Steven Sonenreichs second tenure at Mount Sinai Medical Center has been more tumultuous than his first. When he started working at Mount Sinai in 1976 in the billing office, he was a young college graduate. He quickly rose through the ranks to chief operating officer, served as COO from 1989 until 1996, then became chief executive officer of the old Cedars Medical Center in Miami, now known as University of Miami Hospital. When Sonenreich came back to Mount Sinai five years later as its chief executive officer, the waterfront hospital overlooking Biscayne Bay was nearly insolvent.
When I returned to Mount Sinai at the end of 2001, the hospital had only about 10 days of cash left, Sonenreich said. There were a great deal of problems with many of the operations of the hospital. The Miami Beach landmark institution hemorrhaged a net loss of $65 million in 2001, the worst annual loss since the hospital opened in 1949, and for the first time in its rich history, it was suffering.
Today its financial prognosis is far healthier. Management soon expects to report its fourth annual profit in a row. Management estimates that net income totaled $16.8 million last year, about $1 million more than in 2011. Cash reserves are ample enough to cover about 145 days of operation. Mount Sinais long-term debt has declined to approximately $220 million from $251 million in late 2011 as the hospital has used fatter cash flow to pay down principal on a level of about $7 million to $8 million a year, Sonenreich said.
Moving into 2013, management at this not-for-profit medical center expects yet another profitable year. Among other reasons for bottom-line optimism, a $135 million bond refinancing last summer has produced annual savings of $1.5 million, and the sale of an underutilized medical facility, the old Miami Heart Institute in Miami Beach, has reduced annual expenses by another $2 million.
Last year Mount Sinai also bought out a joint-venture partner in a profitable cancer treatment center, called the Mount Sinai Comprehensive Cancer Center, which will allow the hospital to keep all of the centers earnings instead of sharing them. The cancer-center acquisition was great for us because it accretes to earnings, and we feel that there is a lot of additional opportunity, Sonenreich said.
The turnaround came at a cost. Unhappy with upheaval and Sonenreichs management style, several prominent high-profile medical staffers left or were forced out. The hospital has replaced multiple department heads since Sonenreich became CEO. Over the last 10 years, we replaced 14 different medical department chairs and chiefs. Thats never an easy thing to do, Sonenreich said. But sometimes, in order to change people, you need to change people, and thats what we did.
The hospitals executive board members have plenty of experience with staffing issues: Many of them are among the most best-known business minds in the Miami area. They include biotech billionaire and philanthropist Phillip Frost, auto dealer and civic activist Norman Braman, former Claires Stores co-CEO and co-chairman Bonnie Schaefer, and Laurans A. Mendelson, the chairman and CEO of aircraft parts maker Heico. The current chairman of Mount Sinais executive board is Wayne E. Chaplin, president of distributor Southern Wine and Spirits.
Sonenreich said the management changes at Mount Sinai have produced a more balanced approach to decision-making by the medical and administrative leaders in each department: The common thread here is having an environment of cooperation where our department chairs and administrative directors are all co-pilots. The management changes have contributed to improved morale among the hospitals 3,000-plus employees, he said. Its reflected in our patient satisfaction scores.
Quarterly patient-satisfaction surveys conducted for Mount Sinai by an outside vendor show that the hospitals overall score, based on the percentage of patients who reported the highest levels of satisfaction, averaged 71.8 percent last year, compared to 68 percent in 2011.
Patient admissions at Mount Sinai have been flat, about 23,000 annually in recent years, but revenue-per-patient has risen. The hospitals physicians have been doing more surgeries and delivering more emergency-room care, treating patients who reside near the hospitals main campus in Miami Beach and many more who live elsewhere.
Seventy-five percent of our patients come from outside our immediate Zip Code area, Sonenreich said, and many of them are drawn by the reputation of the 672-bed hospital in such medical specialties as heart surgery and cancer treatment. Miami Beach residents alone could not support an institution of this size and capability, so we need to draw people from across the causeway, from across the bay.
Among other distinctions, Mount Sinai has the best heart-attack survival rate of any hospital in Florida, according to the federal Centers for Medicare and Medicaid Services. The state Agency for Health Care Administration (ACHA) has reported that Mount Sinai has the best cardiac-surgery survival rate among Florida hospitals with a high volume of complex cases. ACHA data also show that, since 2009, more cardiac valve surgeries and cardiac bypass surgeries have been performed at Mount Sinai than at any other South Florida hospital.
