Increased competition from other hospitals in Northern Virginia has prompted Loudoun Memorial Hospital in Leesburg to reorganize its services, opening the way for the hospital's owners to enter other lines of business on a for-profit basis.
Under the reorganization, passed in April by the hospital's board of directors, Loudoun Memorial is now one of several subsidiaries of a newly formed company known as Loudoun Healthcare Inc., hospital administrator Kent Stevens said. The hospital will retain its tax-exempt status as a nonprofit organization.
One of the most important changes may be the separation of the hospital's long-term care facility, used primarily by elderly patients, from the hospital, associate administrator Charles C. Taylor said.
In the past, Taylor said, many of the costs of the long-term care unit have been subsidized by revenues from other hospital operations.
Taylor said the long-term unit will now be a nonprofit subsidiary of Loudoun Healthcare, and not connected with the hospital. He ruled out any increases in fees at the long-term care facility, saying that for the foreseeable future this will be avoided by cost-trimming measures that are not planned to affect service.
"We will take a long hard look at what the true costs of the facility are, what if anything we should be doing differently," Taylor said.
Stevens said the board wanted to enter profit-making enterprises without endangering the tax-exempt status of the hospital, which receives significant amounts of charitable contributions each year.
"If you get into certain businesses that are not related to the hospital per se, the IRS starts to take notice. We needed to diversify our enterprises, but we could not keep them under the same corporate entity," Stevens said.
The most visible of these diversifications will be the construction of an office building, to be owned jointly by Loudoun Healthcare and a group of physicians who work at Loudoun Memorial.
The building, located opposite the Leesburg campus of Northern Virginia Community College, will open in August 1986, Stevens said.
Taylor said that hospital officials hope the building will "be a flag to attract young, talented doctors," to Loudoun Memorial.
Hospitals in the area have been competing with increasing intensity for physicians, especially since the construction of a new hospital to be built in Reston was announced earlier this year, said Mark Epstein, an official with the Health Systems Agency of Northern Virginia Inc., a health care planning agency.
"You hear more and more of the jargon of the marketplace and of competition in health care these days. Health care is more of a business than ever before," said Epstein.
But Epstein said that efforts to lure physicians to hospitals like the kind that is occurring at Loudoun may cause health care costs to rise unnecessarily. In the effort to attract doctors, hospitals often acquire medical equipment and services that are already available in the area.
"From a community standpoint, more is not necessarily better," said Epstein.
But Loudoun hospital officials insist that the changes they have made will make it easier on the average consumer. Revenues from Loudoun Healthcare's other enterprises will be plowed back into the hospital, Taylor said.
Hospital officials added that next year will bring no increase in Loudoun Hospital's room and board fees, the first time this has happened in several years.