Nanticoke Health Services, Peninsula Regional affiliation gets final approvals

SEAFORD – Nanticoke Health Services expects to join the Peninsula Regional Health System on Dec. 31 in a move that will help the combined organization provide greater access to local patients and help Nanticoke avoid joining the number of small hospitals that are going out of business.

Peninsula officials said they expect increased capital investments in Nanticoke’s cancer center, health center, and surgical services areas, with additional focus on technology integration.

Nanticoke Memorial Hospital, Seaford DE

The two organizations have received approvals in the past two weeks from the Delaware Health Resources Board and the Federal Trade Commission to move forward with what is described as an “agreement to affiliate in a membership substitution” instead of a merger because they’re both nonprofits. They announced a letter of intent in January 2019 and a definitive agreement in July. The Delaware Health Resources Board approved the application unanimously in late September.

Peninsula Regional Health System is based in Salisbury, Maryland, just over the state line.

“We saw the handwriting on the wall as the health-care landscape has changed,” said Nanticoke Health Services President and CEO Steve Rose, who plans to retire shortly after the affiliation is completed. “We’ve been looking at this since 2014. It’s kind of like dating. You look for partners while you still look good. Some wait too long.”

Rose said the final decision came down to two hospital systems but declined to name the Delaware system that lost out at the end.

“Health care in the future depends on servicing a region and taking care of a larger population,” said Peninsula Regional Health System President and CEO Steven Leonard, whose organization already gets more than 24% of both its revenue and 21% of its patients from Delaware. He expects his organization will be 20% to 30% larger after completion of the affiliation, with no layoffs planned. “Each hospital will continue to do what it does well. And we’ll be growing some services at Nanticoke that will enable Sussex County patients to stay closer to home.”

Both Rose and Leonard said the goal of the affiliation is to improve access for Delaware patients who have had to use Peninsula facilities for more sophisticated treatment, including orthopedic care. They also said the agreement enables them to continue physicians, nurse practitioners, and physician assistants and protect the wages and benefits of all hospital employees. Rose noted that there’s been no increase in turnover since the agreement was announced.

Rose said smaller hospitals encounter “trigger points” that are leading them to consider their options in light of more than 200 rural hospitals closing between 2005 and 2018, according to a November report by the Rural Health Research and Policy Centers. Industry experts says one of the challenges that rural hospitals are having is that they’re being forced to take care of a declining population that tends to be older, sicker, and poorer than patients in urban areas. 

Those trigger points include an inability to recruit physicians and sustain a capital budget. Like many smaller hospitals, Nanticoke also was hurt by a decision by the federal Centers for Medicare and Medicaid that defined all three Delaware counties as urban, which meant that the hospital would no longer be reimbursed at a special higher rate because about 65% of Nanticoke’s patients depend on Medicare.

That cost Nanticoke about $6 million in add-on payments for three years and made it more difficult to meet its financial needs.

“We got it back last October, but there had been too much damage done,” Rose said.

The Nanticoke name will remain on the hospital for the foreseeable future, and Nanticoke will continue to provide services in Sussex County and parts of Maryland’s Mid-Shore. Nanticoke has had facilities in Sussex County for more than two decades, according to published reports.

The two organizations are focused right now on governance. Nanticoke will continue to have its own board – although there will be changes – and will have representatives on Peninsula’s board of directors. Nanticoke in early September announced that Penny Short, RN, BSN was named president of Nanticoke Memorial Hospital, meaning she’ll be responsible for overseeing all facets of operations for the bed hospital. She was previously chief nursing officer and chief operating officer for Nanticoke Health Services and is being replaced by another internal person.

Leonard says that success in the first year after the deal closes will include “solid integration of our local board; each hospital and provider network operating well and communicating clearly, with big pushes on improving access, connecting with doctors, and keeping people health and well and out of the hospital.

One of the metrics Leonard will be looking at is how far out are we scheduling,” with solutions to longer patient wait times for an appointment being the hiring of more primary-care physicians. 

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