On the road to recovery?: SHS is working to ensure financial stability for the health-care system that serves the local area

Southwest Memorial Hospital in Cortez. Photo by Gail Binkly

With some ups followed by unexpected steep plunges, the saga of Southwest Me­morial Hospital in Cortez at times has re­sembled a roller-coaster ride.

“There have been periods of prosperity and periods of challenges financially,” Joe Theine said to an audience of about 30 at an Oct. 21 presentation organized by the League of Women Voters of Montezuma County.

Theine is the CEO for Southwest Health System, the private not-for-profit that op­erates the hospital as well as six clinics in Southwest Medical Group. He reports di­rectly to the two boards that oversee the hospital, the Montezuma County Hospi­tal District and Southwest Health System boards.

The ups and downs have included re­peated turnover in CEOs, and times of tur­moil and controversy.

The latest came in June of this year, when SHS issued a press release announcing that Southwest Memorial’s Family Birthing Center would be “temporarily” closed.

That caused a furor in the community. A protest took place in front of the hospital on June 8, and on the evening of June 15, some 120 people crowded into the hospi­tal’s ambulance bay to listen to hospital of­ficials’ explanations of the closure of the birthing center. Doctors, nurses, pregnant women, mothers, and other citizens asked questions and raised concerns – some in tears, some angrily shouting.

They were highly critical of Community Health Corp., the hospital’s management company, with many demanding it be fired.

A few days later, SHS issued a press re­lease saying it had been decided the center would not be closed.

But how far into the future can that deci­sion be continued?

“I don’t have a crystal ball. and if I did it would be broken, so I can’t predict multiple years out into the future,” Theine said in an in-person interview with the Four Corners Free Press.

He noted that he was not working for SHS when the decision was made to “press pause.” He was hired at the end of July from his position as CEO of Animas Sur­gical Hospital in Durango.

He commented that, “We haven’t had any days without labor and delivery or OB services in the community.”

But a birthing center is expensive to run.

With just two OB providers at Southwest Memorial, the hospital must sometimes hire locum tenens physicians, independent con­tractors brought in from outside to handle shifts the regular OB providers can’t cover.

At the June 15 meeting in the ambulance bay, one official with Community Hospital Corp., the hospital’s management company, said the birthing center is losing more than $1 million per year and noted that locums cost about $5,500 a night.

Theine said the hospital is “very actively recruiting for family medicine and OB pro­viders.”

“That, in addition to the OB providers that are here, would provide us with a group that can provide that coverage, without us having to use itinerant staff [locums],” he said.

But a key factor in the continued viability of the birthing center is whether enough women choose to deliver their babies at Southwest Memorial. “We can staff a labor and delivery unit, but if families choose to go elsewhere for care, it becomes harder to sustain services,” Theine said.

He said he did not have specific data on how many local residents choose to deliver here or go elsewhere.

However, a hospital employee who chose to remain anonymous told the Free Press in an interview published in July that nearly two-thirds of the infant deliveries that could be done at Southwest Memorial are being done at Durango’s Mercy Hospital instead.

“Having people choose to receive care here is a really important piece,” Theine said.

Southwest Memorial offers an impres­sive amount of services for such a small hospital, he told the audience at the League of Women Voters presentation Oct. 21.

“This community is blessed with the breadth of services. This is a gem in the community. That’s part of why I’m here.”

But, again, in order for the hospital to survive, people need to utilize its services – not just the emergency department, but, imaging, lab, outpatient clinics, the phar­macy, the sleep clinic, and more.

The hospital needs to attract community members to receive care locally, he said.

“We need to look and say, is there some­thing we can do to attract people back to the community? This is really important.”

Fixed expenses

Theine told the Oct. 21 audience that many of the hospital’s costs are fixed, but its income is not.

Southwest Health System CEO Joe Theine speaks to an audience at the Cortez Public Library in a presentation on Oct. 21.

Southwest Health System CEO Joe Theine speaks to an audience at the Cortez Public Library in a presentation on Oct. 21. Photo by Gail Binkly

“If you call 911, Southwest’s ambulance will come,” he said. “Our ER – we’re mak­ing that investment to be on standby for when you pick up that phone. Our cost to have staff in the ER, to have the building heated.. . those costs don’t change for us. When somebody chooses to leave the com­munity for something we can provide, our costs are the same but we just got less rev­enue and it just got harder for us to be on standby.”

