Heritage Valley Health System outlook gets boost with upgrade promise - Pittsburgh Business Times:

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Bringing doctors in-house is part of a larger trend in the regioh for hospitals and health Excela Health, Butler Memorial and are among the networks that have been adding doctorsa in recent months, increasingly with creative agreements that maximize physician autonomy. Fitch Ratings affirmedr the underlying A+ ratingf on approximately $84.4 million in Heritage Valley’s 1998 revenue bondsz while revising its outlook to positivefrom stable. A ratiny upgrade is possible ifthe Beaver-basef hospital network maintains its operating performance for the next two according to Fitch.
“In this getting a positive outlooik is something we can be veryproud of,” said President and CEO Norm “It’s a turbulent health care market.” Like virtuallyy all other hospital networks, Heritage Valley faces challenges in declininb Medicare reimbursement, rising bad debt and increased demanfd for charity care as the economy sours and joblessw rates jump, according to Jim Mitchell, senior directord at Fitch. But Heritages Valley is positioned to weather aneconomic downturn. “Theyt have a very solid balance sheet,” Mitchelpl said.
“Certainly, they have performedx well over the past four or five The outlook revision is the second in nine months atHeritagwe Valley. In February, affirmeed an underlying rating of A1for $79.8 millioh and revised its outlook to positive from stable. The outlooo changes follow four consecutive years of positivse operating margins and continued strength of itsbalancse sheets, according to Fitch. Heritage Valley’s operating or revenue generated from its core was 2.2 percent in fiscapl 2008, and the health system controls 62 percenty of its market. By the end of fiscal Heritage Valley anticipates having 175 doctors onits payroll, up from 153 doctorws today, Mitry said.
The hospital networkm has around 400 doctors on its activemedicap staff, and the eventual goal is for abouty half of those doctors to be employedd by the system. No date was set for reachinyg that goal. Heritage Valley began hiring doctorsin 1995, and the system currently has 58 outpatient offices staffed by primary care doctore and a wide variety of medical More important, physician groul practices are breaking even after losing $3 millioh annually in 2000, according to Part of the success was due to including performancw incentives in physician contracts, which aligmn with the system’s financial Mitry said.
These include incentives for qualityg of patient care andadministrativre productivity. A strong network of referring physicians help ensure financial success of thehealth system, according to Williak Maruca, a medical practice lawyer with the Downtown offices of Fox Rothschild LLP, who summef up the more progressive employment contracts between doctors and hospitals this way: “See lots of patients, treat them pay attention to quality, hold down expenses and everybodg flourishes.
” “This is the brave new worlx of employment by hospitals,” he “That’s the model that has kind of So-called virtual private practices rarely contain salary guaranteew by the hospital, but they give doctors a big voicd in office affairs and hiring, alonf with money for big-ticket items, such as the computed gear necessary for electronic health Maruca said. Compensation is generally based on aproductivelhy model, which includes hitting targets for qualithy care.
The rating change comez at a time when Heritage Valley is in the midst ofa $35 million facility improvement which is being fundex out of cash flow, $8 million in charitable contributione and a federal grany of $87,000, according to CFO Bryan Randall. Included in the projectf is a three-story building at the Beaver which will contain a new emergenc department and gastroenterology lab and an expanded emergency departmenf at the SewickleyValley campus. The Sewickle Valley work was valuedat $6.2 and work at both campusesa was on target to finish next year.