SoutheastHEALTH announces plan to seek partner

Three emerging economic threats are fueling SoutheastHEALTH’s “Project Forward Vision” — a process that ultimately could result in the health care system partnering with a larger organization.

President and chief executive officer Ken Bateman said Thursday, while the system is in good financial shape, the future for the industry requires change.

“I see what’s coming in terms of the economy. I see what is happening with labor, and now, I see what’s happening with Mercy coming into our competitive landscape,” he explained. “When you put the three of them together, I have to make sure I have us positioned for 10 years, 20 years from now. If we do nothing, those forces will start to diminish who we are and the value we bring to this community.”

Bateman stressed the project will not result in a “sale” of Southeast-

HEALTH.

“We are not distressed. We are not being sold, and we could walk away, but I do think that what is coming the way of health care is going to require scale,” he said. “This isn’t a defensive move. ... I want to take Southeast to the next level and that is going to be through a partnership.”

Bateman referenced the Mercy health care system likely entering the region through a partnership with Perry County Memorial Hospital in Perryville, Missouri. The process he outlined for Southeast mirrors the process PCMH officials have navigated in the past six months. Bateman said Southeast has contracted with Morgan Stanley to vet potential partners, noting Southeast’s leaders would consider only health care systems with at least $5 billion in assets.

In June, the organization’s board members will identify priorities and characteristics of a potential partner, and later in the summer official requests for proposals will go out. Bateman said he anticipates on-site visits with potential partner representatives in the fall and a choice made by the end of the year. Negotiating the final contract could take until the fourth quarter of 2023, he said.

Driving forces

Significantly increased labor costs for Southeast’s 2,400 employees is a major factor in searching for a partner, Bateman said.

“One thing we recognize is the challenges that are going on in the industry are going to require scale, and the labor challenges are enormous. The labor shortage has created a labor-cost issue. Last year, we spent about $16 million more on labor than in the previous year,” he noted.

However, because of existing contracts with insurance companies and non-negotiable reimbursements rates from government programs such as Medicare and Medicaid, Southeast can’t pass on increased costs to patients. So, partnering with a larger organization can help increase efficiencies and spread costs among more facilities, which would allow Southeast to pour more resources into wages.

“Cape Girardeau produces over $1 billion a year in health care revenue,” Bateman said. “We are the largest health care market south of St. Louis. So, we know there will be a lot of interest in partnering with us.”

SoutheastHEALTH president and chief executive office Ken Bateman said Thursday the organization is seeking a potential partner to secure its strategic future.Southeast Missourian

Mercy’s potential presence nearby is also prompting Southeast’s move to not only preserve its foothold in Perry County but to stave off more local competition.

“Mercy is about a $10 billion asset system, and we know they want to come into Cape Girardeau and establish a presence,” Bateman suggested. “When you are faced with a $10 billion system 30 miles away, to do nothing is not an option. ... Mercy presented a challenge, and it’s my job to find a solution.”