LMH completes deal to buy one of the largest doctor groups in Lawrence; talk of more health care shakeups continues
There is a new trend in the Lawrence medical industry, and thankfully this one doesn’t involve a doctor trying to convince me that Doritos — hello, they’re corn — aren’t part of the vegetable group. Instead, it involves independently owned doctors’ offices being bought by hospitals. The latest deal involves one of the largest primary care practices in the city being bought by Lawrence Memorial Hospital.
LMH and The Reed Medical Group have finalized a deal in which five of the doctors at Reed have become employees at LMH. The hospital took ownership of the practice on July 1, and the name changed to Reed Internal Medicine. The practice continues to be located in its longtime building at Fourth and Maine, which is essentially across the street from the hospital.
Janice Early, vice president of communications for LMH, said the transition for patients should be relatively seamless. The doctors involved in the deal are Donald Hatton, Joan Brunfeldt, Lida Osbern, Philip Hoffmann and Walter Farrell. Drs. Elaine Kennedy and Eric Huerter will be affiliated with the group but won’t be LMH employees. As we have reported, those two doctors have been operating under a different business model. They offer “concierge” service, which confused me because I thought I had found a doctor who not only would endorse my Dorito intake but actually deliver them to me on my couch. Instead, the service refers to more of a membership model for health care. The doctors take on a limited number of patients, and each patient pays an annual fee to have extended access to the physician and to receive more in-depth treatment and preventive services. Huerter and Kennedy will continue to operate out of the Reed building and will continue to have privileges at LMH. They’ll operate their practice separately, though, under the name Reed Medical Group MDVIP Affiliates.
Early said the other doctors in the Reed Group approached LMH about taking over their practices. She said that is becoming a more common scenario as regulations, information technology demands and other such items become more demanding for independent practices.
“I think they look to the hospital as a potential partner because we have the infrastructure in place to handle those issues, and they can focus on practicing medicine instead of the business side of medicine,” Early said.
Reed becomes the eighth primary care practice owned by LMH. In addition, the hospital owns 13 specialty care practices. The deal comes on the heels of news that LMH is in negotiations with OrthoKansas to form a partnership to build a new state-of-the-art orthopedic facility in Lawrence. We reported in March that the two sides were in serious negotiations to build a multimillion-dollar facility that provides services in hand, shoulder, elbow, foot, ankle, hip and knee replacements and other such services.
Early confirmed that those discussions are still underway, and the hospital remains confident that a deal will be struck with OrthoKansas, perhaps by the end of the summer.
Talk of an OrthoKansas partnership came after KU hospital reached a deal with Dr. Jeffrey Randall — a sports medicine doctor who previously was with OrthoKansas — to open a new orthopedic practice in Lawrence. Randall’s practice, which is part of the University of Kansas Health Systems Sports Medicine and Performance Center, has moved into its new facilities at the Corporate Centre off of Wakarusa Drive. The practice represented the first time KU medical system set up operations in Lawrence, but it may not be the last such partnership. KU medical system officials have said they “are working with other health care organizations in Lawrence to identify collaborative practice opportunities.”
KU’s move into the market may spur a host of strategic moves in the Lawrence health care market. Russ Johnson, the relatively new CEO at LMH, has made exploring partnership opportunities an important part of LMH’s strategic plan. Early said the deal with Reed was a significant one because of Reed’s long history in the community and its standing as one of the largest primary care practices in the city. Primary care practices are particularly valued because those doctors often are a patient’s first point of contact with the health care system.
All the talk of strategic partnerships has created questions about whether LMH is looking to create its own deal with another larger, metro hospital. The KU hospital certainly could be a player on that front. The KU medical system has reached deals with hospitals in Hays and Topeka recently to expand services there. But there could be other players as well. The Kansas City market includes large hospitals, including Overland Park Regional Medical Center, the St. Luke’s System, the Olathe Medical Center and others. In Topeka, Stormont Vail is a large player.
Johnson, who previously was a health care administrator in the Denver area, came from an environment where partnerships were common. Early confirmed the hospital engages in a variety of discussions with other area hospitals, but stopped short of saying there were any current talks of a merger.
