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Struggling financially, Bayfront may seek partner with deeper pockets

Bayfront Medical Center sits on land owned by St. Petersburg, which forced it to sever ties with BayCare over abortion policy.

MELISSA LYTTLE | Times (2011)

Bayfront Medical Center sits on land owned by St. Petersburg, which forced it to sever ties with BayCare over abortion policy.

ST. PETERSBURG — Bayfront Medical Center, a storied Pinellas County hospital struggling as an independent institution, may be looking for a partner with deeper pockets.

Hospital officials won't say directly that they are seeking a buyer, but do speak of interest in "strategic" partnerships. At a time of consolidation in health care to cope with rising costs and a transforming system, Bayfront's independence increasingly makes it an anomaly.

Two of the region's other standalone hospitals — All Children's Hospital and University Community Hospital — recently shored up their futures by merging with much larger systems.

Bayfront's financial statements help explain the interest in a partnership. In 2011 and 2010, its operating margins, key indicators of its core patient-care business, were razor thin — less than 1 percent, state records show.

In 2009, the operating margin — the difference between patient-care revenues and costs — was $4.8 million in the red.

Experts say nonprofit hospitals generally aim for at least a 3 percent margin. But variations can be wide: St. Anthony's Hospital, a not-for-profit less than 2 miles from Bayfront, posted a 10 percent operating margin in 2011, according to state records.

Recent developments could make it even harder for 480-bed Bayfront to remain a solo player:

• The largest multispecialty doctors' practice in south Pinellas County, Suncoast Medical Clinic, is moving at the end of the year from Bayfront's campus to St. Anthony's, which likely will mean even more patient business for St. Anthony's.

• Two new trauma centers have opened at HCA hospitals north and south of Bayfront, siphoning away hundreds of critically injured patients — and the income they generate to support expensive trauma care.

• Changes to Medicare and Medicaid, the government's health insurance programs for seniors and the poor, are likely to erode income at most hospitals, but particularly at Bayfront.

"It seems to me the biggest challenges are how to survive when revenues are barely growing and (Bayfront) has a very large Medicare and Medicaid share with few privately insured (patients)," said Mark Pauly, a professor of health care management at the University of Pennsylvania's Wharton business school, who reviewed Bayfront's 2011 state financial filings.

"When the Medicare cuts start to bite, they will hurt — and it is not obvious there is any way of coping," Pauly added.

Bayfront leaders acknowledged that the hospital is exploring its future generally, given the many changes facing the health care industry. But it has not identified a prospective partner.

"Everybody is talking to everybody about everything," said Kanika Tomalin, Bayfront's vice president of strategic planning.

In a partner, she explained, Bayfront seeks not just to join a hospital system, but to expand its outpatient services and physician alliances. That's because the U.S. health care system is expanding its focus from caring for the sick to include emphasizing wellness and prevention.

Tomalin said that for all the challenges Bayfront faces, its mission remains constant: quality health care for all who come through its doors.

Once known as Mound Park Hospital, Bayfront has served St. Petersburg for over a century. It has a reputation for welcoming uninsured patients and Medicaid recipients, and prides itself on offering a full range of medical services, some unavailable elsewhere. It boasts Pinellas County's only Level 2 trauma center, and its new Baby Place is the county's only state-designated high-risk perinatal referral center.

"If we are able to access the benefits of partnership — and preserve that mission and continuing commitment to the community — that would be what's best," Tomalin said.

• • •

Bayfront has tried to team up before. In the 1990s, it was among the founding members of a regional network of not-for-profit hospitals, BayCare Health System, which today includes St. Anthony's, St. Joseph's in Tampa and the Morton Plant Mease hospitals in mid Pinellas. BayCare claims the largest share of the Tampa Bay health care market.

But Bayfront had to leave the organization after St. Petersburg city officials learned that it had revised its abortion policy in deference to BayCare's Catholic ties. The city, which owns the land Bayfront sits on, sued the hospital for violating separation of church and state.

Any future change of control at Bayfront, a private, secular hospital, would require the approval of the City Council.

In a highly competitive market, Bayfront's finances have grown precarious.

"What is really disconcerting is their low net patient revenue," said John Large, an assistant professor in health policy and management at the University of South Florida. He noted that most of Bayfront's medical services are funded through Medicare and Medicaid, whose reimbursements are a fraction of billed charges. "As these payer types increase, the hospital may start to lose money."

On the upside, he noted, Bayfront has relatively low debt for a nonprofit hospital.

"We do operate on thin margins and a lot of that has to do with our heavy commitment to the community and charity care," said Bayfront CFO Bob Thornton. "That is the burden that we bear."

But he said the organization remains strong and has invested in recent years in the construction of Baby Place, a new maternity unit, new operating rooms and a heart center.

Finances are not driving its current discussions, Bayfront leaders stress.

"Our evaluation of partnership is not from a position of crisis, financial or otherwise," said Tomalin. "It's really a strategic imperative that's very proactive."

• • •

So who might be interested in Bayfront? None of the major players in the region are raising their hands, at least publicly.

Leaders at Johns Hopkins Medicine, which merged with neighboring All Children's, say they're only interested in pediatrics in the Tampa Bay market.

At the Florida Hospital/Adventist Health System, which bought University Community, officials acknowledge that they routinely reach out to unaffiliated hospitals. But no formal discussions are under way with Bayfront.

The HCA hospital chain, a for-profit enterprise that owns nearby St. Petersburg General, Edward White and Northside hospitals, declined to comment. HCA recently opened trauma centers in Pasco and Manatee counties that are drawing out-of-county patients who used to come to Bayfront.

BayCare isn't in talks with Bayfront, either, officials said. It is building a $22 million medical office at St. Anthony's for the Suncoast Medical Clinic, whose approximately 50 physicians plan to move from Bayfront's campus at the end of the year.

Suncoast doctors will continue to practice at both hospitals, and officials insist that patients will decide which hospital they use.

But experts expect the move to benefit St. Anthony's.

"The reality of buying a 50-physician group means you expect that (hospital) business, diplomacy aside," said Peter Young, a veteran hospital consultant from Fort Myers.

He also said that Bayfront would likely have to change its operations if it were acquired.

"It fits into some other organizational structure, but the question is, what does that look like? And does it fit in as it is now?" Young said. "It fits in with very significant reconfiguration of service lines and likely the elimination of service lines."

While stressing its legacy of quality care for all, Bayfront leaders acknowledge that change may be inevitable.

"How can we be most relevant and meet our goals for the future? There is not one path to that that's predetermined," Tomalin said. "The goals are defining where we go — if we go."

Letitia Stein can be reached at lstein@tampabay.com or (727) 893-8330.

Struggling financially, Bayfront may seek partner with deeper pockets 08/27/12 [Last modified: Monday, August 27, 2012 10:26pm]

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