Loudoun Healthcare Inc. has sent a letter notifying employees that it faces a financial crisis and two choices: cut costs or find a new owner for the county's only hospital.
The letter said the not-for-profit Loudoun Hospital Center had operating losses of $20 million in the last two years because of unexpected costs involved in opening a new hospital while continuing to use the old campus.
Industry analysts and Loudoun Healthcare officials said the 80-bed Loudoun Hospital is beset with the same financial pressures that are forcing other hospitals to retrench. But they said running two facilities compounded the hospital's problems.
"The people who did the projections on what that was going to take just missed it," said Cheree Cleghorn, senior vice president for corporate affairs at Loudoun Healthcare.
"We had to do too many things for the first time all at the same time," Cleghorn said. "All of the big changes kicked in the same year we moved. The scale of change, the speed of the change -- internal and external -- has been more than our cost structure could bear."
Loudoun Hospital moved in October 1997 to a new $58 million facility in Lansdowne to be closer to the burgeoning population in the eastern part of the county and to fend off competition from hospitals in Fairfax. The old campus in Leesburg is used for transitional care before patients go home, and it also has a psychiatric unit.
Loudoun Healthcare officials said they are committed to maintaining an independent community hospital. The letter to employees from G.T. Dunlop Ecker, president and chief executive officer, said overcoming the crisis will require negotiating "more favorable" managed-care contracts, "charging appropriately" for services and taking "extraordinary measures" to control costs.
Cleghorn said that hospital employees have been aware of the problems and that their fears for their jobs "will slowly start to come down. . . . We'll look for every dollar we can save before we get to jobs."
Ecker said task forces of management employees will spend the next two months identifying cuts they can carry out in their areas.
Doctors and nurses at the hospital said they were not surprised to learn of the crisis, especially given the drop in reimbursements from health insurers. "It's a complicated business to be in these days, and that's cause for great alarm," said Grace Keenan, a doctor with the NOVA Medical Group, which recently became affiliated with Loudoun Healthcare. "We want it to remain a community hospital."
If Loudoun Hospital does, it will be bucking the tide. "Generally, the trend in health care . . . has been towards consolidation," said Katharine Webb, a spokeswoman for the Virginia Hospital and Healthcare Association.
Webb said mergers allow economies of scale and greater leverage in bargaining with managed-care organizations.
Rick Wade, a spokesman for the American Hospital Association in Washington, said proliferating managed-care organizations are demanding hospital care at lower costs. At the same time, he said, patients and their insurers are seeking newer hospitals outfitted with state-of-the-art equipment, forcing hospitals to upgrade their facilities or risk losing market share.
Loudoun Hospital's occupancy rate last year was 79 percent, with a 10 percent increase in inpatient services and a 20 percent rise in emergency room visits from the previous year. "We kept thinking, `The revenue is coming, it just isn't here yet. Nobody can be this busy and not making money,' " Cleghorn said.
The 20-bed transitional-care unit at the old campus operated at 39 percent capacity, less than necessary to cover costs, according to industry analysts.
"If they're both running at 80 percent, they're okay," Gerard Anderson, director of the Center for Hospital Finance and Management at Johns Hopkins University, said of the two Loudoun facilities. He said the trouble comes "if they're together running at 40 or 50 percent."
Staff writer Dana Hedgpeth contributed to this report.