Investments for the Future Strain Memphis-Based Baptist Memorial Health Care

June 23--Baptist Memorial Health Care Corp. will have spent more than $1 billion over five years preparing for an American health care system moving to payments based on value instead of volume, its top executive says.

But those investments come at a cost for the not-for-profit organization with a faith-based mission: Baptist's operating loss grew to $300 million last budget year, more than double what the hospital system lost in 2012 and 2013 combined.

For the first half of this budget year, the loss slowed to about $41 million, compared with about $76 million for the same period last year, Baptist reported. Still, credit analysts predict Baptist won't get close to break-even results until 2017. Citing three years of red ink, Standard & Poor's Ratings Services in February downgraded Baptist's long-term credit rating for a second time since last year, to "A-" from "A."

Officials at the hospital system that serves 110 counties in three states say they are facing a health care future in which they have to learn to live on less revenue, and in which people receive the appropriate care to detour them from needing one of the system's 2,350 hospital beds.

Baptist executives say the investments in hospitals, an electronic health record system and absorbing physician practices are paving the way to better care at reduced costs, as governments, insurers and employers are increasingly demanding.

"Really the call for the future is to be able to deliver care at the absolute best price and transfer from a volume-based system to one of providing value," Baptist chief executive officer Jason Little told The Commercial Appeal during a meeting with the system's top executives.

He said that in many ways, hospitals of the future will be centered around emergency rooms, operating rooms and intensive care units as better care is delivered in homes, doctors' offices and outpatient visits.

"I think as part of our strategy we can demonstrate how not only we're already doing that, but planning to do that for the future, and that really changes the look of how we're delivering care today, and it's why these investments are so essential," Little said.

The more than $1 billion in investments Baptist will make in communities by 2017 include:

A $400 million replacement hospital in Jonesboro, Arkansas, that involved the purchase of a 110-physician group.

A $310 million replacement hospital under construction in Oxford, Mississippi, with a move-in target in 2017.

Spending $250 million installing the Baptist OneCare electronic medical record system, now a year old.

Growing the system's Baptist Medical Group to include about 500 multi-specialty doctors. Of the $299.7 million loss for 2014, about $75 million wasn't cash, but writing off above book-value prices for physician practices.

Other projects have included the $14 million Spence and Becky Wilson Baptist Children's Hospital emergency room that opened in January as part of Baptist Memorial Hospital for Women, and partnering with Centerre Healthcare, which provided funding for the $33 million Baptist Memorial Rehabilitation Hospital in Germantown that opened last October, state filings show.

Baptist's chief strategy officer, Zach Chandler, cited the Jonesboro hospital that opened in December 2013 with its fully integrated medical staff as an example of investments beginning to pay off.

Patients, for example, may see four different specialists in a day instead of making four appointments months apart.

"It means you get better care faster, the right care, at the right place, at the right time, at the right cost," Chandler said. "We had to invest close to $400 million, but today it's up and running, cash is flowing, so you invest a bunch of money, but now we're starting to see the return."

"That's just the right thing to do for patients and care," he added.

Little said Baptist's system has squeezed $200 million in costs of health care in the last two years by managing care with Baptist Medical Group physicians and affiliates providing coordinated care, aided by the electronic medical record system.

An Aetna health plan called Aetna Whole Health, for example, has seen health care costs with Baptist reduced by nearly 8 percent, he said.

"I'd say the plan is working," said Little, promoted to the CEO seat from chief operating officer a year ago. "The investments that we've made are beginning to take hold."

Copyright 2015 - The Commercial Appeal, Memphis, Tenn.