The same is true for other services the hospital offers.

“There’s very few things we do that we don’t have a fixed cost around. Even prima­ry care. If somebody cancels [an appoint­ment], our costs are fixed. Heating bills, somebody to answer the phone, somebody to bill the insurance company – we have very fixed costs as a hospital.”

He said he has been encouraged about the support the community has been show­ing.

“In 2022 more than 1 in 2 residents [lo­cally] were seen in one of our outpatient clinics,” he said. “More than 1 in 2 received hospital services” such as lab work, an MRI, or a hospital stay at Southwest.

In addition, in an election on May 3, 2022, voters in the Montezuma County Hospital District chose by a 55-45 percentage mar­gin to remove a sunset provision on a 0.04 percent (4 cents on every $10) sales tax in exchange for reducing the district mill levy by 25 percent.

The sales tax, which was approved in 2015, had been designated to sunset in 2030. But voters instead granted the hos­pital permission to collect the sales tax in perpetuity and use it to finance $23 million in upgrades and maintenance.

“That is meaningful.” Theine said. “[When recruiting providers] I can tell people that voters care so much that they removed an end to a tax on themselves.”

A lengthy argument

Still, the hospital has never had an easy ride, and its history has been marked by controversy.

Its management was turned over to SHS in 1996 only after a lengthy argument with the Montezuma County Commission.

The taxpayer-funded special district that had been running the hospital, the Mont­ezuma County Hospital District, proposed shifting control to SHS but were met with skepticism by the commissioners and other critics. The commissioners said they had the authority to approve or deny the restructuring because state law required special districts to get county approval for “material modifications” to their original service plans.

Finally the MCHD and commissioners worked out a 50-year lease with SHS and developed operating bylaws, and the re­structuring went through.

In 1998, MCHD planned to sell $9.6 million in bonds to build a medical office building, which many people thought was financially foolhardy. In an election for members of the MCHD board, four peo­ple who opposed the bond sale and office building were voted in and that proposal was abandoned.

In 2018, the same year a $32 million ex­pansion of Southwest’s facilities was com­pleted, the hospital laid off more than 40 employees to cut costs. At that time, hospi­tal officials said the hospital had only about 21 days of cash on hand rather than the 81 it’s supposed to have.

Days’ cash on hand is a measure of how long a hospital could operate if no new revenue came in. Of course that isn’t likely to happen, but cash on hand indicates how well a hospital can function if payments are late or expenses rise. At the time of the gathering in the ambu­lance bay this year, the hospital had only 67 days of cash in hand and had just laid off nine employees in a cost-cutting reduction in force.

Greater transparency

A number of concerns raised by the community at that meeting have been ad­dressed.

People had complained that the SHS board had unfilled seats, that their bylaws were unobtainable by the public, and that SHS was not being very transparent.

Hospital officials had also not been meet­ing regularly with the county commission­ers as was called for in the old agreement.

Since then, the website https://www.swhealth.org/ has been expanded and up­dated. If you look under the About Us tab, then go to Boards, you will be able to access either the SHS or the MCHD board. The SHS board’s page now has meeting minutes and agendas as well as hospital financial data.

“We’ve got things up on our website,” Theine told the Free Press. “Agendas, ap­proved minutes, bylaws, financial informa­tion. Some of the key financial indicators are now up on our website, based on finan­cials that are approved.”

And hospital officials have been meet­ing again with the county commission on a quarterly basis, Theine said. The commis­sioners and the MCHD and SHS boards have also met with each other in some work sessions.

“Communications are open and ongo­ing,” he said, adding, “Our elected and ap­pointed officials are welcome to come to board meetings.”

Filling the board

Interest in being on the SHS board has increased since the uproar over the birthing center. For a long time, there weren’t even enough applicants to fill the board, “but late this summer a number applied to be on the board, so for the first time in many people’s recollection we’ve had more appli­cants than seats,” Theine said.

This prompted the idea of establishing a process to choose SHS board members, who, unlike the members of the MCHD board, are not publicly elected. A nominat­ing committee was developed that met with the applicants and was soon to be making recommendations to the existing board re­garding new members.

Chuck McAfee of Lewis, a former board member himself who spoke passionately at the June 15 meeting about the need to keep the hospital going, agreed that some good things have been done for the hospital.