“Literally from day one, Russ has reached out and been open to talking to other hospitals and other providers, both east and west,” Early said. “It is a discussion. I don’t know what the future will hold. Are we in active discussions about joining another hospital? No. But we are talking with other hospitals about how we can work together. That door is open and we will keep that door open.”
High-tech firm files plans for Lawrence expansion; LMH provides more details on plan to tear down houses for parking
Finally, a Lawrence business that makes something smaller, other than my wallet. I’ve reported several times over the years about Crititech, a Lawrence-based high-tech firm that makes drug particles smaller. The latest news on the company is it has filed plans to expand its North Lawrence headquarters and laboratory.
Crititech has filed plans with the Lawrence-Douglas County Planning Department to build a 4,100 square-foot laboratory, research and production building at 1849 E. 1450 Road. If you are having a hard time picturing the location, it is just north of the North Lawrence city limits, next to the large Heetco propane station.
I’m waiting to hear back from Crititech officials to learn more about the project, but it appears to be a significant expansion. The company currently operates out of an approximately 10,000 square-foot laboratory, research and office building. The application for the project states the need for the expansion is due to company growth. It also says the company will be processing two types of products, and FDA regulations require the work to be done in separate building. Hence, the expansion.
The big question is whether the expansion will result in any new jobs at the company, which generally employs researchers and other good-paying scientific positions. I haven’t heard on that, but I’ll let you know when I do.
The company moved from west Lawrence to North Lawrence in 2013 to give itself more space for growth. At that time, the company had about 10 Lawrence employees, but company leaders then said they could envision that growing to about 50 in five years.
What does the company do that has it growing? In a nutshell, it provides technology to other drug companies that are looking to make their pharmaceutical products more palatable to the body. Often times, that means making the drug particles smaller. For instance, if you can make a drug particle smaller, a pharmaceutical that once had to be taken orally might be able to be delivered through a patch, an inhaler, injections or some other type of less invasive delivery method. Sometimes the smaller particles actually help the body better absorb the drug, making it more effective.
The company ended up in Lawrence because its founder is Bala Subramaniam, a renowned KU researcher. The company continues to have some strong Lawrence ties. Longtime Lawrence entrepreneur Sam Campbell is the chairman of the company, and Matt McClorey, who led the efforts to get the Lawrence Bioscience and Technology Incubator off the ground, is Crititech’s president.
I did a longer article on the company in 2012 when it added McClorey and had signed a deal to put some of its technology into India. The company at that time was reaching a stage that has become dangerous to some Lawrence startups: They become successful enough that outside investors begin looking to buy the company and move it to one of the more traditional high-tech hubs on the coasts.
Campbell back then said he couldn’t make any promises, but that he was working to figure out ways to keep Crititech based in Lawrence for the long term. Keeping promising tech companies in Lawrence is a prime goal of local economic development leaders. These latest expansion plans seemingly provide some evidence that the company continues to have its needs met in Lawrence.
I’ll let you know if I get more details from the company.
In other news and notes:
• On Tuesday I reported on a plan by Lawrence Memorial Hospital to tear down six houses along Michigan Street to make way for an approximately 100-space parking lot. At the time I told you I was waiting to hear some more details from hospital officials. Well, I have heard from the hospital, and the hospital spokeswoman confirmed LMH has heard from quite a few members of the public.
Tearing down any house in Lawrence can become a controversial subject.
“We recognize it is a very sensitive issue,” spokeswoman Janice Early said.
But Early said the hospital is working hard to balance several issues. Among the points she expressed:
— The hospital has considered building a parking garage on site rather than expanding into the neighborhood with another surface parking lot. However, the numbers for a parking garage get big in a hurry. She estimated a surface parking lot costs about $4,000 per parking space, while a parking garage usually costs a minimum of $15,000 per space and often more.
Plus, the hospital is unsure that it really will need a parking garage in the future. New LMH President and CEO Russ Johnson has talked about the need for LMH’s geographic footprint to be more varied in Lawrence. That could mean some ambulatory services would be removed from the hospital’s main campus and relocated elsewhere in the community. That could cause a reduction in parking demand near the hospital.
