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Excela Health loses estimated $16.5 million in fiscal year

| Tuesday, July 16, 2013, 12:01 a.m.

Excela Health lost an estimated $16.5 million in the past fiscal year but offset the deficit by relying on earnings from its stock portfolio, CEO Robert Rogalski said.

“It's going to be in that neighborhood,” Rogalski said. “I can't say that number is right or wrong right now.”

The actual amount of the loss won't be known until an audit is completed by late August or early September, he said.

Rogalski said investment income for the fiscal year that ended June 30 was “very strong,” although he did not provide a figure.

In addition, Rogalski is dealing with dissension among physicians who have privileges at Excela's hospitals in Greensburg, Latrobe and Mt. Pleasant. He's negotiating with a group of 50 to 60 independent doctors who are resisting pressure to sell their practices to Excela and become employees.

Rogalski last week met privately with the doctors and presented them with a “medical staff development plan” that will require them to meet certain criteria in order to retain hospital privileges. Rogalski asked the doctors to promise they would not negotiate with UPMC or Highmark for at least 120 days.

The physicians, who are in a variety of specialties, have been wooed by recruiters from the Allegheny County-based health-care giants in their effort to draw patients from hospitals in other counties.

Rogalski said he was “shocked” that the plan surfaced publicly because it contains confidential information about Excela's market share.

Excela announced on Friday that it is laying off 78 employees and leaving another 58 unfilled positions vacant.

“We need to get our cost structure lowered,” he said.

Without controls, government benchmarks aimed at reducing the cost of medical care will be difficult to attain, he said.

In the development plan, Excela's staff details what constitutes a conflict of interest and warns physicians of the possible consequences.

The conflicts include:

• Any financial arrangements with UPMC or Highmark.

• An employment contract with a competitor such as UPMC or the newly created Allegheny Health Network, a merger of Highmark and the West Penn Allegheny Health System.

• Any physician who recruits a doctor or a member of the medical staff for a competitor.

In addition:

• Any procedures or testing now done in a physician's office should be done in the hospital.

• Physicians must prove loyalty to Excela by demonstrating “their commitment to the organization's mission, vision and values.”

• Doctors on Excela's staff who have a financial relationship with another hospital will be limited to a year or less.

Rogalski has been meeting with the independent physicians, who created a medical specialty group in an effort to coordinate care and “create a strong alignment position” between the doctors and the hospital.

Excela is worried about competition from UPMC and Highmark. When the state this year approved a merger between Highmark and West Penn Allegheny, it noted Highmark's venture will require adding 41,000 patients to be solvent, and those new patients likely will come from hospitals in other counties.

Like other hospitals, Excela faces declining admissions.

Admissions are down about 5 percent from 2012, Rogalski said. The systems' market share for pulmonary and cardiology is more than 70 percent, but its share is lower in other areas, the plan states.

For example, family medicine and urology have a share between 60 percent and 70 percent. Orthopedics, general surgery, cardiothoracic surgery, oncology and gynecology are less than 50 percent. Neurosurgery is below 30 percent.

Excela's market share is “good. I'd be happy if they all were 70 percent,” Rogalski said.

The independent doctors account for only a small percentage of the 500 on the staff at Excela and only a small portion of the system's overall revenue, Rogalski said.

He contends most of the doctors are comfortable with the staff development plan.

“Seventy-five percent of the revenue of Excela is generated by employees and affiliated doctors,” he said, adding there are “pockets of independents” in the service area with whom “we have excellent relationships.”

Excela has not been approached by UPMC or Highmark about a purchase or alliance, but both systems have a strong interest in Excela, Rogalski said.

“We intend to remain independent — at least today,” he added. “That may change.”

Richard Gazarik is a staff writer for Trib Total Media. He can be reached at 724-830-6292 or at rgazarik@tribweb.com.

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