique ways creating value.”

Kalispell Regional already has slowly started working with leadership in Shelby to evaluate opportunities for expansion of health-care services, which includes the recruiting and hiring of different health-care professionals that will “strengthen the ability for each entity to serve the health-care needs of the local communities.”

The proposal states Kalispell Regional would like to “offer or enhance” primary care, obstetrics and gynecology, general surgery, orthopedics, cardiology, ophthalmology and maternal-fetal medicine services at the medical center in Shelby.

“What we are trying to do is invest in those communities. We are looking at what opportunities there are for growth and what makes sense for the Shelby area and we are asking others who understand those communities to talk to us about the patients’ needs in those areas,” Morrison said. “These same principles would apply to other partners as well.”

In addition to bringing in additional specialists, Kalispell Regional plans to pay about $1 million to upgrade the Marias Medical Center’s software program, will “commit to additional capital of $1.5 million over five years related to infrastructure improvements and increased access to health-care services in Toole County” and will “provide sufficient working capital to operate facilities,” which is estimated to cost nearly $1.5 million.

Over the coming months, the two organizations will be working through a period of planning and due diligence — otherwise known as a comprehensive appraisal — that will hopefully lead to the partnership being finalized by early 2021.

MORRISON ACKNOWLEDGED that “at first glance” it seems like an odd time for Kalispell Regional to be investing in partnerships.

The move toward a large-scale integrated system — a health-care model that has proven increasingly successful and popular in recent decades throughout the United States — comes as hospitals large and small across the nation grapple with uncertainties surrounding the ongoing COVID-19 pandemic. And not least among those is how hospital revenue streams will remain stable, a concern that may lead some to wonder if now is an appropriate time for Kalispell Regional to be investing in an expansion.

At the start of the outbreak, hospitals across the country, Kalispell Regional included, were reporting steep revenue declines as facilities halted profitable services such as elective surgeries in order to make room for what was anticipated to be a wave of COVID-19 patients.

Kalispell Regional Healthcare’s President and Chief Executive Officer Craig Lambrecht said in a letter that officials projected revenue losses in excess of $16 million per month due to the virus. He also said that in an effort to offset some of those anticipated losses, 600 hospital employees would be partially or fully furloughed and hospital executives, directors and physicians would take salary cuts.

Lambrecht wrote, “the compounding effect of the loss of patient volumes, cancellation of elective surgeries, and the closure of the entire service lines has had a tremendous financial impact on KRH.”

But Morrison said a lot has happened since Lambrecht released his letter in April.

Kalispell Regional “lost millions” in the spring due to the virus, but Morrison said stimulus money that was later supplied to hospitals through the federal CARES Act, which amounted to $30 million for Kalispell Regional Healthcare, helped the system immensely.

“Those stimulus dollars really helped stabilize our organization and many other hospitals in the country,” Morrison said. “We are not back to 100% where we would like to be for a whole host of reasons, but we have come a long way since Craig’s announcement.”

The hospital’s fiscal year began in April and Kalispell Regional, which Morrison describes as “a $650 million organization,” is going into this year with a budget that is “pretty close” to what officials had anticipated starting with.

Morrison added the system is financially prepared for what is estimated to be a somewhat volatile year for hospitals as COVID-19 cases continue to ebb and flow in the U.S. and emphasized that setbacks likely won’t impact Kalispell Regional’s plans for the Shelby acquisition. If anything, Morrison said, this outbreak has demonstrated the reliance that Montana’s rural hospitals have on one another.

“I think the pandemic raised the scale of how critical health care is and some very rural clinics have found themselves in a position where they need help and support sometimes,” Morrison said. “I think it highlighted the fragility that a lot of people knew was there. But it allowed us all to focus on how we can all coordinate in a much bigger way.”

Reporter Kianna Gardner can be reached at 758-4407 or kgardner@dailyinterlake.com