— On the six houses that are slated to be demolished, Early said the hospital did study whether they could be made available to people who wanted to move them to another site. A consultant, however, recommended against such a strategy. The consultant determined they are not really in a movable condition. Some of the houses also would require significant improvements to meet current standards. For instance, some of the houses have asbestos siding, Early said. The hospital, however, will hire a firm to remove fixtures and other such items from the interior of the homes for recycling, she said.
— The plans submitted to City Hall showed several angled parking spaces would be added along Arkansas and Maine streets. Early said the hospital has decided not to move forward with building those new spaces. She said the new lot along Michigan Street is expected to be adequate to meet parking demand.
— Early said the new parking lot will include a substantial amount of landscaping, and the project will install a new sidewalk along much of the east side of Michigan Street, according to the plan.
— The parking shortage that the hospital faces can be severe at times, Early said. The hospital has expanded its free valet parking service for patients and visitors, but that doesn’t address staff parking issues.
“We definitely are spilling over in the neighborhood today,” she said. “Both staff and visitors are parking on residential streets in front of people’s property.”
Neighbors have noticed that. She said LMH has met with the Pinckney Neighborhood Association to discuss the parking lot proposal. She said the hospital heard supportive comments about the proposed parking lot because it would cut down on the amount of on-street parking that occurs in the neighborhood.
If the plans are approved — both the Planning Commission and the City Commission will have to consider them — the hospital hopes to have the lot completed by early fall.
A multimillion-dollar deal is brewing between two local health care companies that could someday result in Lawrence being known as the “knee and hip replacement capital of the Midwest.”
No, it is maybe not the best moniker for the convention and visitors bureau, but it could result in big business, and might end up being a key development in Lawrence's changing health care market.
Leaders with Lawrence Memorial Hospital and Lawrence-based OrthoKansas confirmed this morning they are in serious discussions about partnering on a new state-of-the-art orthopedic facility that would be built in Lawrence but designed to serve patients from throughout the state and beyond.
“We want to take the clinical expertise that already exists here, and create a partnership that better leverages that into a regional delivery system,” said Russ Johnson, president and CEO of LMH. “There is every reason to think Lawrence could become a true destination for orthopedic care and sports injury in the next 20 years.”
LMH and OrthoKansas hope to finalize a deal by the end of summer. The deal could involve LMH purchasing OrthoKansas, but Dr. Doug Stull, president of OrthoKansas, said he didn’t think that was likely. Instead, some sort of partnership is more likely. LMH and OrthoKansas are characterizing the talks as an exploration of a possible “affiliation.”
The new facility would be a “regional center of excellence” that would provide services in hand, shoulder, elbow, foot, ankle, hip and knee reconstruction. It would be a one-stop shop for surgery, therapy and imaging services. The center also would likely include a sports performance and and athletic training program that would focus on high school and collegiate athletes.
The two parties haven’t decided on where the facility should be built. But in my conversation with Johnson and Stull, it sounds like they are not necessarily looking to build it near LMH’s main campus at Third and Maine streets.
“It needs to be a place where the region can access us,” Stull said. “If you live in Ottawa or Hays or Atchison or any number of other places, how do you get there easily?”
The potential deal between LMH and OrthoKansas comes at an interesting time. As we reported in December, KU Hospital has reached a deal with Dr. Jeffrey Randall to open a new orthopedic practice in Lawrence. Randall is a sports medicine doctor who previously was with OrthoKansas. The deal is significant because it marks the first time KU Hospital has entered the Lawrence market in such a big way. Importantly, KU Hospital made it known as part of its announcement that is is “working with other health care organizations in Lawrence to identify collaborative practice opportunities.”
That makes this potential deal between LMH and OrthoKansas about more than just knees and hips. Johnson confirmed that if LMH can successfully complete this deal with OrthoKansas, it should send a message to the broader medical community that LMH also is serious about partnerships and knows how to get them done.
“I think Lawrence is a fantastic market and it is very likely that as a community we’ll see other people enter this market,” Johnson said of other health care providers. “I think it is important for them to know they can enter it in a partnership way with us, and we can build a strong alliance as the local community hospital and serve the community in a very good way.
"Or, if that is not their interest, they may just want to come in and compete.”
