How a hospital had to heal itself

Though rated one of the state’s best, a rural medical center goes on life support after a fatal mishap chokes off funding.
By Edward Martin

It’s early, but the hospital parking lot in tiny Clyde is full. People stroll in. While another waits in line behind it, a nursing-home van stops under the portico and the driver opens its side door. A nurse parks a wheelchair next to it and extracts a white-haired woman, wispy and fragile as a dandelion. She rolls her inside past a glass vending case with cut flowers. Up the stairs and down the hall, a door stands ajar. Inside, a stained-glass panel greets visitors to the chapel. The lights are already on.

It was on a morning like this that a desperate struggle raged inside Dawn Reece’s body. For a week, bacteria had coursed through her veins, overwhelming the antibiotics they gave her. Sepsis, the doctors called her condition, but her family used its more common name — blood poisoning. They expected her to pull through. The mother of two was outdoorsy, strong and only 37. But one by one, her organs shut down until, a little before noon on a November day in 2007, she died. Whispers spread through the hospital. Tipped by a doctor, investigators would determine that she had been given Xigris, an anticoagulant critical in the treatment of sepsis, for only 12 hours, not the prescribed four days. Probing deeper, they found drug-administration errors with other patients.

Dawn Reece’s death and its aftermath would jolt Haywood Regional Medical Center, the 170-bed hospital where 160,000 patients a year come for care from hills and valleys at the gateway to the Great Smoky Mountains. In the days that followed, as state and federal investigators pored over records, it was the hospital that would be fighting for its life. In February 2008, the government agencies that provide 68% of its revenue — Medicare and Medicaid — revoked its certification. Commercial insurers and others quickly followed, and for five months, Haywood Regional would exist on the life support of its dwindling reserves.

“We got the death penalty,” says Mike Poore, the CEO who began work in October, eight months after the cutoff. “How many organizations, hospital or otherwise, can go 150 days with no cash coming in?” Medicare spokeswoman Lee Millman in Atlanta answers the question. Three of about 6,700 hospitals nationwide lost certification in 2008. Only Haywood, after a wrenching struggle that bled it of its top management and forced it to revamp patient-safety and management procedures, is open, again fully certified and accredited. Its collapse and rebirth — and now, its looming affiliation with one of the state’s mega health-care systems — is a lesson in care quality, administration and crisis control in small, rural hospitals.

Above all, Haywood Regional demonstrates the stunning speed with which a hospital’s fortunes can change. It is ranked as one of the state’s top 10 hospitals in critical care and one of three chosen for overall clinical excellence in this year’s Business North Carolina hospital ratings. The ratings, explains a spokeswoman for Golden, Colo.-based Health Grades Inc., which compiled them, were based on Medicare data for the three most recent years available — 2005, 2006 and 2007. The clock stopped just before the tragedy of Dawn Reece came to light, underscoring the thin line between excellence and extinction for a small, rural hospital.

Snow drifts down on a winter day, obscuring the mountains across the valley from the hillside in Clyde, population about 1,400, where the county built Haywood Regional in 1979. Its dramatic architecture — dark brick, curves and rectangles, windows deeply recessed — hints at its relative youth. “Most rural hospitals,” Poore notes, “were built in the ’40s under the Hill-Burton Act,” when the federal government pumped huge amounts of money into hospital construction.

The hospital’s impact here is as dramatic as its architecture. Its 790 employees — it had 900 prior to the Medicare cutoff — make it Haywood County’s third-largest employer. It’s southwestern North Carolina’s third-largest hospital and provides sophisticated diagnostic procedures, surgery, cancer treatment and other care — severe trauma cases are helicoptered to Mission Hospitals in Asheville, 25 miles away — that is critical for the region’s growing elder population. “Without it, Haywood County would shrivel up,” says Otis Sizemore, 72, a retired drug-sales representative from Maggie Valley. “No industry would ever come here without a good hospital.”

Clinically, Reece’s death was not extraordinary. Sepsis often sets in after lung illnesses, and the woman had been admitted a week earlier with respiratory-distress syndrome. Why her potentially life-saving medication was halted early, however, is buried in the inner workings of what was a dysfunctional organization. Poore, 44, who has turned around other struggling hospitals, was hired to heal it. He and others, including state and federal investigators and some former doctors, depict a miasma of rivalries, turf guarding and friction between doctors, staff, nurses and administrators.

Rightly or not, much of the blame fell on CEO David Rice, who, in the crisis following the Medicare cutoff, would resign after 15 years as chief administrator. His departure was joined by those of other top managers — the chief operating officer, human resources director, nursing director — and, ultimately, Nancy Freeman, chair of the hospital authority board. How — or if — the hospital’s malaise affected Reece’s care is uncertain. Her family has not filed legal action, though it still has time, and Haywood officials shy away from talking about her case. But Poore, whose credentials include a MBA from the University of South Alabama, says communication clearly had suffered. “There were information silos, where departments worked in and of themselves. If you had information and nobody else did, it gave you power.”

Medical errors — particularly in administering drugs — don’t appear to have been unusually high, Poore says. Statistical data supports him. One of the first studies of hospital errors and accidents was released a decade ago by the Institute of Medicine, part of the National Academy of Sciences. It concluded that 98,000 patients nationwide die each year because of mistakes — more, health-care critics pointed out, than were killed in car wrecks — setting off a flurry of efforts by medical groups to improve the record. Whether the toll has improved substantially remains to be seen, because the only source of reliable data — the Medicare and Medicaid records used by Health Grades to issue its ratings — takes sophisticated computer programs and years to compile and analyze. And often, accidents go unrecognized unless detected and reported by doctors, as was the case at Haywood Regional.

