Case Study: Edgewood Lake Hospital - Leadership in a Rural Healthcare Facility During Challenging Economic Times
Edgewood Lake Hospital (ELH) which opened in 1945, is a 30-bed, independent, not-for-profit hospital located in rural northern California. It provides inpatient and outpatient services to the close-knit community that resides within the forested and lakeside town the facility is nestled in. Although it is known for its great track record for quality and is held in high regard by the surrounding community, it has steadily experienced financial losses from 2006 through 2009. These losses can be attributed to factors both internal and external to the facility itself. Poor executive leadership by the recently replaced CEO, Richard Fuchs, has resulted in great financial losses for ELH. Further paramount financial losses have resulted from extreme budgeting discrepancies, mismanaged funds and failure to identify loss-contributors in time to rectify them. These losses have resulted in a decreased morale of the existing staff and have made recruiting for open positions difficult. The staff’s faith in the facility and its longevity has wavered and diminished as a direct result of mismanagement and the resulting financial instability. Nearby competition from a newer and better-equipped for-profit hospital that offers specialty care is a direct and impending threat. Increasing billing regulations from Medicare that call for replacing/purchasing new computer systems are sure to add to the surmounting financial pressures. The Board of Directors has hired a new CEO, Shannon Johnson, who comes from serving 5 years as CFO to Rocky Hills Valley Hospital, a critical access facility in rural northern California. She will be faced with the challenge of employing effective leadership in order to make ELH profitable within a 2-year time span. By examining the current state of the hospital, identifying its key stakeholders and scanning its internal and external environments for contributing factors and possible areas for improvement, strategies aimed at better positioning ELH both competitively as well as financially will be recommended. Key Stakeholders
ELH has various stakeholders, each of which has a different relationship with and varying interests in the community hospital. One group of stakeholders would be the close-knit, small community that is offered inpatient/outpatient services by this facility. This stakeholder group boasts a county-wide population of 5,135 citizens. A more distinctive stakeholder group would be the elderly sector of the population, as they make up 54% of the payer mix that is responsible for all revenue received by ELH. The healthcare costs of these senior citizens are funded by the government through the Medicare program. Another group of stakeholders is the primary care providers within ELH. Although the hospital does afford them a facility to practice medicine in, growing discontent has resulted as of late within this stakeholder group. Due to the lack of specialty physicians in this facility, these providers have been forced to provide care that is out of their scope of practice and out of their comfort level. Another principal stakeholder is the newly hired CEO of ELH, Shannon Johnson. She is a graduate of a major university and is also a certified public accountant. Her role will be a vital one in whether ELH recovers from its recent history of financial losses as her executive leadership spearheads this effort. She was chosen by the board of directors as she brings with her experience in managing a hospital in a rural setting. Another stakeholder, as well as direct competitor, for ELH is Creekside Trails Hospital. Although each hospital serves distinct patient populations, a competition for patients in recent years has developed.