Johnson said it is not yet clear what type of relationship KU Hospital’s new Lawrence facility — called the Sports Medicine and Performance Center — wants to have with LMH. Johnson said LMH is open to working with the new practice.
In this business of finding partners, the stakes are high for LMH. Think of it this way: The hospital receives some of its business from patients who just come through the door of the emergency room. But it sees a lot of its business from physician offices that refer patients to LMH for a scheduled procedure or service. If several of those physician offices become affiliated with KU Hospital or other hospitals in Kansas City or Topeka, LMH could be at risk of losing some of that referral business.
Johnson didn’t get into that level of detail with me, but did acknowledge that the search for partners is a high priority for the hospital, and that such partnerships will become more critical as the industry changes.
“It is a new era in health care,” he said.
It could be a good one for consumers. If multiple hospitals from Kansas City and elsewhere decide they want to be players in the Lawrence market, that could mean other new facilities, new state-of-the art equipment, and maybe even competitive pricing practices.
Stull said he thinks the potential new orthopedic facility could be a good example of what local providers and LMH can offer to compete with the larger Kansas City companies.
“I know there are some people in Lawrence who think seeing a doctor in Lawrence isn’t good enough, and they think they need to go to the city,” Stull said. “I want those people to stay in Lawrence. I’m confident this alliance will show them that if they had a doubt about where to go, they won’t have a doubt anymore.”
As for the near term, OrthoKansas will continue operating at its facility at Sixth and Maine Streets, which shares a building with the Lawrence Surgery Center. OrthoKansas has about 60 employees and has offices in Lawrence, Leavenworth and Holton.
A conversation with LMH president and CEO Russ Johnson, plus a look at whether LMH will find a partner
As part of my effort to bring you more conversations with community leaders, I sat down recently with Russ Johnson, the relatively new president and CEO of Lawrence Memorial Hospital. Yes, I probably missed a golden opportunity because I did not ask him why the gowns are so drafty. Instead, I asked him about the hot breath of competition that LMH may be feeling more acutely these days.
Johnson took over the hospital’s top spot in August after the retirement of longtime president and CEO Gene Meyer. By December, he had gotten a welcome present from neighbors to the east. As we have reported, officials with KU Hospital confirmed construction work is underway on a new orthopedic clinic along Wakarusa Drive. It will be KU Hospital’s first expansion into the Lawrence market, and I opined at the time that may be a significant sign of things to come.
Johnson agreed that KU Hospital’s decision to have a clinic in Lawrence is significant. It was not a development, however, that caught him by surprise. Johnson said it is clear to him that partnerships, collaboration and scale are among the most important trends in the health care industry for today and tomorrow.
None of those ideas are likely to discombobulate Johnson. Although he grew up in the Kansas City metro area, he comes to Lawrence after having served as an executive at Centura Health System in Englewood, Colo., a suburb of Denver. Centura operates 17 hospitals and has affiliation agreements with 12 other hospitals throughout Colorado and western Kansas. It is Colorado’s largest health care network and has more than 21,000 employees.
“Centura was all about creating partnerships and scale,” Johnson told me. “That doesn’t really scare me.”
Those could end up being important words for the future of Lawrence health care. It seems clear that LMH will have opportunities to collaborate or partner with other health care organizations in the future. Whether those opportunities end up being the right fit is tough to say, but it sounds like Johnson is in a mood to explore them.
I did not get the impression, though, that such exploration will start and stop with KU Hospital. The KU Hospital may be a good fit for a partnership or a collaboration, but just because it has the KU brand in its name doesn’t mean that it is a given that it will partner with Lawrence’s largest health care provider.
“There are lots of options out there,” Johnson said.
The Kansas City market is full of them. There’s St. Luke’s, Shawnee Mission, Overland Park Regional, Olathe Medical Center and others. LMH may not limit itself to collaborating with just a single entity. Aside from watching whether any of those Kansas City hospitals form partnerships or collaborations with LMH, it will be interesting to see how many of them expand into Lawrence with or without an LMH connection.