“There has been quite a bit of action around putting people on the SHS board who can make a difference,” he told the Free Press in a phone interview. “We’ve made good progress there. We agreed to a nominating committee making recommen­dations. There are a variety of people that are on the committee.”

McAfee said a group called Friends of the Hospital, which includes him and his wife M.B., several doctors and other people with knowledge of and interest in the hos­pital, proposed the idea of a committee to recruit new board members.

McAfee said the hospital is also working hard to recruit new physicians in response to a shortage of providers, especially pri­mary-care providers, in the community.

The hospital’s financial picture, however, remains troubled. “The financial picture has been tough,” McAfee said.

One particular concern is the need for maintenance of the facilities.

“The vast majority of care a hospital provides is in a physical space,” Theine said at the Oct. 21 presentation. He said three things are needed to support health care – “the people (staff), supplies, and a build­ing.”

“All three things are necessary and not one takes the place of another,” he said. “We can’t say we will have more people but no roof, or a beautiful building but no people.”

The roof in particular needs urgent at­tention, he said.

“Ideally it would have been replaced al­ready,” he told the Free Press, adding jok­ingly, “You can visit us this winter and see our ‘indoor water features.’ We have leaks in the roof.”

While it can be patched and repaired, the roof needs to be replaced on most of the hospital complex’s buildings.

“We’re still out to bid, so I couldn’t tell you what it’s going to cost,” he said.

He said a facilities committee is working to prioritize what things need maintenance work – “where money will be spent.”

“Some things are relatively urgent and will need work in the next couple years. The highest thing on the list is the roof.”

Making choices

Southwest Memorial is certainly not the only hospital facing financial struggles.

“It’s not just birthing centers. I think all of our health-care systems, whether rural or urban, are challenged,” Theine told the Free Press.

Becker’s Hospital Review, an online site for hospital-related news, shows that many hospitals are closing services or closing en­tirely, both urban and rural, Theine said on Oct 21.

Exits by CEOs in all industries are at a 21-year high, he said, with a particularly high rate of CEO turnover in hospitals. (SHS has had about a half-dozen regular or interim CEOs since 2019.)

Theine said 18 percent of health-care workers quit during the pandemic, and there is an estimate of that there will be a shortage in the health-care workforce of 3.2 million by 2026.

According to a report by the Cecil G Sheps Center for Health Services Research, there have been 195 full closures or conver­sions of rural hospitals since January 2005. Conversions mean the facilities no longer provide inpatient services but continue to provide services such as primary or emer­gency care.

Hospital officials have worked to ream­ortize bonds and reduce the payments to the debt for the hospital expansion, with a portion of the reduction going into a fund for capital improvements.

CHC’s role

At the June 15 ambulance-bay meeting, many people were highly critical of CHC, the hospital’s management company. But Theine spoke positively of them.

“CHC is a great partner in this commu­nity,” he said at the League of Women Vot­ers talk. He said the role of chief financial officer is hardest job to fill and “your local board would really struggle to fill that role. With CHC that role is staffed.”

SHS leverages CHC’s relationship with suppliers in order to get a major discount, he added.

“I think for a rural community like ours to not have a relationship with somebody would get us to a point where we would be saying, ‘what’s the large hospital system we need to be aligned with?’. The number of independent hospitals is getting smaller.

“This community has spoken pretty loudly that you would like to have an in­dependent hospital. Our relationship with CHC helps us to maintain our indepen­dence.

“I can lean on their expertise and knowl­edge.

“I think you’ve got a fine management company supporting this community.”

Theine told the Free Press that CHC’s mis­sion aligns well with SHS’s. “They’re also a not-for profit company in the business of serving communities, not outside entities, not shareholders, so for our community and our hospital, our mission and theirs align well. It’s great for us to be aligned with someone that’s similar in mission and governance.”

He reiterated that local residents will de­cide the hospital’s future by deciding where they receive their health care.

Both the MCHD and SHS boards are in­volved in the big decisions, he said, “but it’s really all of us that are deciding.”

“From a hospital side, this is a relatively small facility with 20 licensed beds, yet it has many services. Not all communities our size are blessed to have all the services we do.“

Our choices really dictate what services are here.”

From November 2023. Read similar stories about .