“You’ve seen in the national press things in larger hospitals that were as egregious or more egregious,” Poore says. In 2003, for example, a 17-year-old girl died at Duke University Hospital in Durham after receiving a transplanted heart and lungs of the wrong tissue type. Duke promptly acknowledged the mistake, acted to prevent recurrences and escaped Medicare sanctions. “The difference was how they responded and what they did to make sure it would never happen again. Here CMS — the Centers for Medicare and Medicaid Services — was unsatisfied that the leadership had taken it seriously enough.”

On Feb. 24, 2008, federal officials acted. The cutoff was devastating, and within days the hospital received another blow. Blue Cross and Blue Shield of North Carolina, with about 7,000 members in Haywood County, quit covering all but emergencies there. Other insurers followed. Haywood Regional Medical Center began bleeding to death. It slashed employees. Doctors began an exodus. The patient census fell to a handful. “Our fiscal 2008, which ended in September, was pretty disastrous,” Poore says. “We lost over $13 million.” Its total budget was $150 million. Other Tar Heel hospitals watched warily as Haywood Regional’s slide underscored their own strained dependence on the government programs.

“North Carolina hospitals actually lose money on their Medicare book of business,” says Don Dalton, a vice president of the 135-member North Carolina Hospital Association in Raleigh. “The law at best allows us to break even, but we’ve never been able to do that.” As a result, hospitals routinely shift part of the Medicare-patient costs to other insurers and patients who pay their own bills. By spring 2008, though, with Blue Cross and others gone, Haywood had no income and nowhere to shift costs. The thing Medicare provided — steady though stingy income — had dried up. “How dependent are rural hospitals on Medicare?” asks Rebecca Slifkin, a researcher at the Cecil G. Sheps Center for Health Research in Chapel Hill. “All you have to do is think about who gets sick the most — the elderly.”

Otis Skidmore winces recalling each trip. Terminally ill with a bone-marrow disease, his wife had been treated at Haywood Regional for months until the cutoff. “After that, we had to go to Asheville five days a week for chemo, and we’d drive right past the hospital.” It added 45 minutes, and hundreds were making similar trips. “The [Haywood Regional] staff was excellent, absolutely patient-oriented. I’d seen care at Baptist in Winston-Salem, Moses Cone in Greensboro ... . I’d never seen better.” But Medicare had spoken.

One night last April, he bolted upright in bed. “I said, ‘We’ve got to do something.’” A member of the Frog Level Philharmonic, a Dixieland band, he and other hospital supporters began organizing. Purple “Save Haywood Regional” bumper stickers festooned cars around Clyde and Waynesville. On April 27, supporters organized a rally, with 10 local bands, tours of the hospital and pep talks. It rained, but hundreds showed up.

Through the spring, the medical center treaded water under an interim CEO. It hired The Compass Group, a Cincinnati, Ohio health-care consultant, to overhaul practices such as administering medications, nursing care and infection control. Compass brought in its own crisis team — a nurse to oversee the emergency department, a pharmacist, two senior doctors and a nursing supervisor. Rival WestCare Health System, with hospitals in Sylva and Bryson City, helped absorb Haywood Regional patients and allowed physicians who practiced there to use its hospitals for surgery and in-patient care. “A tremendous gesture of good faith,” Poore says.

Medicare inspectors popped in for unannounced inspections. On June 6, they restored the hospital’s certification. But the fight for survival wasn’t over. The medical center’s bank account was depleted, with only 45 days of reserves left, not the 100 days or more — $8 million — that Poore says is needed. “Because of our financial issues, our bonds — about $5 million — were called by Wachovia, so we ended up having to pay them off.” To do that, and to meet operational needs, the hospital was forced to raid its investments last summer, before Wall Street — and Wachovia itself — tanked. “It turned out to be a blessing in disguise.”

When Poore arrived Oct. 1, he found a hospital recovering but financially strapped and suffering from battered morale. He set up a three-pronged, 90-day battle plan. First was crisis management. “We had to turn the ship around.” Second came rebuilding management. The third was assuring the long-term future. Poore, previously a senior vice president of a five-hospital system near Atlanta, froze hiring, deferred capital spending and clamped down on accounts receivable, such as unpaid insurance co-payments. Through December, the budgeted loss of $598,000 had been trimmed to $215,000. Rebuilding morale has been as difficult as balancing the books. “There was a lot of mistrust on the part of the medical staff when I got here,” he says. Poore launched a whirlwind series of so-called town-hall meetings at all hours, plus sometimes confrontational sessions with staff. “We will not compromise on care,” he told them. “If we can’t provide quality with staffing [with which] we can still have a bottom line, we don’t need to be in this business.”

Now Haywood Regional — originally Waynesville Hospital, dating back to 1907 — faces the biggest change in its history. Like scores of small Tar Heel hospitals under pressure from Medicare and private insurers to reduce in-patient stays, operate on smaller margins and attract increasingly mobile patients able to choose distant hospitals, it seems headed for affiliation with a big-city health-care system. In October, Haywood Regional and WestCare asked Asheville-based Mission Hospitals, Winston-Salem-based Novant Health Care and Charlotte-based Carolinas HealthCare System to submit proposals for joining one of their networks. “With the changes taking place in our industry, it’s more and more difficult to make any kind of margin for the long-term, especially when you’re just one, free-standing hospital,” Poore says.

Poore notes that Haywood Regional, unlike many rural hospitals, is relatively new and well-equipped. But hospital technology can change as stunningly fast as a hospital’s fortunes. Many large hospitals — few small ones can afford it on their own — have converted to electronic patient records, in which patients’ bar-coded wristbands instantly tell nurses their medications, when they were last administered and who administered them. It’s late morning on a dank, gray day. Maybe, he says, on a morning like this 15 months ago, such a system could have saved a life.