Some of you may remember the late 1990s and early 2000s when new banks sprouted in Lawrence faster than dandelions. I wonder if such a trend will occur with health care facilities in Lawrence. Some of the same conditions may exist. Many banks came to Lawrence because they decided they wanted to try to remain an independent bank rather than be gobbled up through a merger. But to remain independent you needed to grow. To grow, you needed to have a presence in growing communities. Sadly, there are only a handful of communities in Kansas that are growing. Lawrence was and is one of them, thus Lawrence seemingly ended up on every bank’s radar screen. There may be hospital chains going through the same calculations currently. That doesn’t mean we should expect to see lots of new hospitals. Instead, think of clinics and other outpatient procedure facilities. The grand prize for a KC hospital would be a partnership with LMH.
Well, actually, the grand prize may be to purchase LMH. However, nothing in my conversation with Johnson led me to believe that LMH is looking to be sold. That would be an unexpected outcome. LMH has been very financially strong for more than a decade. Normally, hospitals that feel a need to sell do so because they are facing a shortage of financial resources. That’s not the case with LMH today.
“We are in the enviable position of being able to be thoughtful about whatever we do,” Johnson said.
As for some other takeaways from my conversation with Johnson:
• Don’t look for all the growth of LMH to occur at the hospital’s main campus at Fourth and Maine streets.
“Fourth and Maine has a critical long-term future as an inpatient facility, but a lot of our future will be in decentralized delivery,” Johnson said.
There still will be improvements made at the main campus, but Johnson characterized them more as improvements inside the existing walls of the facility “rather than new bricks and mortar.”
But other facilities — outpatient care is about 75 percent of LMH’s total volume — are possible. Johnson said he believes convenience is definitely at the “top of the consumer value proposition.” Hospital leaders will be keeping their eyes open for where the hospital needs to be offering services in order to be convenient to area residents.
• Figuring out new ways to deliver health care services will be critical to LMH’s success. Johnson briefly mentioned how people in the future will access health care services on their smart phones much more than they do today. He talked about how consumers, especially those with high-deductible health care plans, are going to shop around for the best price for a service more than they do today. And he said LMH will have to continue to offer more services in the areas of prevention and wellness. In addition to that being the right thing to do for people’s health, Johnson is betting that ultimately the way hospitals get paid will be tied back to factors such as health and wellness metrics. He said he doesn’t know how the Trump administration and changes to Obamacare will shake out, but he thinks hospitals already were destined to face changes to their payment models.
“Our payment model eventually will change,” Johnson said. “We won’t always be a fee-for-service type of business.”
Hospital leaders will spend the next several months thinking about what the future may look like. LMH is undergoing a formal strategic planning process. It seems clear that Johnson will play a role to help people understand that change sometimes is both good and necessary.
“If we continue serving the community in the same ways we always have, I think we become vulnerable to somebody who has a better mousetrap,” Johnson said.
Pretty soon, the cafeteria/atrium area at Lawrence Memorial Hospital is going to have a bit of an Allen Fieldhouse feel to it; there will be championship banners galore.
LMH has made another banner-worthy type of list. The hospital recently was named as one of the “100 Great Community Hospitals” in America by Becker’s Hospital Review.
The ranking comes after LMH earlier this year landed on the granddaddy of hospital lists: Truven Health Analytics’ 100 Top Hospitals. That list stacked LMH up against every hospital in America, and conducted a rigorous review of LMH’s data on various performance measures.
This latest ranking focuses on smaller hospitals that have fewer than 550 beds, minimal teaching programs, often are located in rural areas and serve as the only hospitals in their communities. Becker used the rankings of Truven and other similar rankings programs to create its top 100 list.
LMH was the only Kansas hospital included on the Becker list. The Becker report called attention to LMH’s $45 million expansion in 2009 that included new facilities for its emergency and surgery departments as well as additional space for maternity and intensive care units.
As for the banner, I don’t really know whether LMH will hang a banner for this award. Hospital leaders did hang a large one in the dining/atrium area near the hospital’s cafeteria when it landed on the Truven list.
So, who knows, perhaps they can consult with the banner experts at Allen Fieldhouse about whether they should hang a banner for this one. Hopefully they won’t take this too far, though. A “Beware of the Phog” banner is not what I want to see when I sit down to eat my fine LMH cafeteria food.