The years 2005 and 2006 were great ones for Skiff Medical Center. Revenues were high, employee morale was exceptional, and the satisfaction of patients with the hospital had never been higher. Skiff had experienced more than a decade of growth and was recognized throughout the Iowa health-care community as one of the best rural hospitals in the state.
Skiff had evaluated the idea of gaining Critical Access Hospital (CAH) designation prior to the final deadline for application in January 2006, but limiting the inpatient capacity of the hospital was an unpopular idea with the medical staff as the number of patients in-house at times exceeded the limit of 25 associated with the CAH designation.
This decision, combined with the strong growth trend of prior years, no doubt seemed like a good one at the time, and the CAH application deadline passed quietly by.
Skiff had successfully navigated the ever-changing currents of the health-care industry for nearly 90 years, and the modern version of the organization bore little resemblance to its humble beginnings in the small house with a $350 per month budget in 1917.
To be sure, the mid-2000s were not without challenges at Skiff. Payment for health-care services had been getting tougher for quite some time as private insurance companies continually reduced their reimbursements to hospitals. The Maytag Corporation had fallen on hard times in recent years, and by 2006 the acquisition by Whirlpool was complete and the plants and headquarters in Newton had begun to close.
While the changes associated with Maytag were projected to have an impact on Skiff, it was thought to be something to which the hospital could adapt.
Fiscal year 2007 continued the long-term trend with another great year of volumes and financial performance.
It was marred only by the departure of Eric Lothe, Skiff’s long-time CEO, who had accepted the position of President with Health Enterprises of Iowa in Cedar Rapids (the company that is now investing in the new medical laboratory in Newton).
The fiscal year ended with positive performance as the search for a new CEO was undertaken.
Newton had undergone a considerable change since the departure of Maytag. Some employees of the plant and the headquarters relocated to other Whirlpool sites out of state, leaving Newton for good.
Those who elected not to relocate went in search of jobs, only to find that the high pay and great benefits of Maytag were nearly impossible to match locally and difficult to match even when commuting to employers in the greater Des Moines area. Newspapers from around the country chronicled the devastation wrought to the local economy and focused many articles on the problem of health insurance coverage.
Maytag had provided exceptional health-care benefits and Skiff had benefited from this extraordinary coverage for many years, but as people migrated to less supportive insurance plans, or lost their coverage entirely, the costs of health care forced many to forego seeing their doctor and limit visits to the hospital to only emergencies.
A free clinic hosted at Skiff was started by the physicians in town at this time, and it immediately became the only source of health care for many individuals in the community.
By early 2008, about the time the new CEO started, it had become clear that the long-term growth trend had ended and, in many departments of the hospital, volumes actually began to decline. Unfortunately, as is the case with many organizations, long-term growth trends create cultures in which the expectation is that those trends will continue.
Add to this the effects of increasing expenses associated with inflation, and a serious disconnect appears in which expenses continue to grow while revenues begin to decline and mounting financial losses inevitably result.
At about this same time, key physicians began to depart due to retirement or personal reasons, reducing volumes even further. The escalating financial issues began to cause divisions at Skiff. Many were in disbelief that a hospital that had done so well for so long could suddenly be experiencing such an extreme downturn.
In early 2009, the situation had become dire, marked by the departure of many individuals in leadership capacities in the hospital. An outside health-care operations firm was engaged in 2009 to fill the gap in leadership and develop a path toward restoration.
Intense analysis revealed that a two-fold approach of volume growth and expense reduction were needed. Due to the severity of the situation, the interim leadership implemented a significant reduction in force. Unfortunately, the process was handled poorly by the outside firm and it only fanned the flames of division already in place in the hospital.
Late in 2009, the board made the decision to appoint Brett Altman, then Director of Physical Medicine and Rehabilitation, to the post of interim CEO while the search for a permanent CEO was completed. The appointment of a talented internal person to the position was a huge stride forward, and one of the first tasks Brett completed was sending a letter to the US Department of Health and Human Services (the department in which Medicare is included) for inclusion in the Critical Access Hospital program.
By this time, there was no question that the hospital was small enough to operate under the 25-bed limitations of the program and that the significant financial benefit associated with its cost-based reimbursement model would go a long way toward ensuring the long-term viability of Skiff.
Unfortunately a response was received a few months later recognizing that, though Skiff would benefit from the Critical Access Hospital designation, other hospitals were located within 35 miles, and the state no longer had the ability to waive the mileage limit by designating the hospital a “necessary provider.” Sadly, Skiff was no longer eligible for the program.
Shortly after this, in January 2010, I had the privilege of joining the Skiff Medical Center family and got right to work with the Skiff team.
Then, on March 30, 2010, President Obama signed the Affordable Care Act into law and the future of the entire health-care system in America changed …