Term Paper on "Organizational Analysis of Community Health Systems Home Ported in Tennessee"

Term Paper 17 pages (5245 words) Sources: 20 Style: APA

[EXCERPT] . . . .

Community Health Systems (CHS) is a large corporation that owns and operates full-service hospitals in non-urban areas. In most such areas, CHS is typically the sole or primary acute care services provider. The company currently operates some 75 hospitals with about 9,200 licensed beds in more than 20 states, with most found in the southern United States. These hospitals offer a variety of inpatient and outpatient medical, surgical, and emergency services. Some of the hospitals also offer skilled nursing and home health services. CHS seeks to control supply costs by means of its membership in the group purchasing organization HealthTrust, and this organization negotiates price agreements with suppliers on behalf of its members. The company analyzes its mission and its operation to see how the two mesh and to determine the population served, the various services that are needed most, ways of reducing costs, laws that may apply to the operations in different states, and much else that enables the company to maximize profits while maintaining a high level of service.

Community Health Systems (CHS)

Community Health Systems, Inc., either directly or through its subsidiaries, owns, leases, and operates acute care hospitals serving as the principal providers of primary healthcare services in non-urban communities. When the company reported on December 31, 2006, it owned, leased, or operated 77 hospitals across 22 states, with an aggregate of approximately 9,117 licensed beds. On February 1, 2007, the Company executed an agreement to acquire the 159-bed, Lincoln General Hospital in Ruston, Louisiana. As of November 1, 2006, CHS acquired Campbell County Hospital, a 99-bed facility located in Weatherford, Texas. On November 1, 2006, CHS acquired Union County Hospital, a 25-bed facility located in Anna, Illinois. As of October 1, 2006, the company completed the acquisition of HelpSource Home Health, a home health agency located in Wichita Falls, Texas. As of September 1, 2006, the Company completed the acquisition of Humble Texas Home Care, a home health agency located in Humble, Texas. The company has continued to acquire such facilities in different states. Reuters characterizes the business of the company as follows:

The Company generates revenues by providing a range of general hospital healthcare services to patients in the communities, in which it is located. Services provided by the Company's hospitals include emergency room services, general surgery, critical care, internal medicine, obstetrics and diagnostic services. As part of providing these services the Company also owns, outright or through partnerships with physicians, physician practices, imaging centers, home health agencies and ambulatory surgery centers (Community Health Systems Inc.: Company Description, 2007, para. 3).

A major part of the strategy for this company is the acquisition of existing hospitals and hospital chains (Saito-Chung, 2002, p. B06). This has become the primary way this company grows, and it pursues this strategy in stat after state. The company has started to organize regional operational divisions around different groupings of hospitals, as it has done for seven hospitals in Tennessee, along with Parkway Regional Hospital in Paducah. All of these facilities are within an hour of Jackson, Tennessee. The intent is to integrate existing facilities into another hospital company's network, and this is said to be a delicate procedure. Parkway was already in the Community Health system, and integrating thee other seven hospitals into the system gives administrators in the new hospitals a resource they can use during the transition period. Such a move can also accelerate the process of integration. As can be seen from the above, CHS has been acquiring new hospitals at a rapid rate, making CHS the largest of the three publicly trade hospital companies focusing on the rural market, ahead of LifePoint Hospitals, Inc. And Province Healthcare Co. Inc. In Nashville. Come have raised concerns about growing too quickly, but the company does not worry about this because it ahs demonstrated the ability to acquire hospitals and to do so successfully as an integral part of the company strategy (Growing CHS to group acquired hospitals in new division, 2003).

While acquisition is the primary strategy for the company, executives note that deciding which hospitals to buy is not a simple task. CHS does not simply buy every hospital chain on the market, and the company is said to be selective in making this decision. The company seeks opportunities in suburban areas and areas where it has no holdings as yet. CHS does due diligence in examining any offer and in deciding which hospitals to buy and which not. In each case, the company also has to gain the needed regulatory approval for the acquisition, which is usually based on issues such as financial soundness for stockholders and the maintenance of some competition in a given region. The approval process can take several months in most cases (George, 2001, p. 10)..

Company History

Community Health was founded by Richard Ragsdales and E. Thomas Chaney, and they assumed an active role in running the company. The company was founded in 1985. In the beginning, Ragsdales served as the company's chairman and Chaney served as its chief executive officer. The first hospital they controled was the Fannin Regional Hospital in Blue Ridge, Georgia, acquired in January 1986 with 34 licensed beds, the fewest number of beds acquired by the company during its first twenty years in business. This was followed by the purchase of two more hospitals, the Highland Medical Center, a 123-bed hospital in Lubbock, Texas, and the Russell County Medical Center, a 78-bed hospital located in Lebanon, Virginia. The first three hospitals provided a blueprint for expansion as the company set its sights on acute-care hospitals operating in rural communities, focusing on towns with populations ranging between 20,000 and 80,000. Candidates deemed suitable were generally operated as nonprofit hospitals and typically were suffering from financial problems. Community Health operated as a publicly traded, for-profit, enterprise, and it served as a sort of savior for troubled rural hospitals. For Ragsdales, Chaney, and their successors, Community Health's strategy allowed them pursue two missions at the same time: serving the public good and focusing on generating profits. The strategy was sound and provided service for a specific population. According to U.S. Census Bureau figures, one-quarter of the country's population lived in rural communities during the early decades of the company, and these communities were served by hospitals spread far apart. A given community was often dependent on a single hospital for providing healthcare. Community Health focused on communities in which it would become the sole provider of general hospital services, and the company targeted hospitals that were located more than 25 miles from any competing hospital. This strategy left Community Health free from any meaningful competitive pressures while also aiding the community being served. The financial well-being of an isolated hospital was clearly integral to the health of the community it served. The continued existence of the hospital provided another benefit to the community by serving as one of the community's primary employers. Resistance was seen to the idea of a corporation taking over control of nonprofit hospitals in certain areas of the country, but more often communities welcomed the arrival of Community Health, whose intervention rescued financially failing hospitals and often meant an improved level of healthcare at the same time (Community Health Systems, Inc., 2005).

The company was effectively becoming a company in the corporate turnaround business, after which it would improve the management of each acquisition and gain a more valuable business through its efforts. Community Health made capital improvements in the hospitals it acquired and also expanded the services offered by these hospitals. CHS invested in more sophisticated emergency rooms and added physical rehabilitation centers and capabilities such as laser surgery. The company also recruited doctors, and this was often a difficult task in the more remote areas of the country. CHS would attract young physicians by offering subsidized office space and other incentives. These changes would be combined with the standardization of tasks such as accounting, all presided over from a central office, and the result was better, more profitable hospitals. According to Forbes magazine in December, 1991, the company was "turning marginal outfits into big moneymakers" so that revenues by the end of 1991 reached $138 million, from which the company made $9.3 million in profits (Community Health Systems, Inc., 2005).

The financial growth of the company in the 1990s increased rapidly, and this increase was driven by several factors seen as offering ideal conditions for Community Health's acquisition strategy. More than 450 community hospitals, most nonprofits, went out of business during the decade, and this reduced the resistance of for-profit companies coming in to salvage nonprofit hospitals. Chaney was in charge of the day-to-day management of the company and made his most aggressive move during this period by completing the acquisition of Atlanta-based Hallmark Healthcare in 1994, an acquisition that nearly doubled the size of Community Health, giving the company 18 hospitals.

Roughly a year later, a leadership dilemma led to dramatic changes as Chaney announced he no longer wanted to lead… READ MORE

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