In an unorthodox approach toward population health, ProMedica is investing its capital resources to rehabilitate the real estate and businesses surrounding the health system's 12 hospitals to spur economic development and address community issues, Philip Betbeze reports for Health Leaders Media.
According to ProMedica CEO Randy Oostra, clinical excellence is "job one." But the system in recent years has worked to target social determinants of health by stepping a bit outside the hospital, including investing in affordable housing, community outreach, grocery stores, and real estate.
"The idea is to use our resources to drive economic development and attack tenacious community problems," Oostra explained.
A 'lightbulb moment'
The initiatives began with a "lightbulb moment" about seven years ago, Oostra said. According to Oostra, the Toledo, Ohio-based health system in 2010 launched an obesity intervention designed to teach children and their parents about healthy eating—but ProMedica quickly realized, as Oostra put it, that "these kids were hungry." The area targeted by their efforts was a "food desert," he said, and so ProMedica revamped its plans and established a full-service grocery store in the area.
Redirecting hospital resources
Since then the health system has launched similar projects that address social determinants of health. For instance, ProMedica under Oostra moved its headquarters to downtown Toledo and rehabilitated several other buildings in the area. And in another redevelopment project, the system bought a hotel out of bankruptcy and is supporting its rehabilitation under new ownership. The hotel is scheduled to open again in August as Marriott Renaissance.
Oostra said in each of the projects, ProMedica was the source of capital, but it would complete transactions quickly and was not drawn into manaing organizations that are not part of the direct delivery of care. "Our capital got in and got out," Oostra said.
"We realized we can be a catalyst not only to treat people who are sick, but to create well-being in our communities," Oostra said. He added, "As we've rolled along, there was convincing needed [on the hospital's board], but the more we've done, we've been blessed with success, so they've gotten more comfortable doing it."
Now, the system is investing in a new project borne of those successes. In collaboration with Toledo officials, and in partnership with Continental Real Estate Companies, ProMedica in 2016 purchased a 70-acre plot of land in Toledo's Marina District. The health system plans to develop some of that acreage into housing and retail space, while the remaining 50 acres or so will be sold to Metroparks to further develop the city's park system.
Skepticism from ratings agencies
But it hasn't been an entirely smooth approach, Oostra said. According to Oostra, ProMedica's ventures have faced some skepticism from ratings agencies. "We have gotten pushback from the rating agencies," Oostra said. "They might think we're trying to do too much."
Betbeze reports that Moody's downgraded the system's $775 million in debt in March from Aa3 to A1. However, the downgrade was largely attributed to a big operating loss and an unexpected liquidity decline, primarily from ProMedica's traditional operations, according to Betbeze.
Oostra acknowledged that the ProMedica will always face some skepticism when it comes to nontraditional activities. However, he said he is happy to be a leader who is broadening the definition of how ProMedica addresses social determinants of health in ProMedica's patient communities. Further, he said that such efforts are key to bending the health care cost curve.
"I understand (the skepticism), but 95 percent of our resources are still in the clinical bucket," Oostra said. "On the other hand, we feel passionately about this and we can't just sit around and witness the effect of poverty on people's health and lives" (Betbeze, HealthLeaders Media, 6/8).
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