Key were a partnership with New Yorks Columbia University and the recruitment of Dr. Joseph Lamelas, a pioneer in minimally invasive heart valve surgery. He joined Mount Sinai in 2008 as chief of cardiac surgery and has become a feature attraction at the hospital.
He is the best cardiac surgeon, in my opinion, in the state of Florida, for sure, and probably in the Southeast, said Dr. Gervasio Lamas, chief of the Columbia University Division of Cardiology at Mount Sinai.
Less famous but no less important, Lamas said, are the hospitals emergency room clerks, who are trained to ask possible heart-attack patients medical questions first, not Hey, do you have insurance? ... Every minute you wait, more of the heart has died, and thats irreversible, so you need to stop the progressive cell death.
U.S. News & World Report ranked Mount Sinai as the seventh-best hospital in southeast Florida and 16th-best in the state in the publications 2012-2013 survey of the nations best hospitals. The survey classified the hospitals programs in cardiology, endocrinology, gastroenterology, geriatrics, neurology, urology and other specialties as high-performing.
Like Miami-Dades Baptist Heath and Browards Memorial Health Care System, Mount Sinai gets some of its patients from its network of outpatient facilities, including two in Coral Gables and one each in Hialeah and Key Biscayne, all of which have opened since 2009. The hospital also has a freestanding, full-service emergency department in Aventura that opened in 2008.
A teaching hospital
Mount Sinai also is a state-designated teaching hospital and currently has 163 residency slots in 18 different training programs. We also train over 300 allied health students and 500 nursing students every year, so there is a large amount of academic activity that takes place here daily, Sonenreich said.
Mount Sinais educational side has gained from the hospitals three-year-old relationship with Columbia University, which has research-driven affiliations with Mount Sinai Medical Center and about three dozen other hospitals with a heavy emphasis on training and continuing education. Mount Sinai has a very comprehensive academic program even if they are not themselves a medical school, said Doug Levy, a spokesman for Columbias medical school. Were able to provide additional training and outreach to the physicians there, and we also benefit from what theyre learning from their patient populations. So its a two-way information flow. It certainly facilitates research collaboration.
Still, Mount Sinai faces tough competition from other Miami-area hospitals that draw patients throughout South Florida, said Linda Quick, president of the South Florida Hospital and Healthcare Association. Mount Sinai isnt a member of the association.
They arent the only ones competing for that larger regional market, Quick said, citing not-for-profit rivals Baptist Hospital, Jackson Memorial Hospital, Miami Childrens Hospital and the University of Miami Hospital. For example, Baptist Hospital in southern Miami-Dade County has outpatient centers in Broward County thinking that, if they identify a problem with somebody who needs hospitalization, they will drive all the way to south Miami.
And some South Florida hospitals offer services unavailable at Mount Sinai. Browards Memorial Healthcare Systems highly rated cardiac services include pediatric heart transplants; plans call for adding adult transplant by the end of 2013.
But Quick also said Mount Sinai itself is a formidable, well-regarded player in the hospital business: Its a very good institution with a longstanding record of serving its community. Their physicians have excellent reputations. Certainly not all of them but some of them are well known outside the state of Florida.
Not-for-profit Mount Sinai has become more competitive thanks largely to vital financial support from a foundation that exists solely to support the hospital. The Mount Sinai Medical Center Foundation has more than $100 million of highly liquid assets and annually raises about $15 million of donations. Many the hospitals board members also serve on the foundations board.
The foundation guarantees repayment of bonds issued on behalf of the hospital and has provided direct operating subsidies to help Mount Sinai make ends meet. But these subsidies ended in 2011 as the hospitals financial performance improved. We would transfer $10 million a year from the foundation to the hospital, and so it was $2.5 million per quarter, Sonenreich said. After the first quarter of 2011, however, we said theres really no reason to do this any longer.
Nationally, few hospitals have a large foundation like Mount Sinais at their side, Quick said, and very few have philanthropic supporters willing to fund hospital operating subsidies rather than buildings bearing their names. Frequently, large donations are made for a particular thing, a particular program or a building, she said. At the Mount Sinai Medical Center Foundation, people have been perhaps a little more flexible with respect to how those resources can be used.
The foundations financial backing and the hospitals operational turnaround have fortified Mount Sinais creditworthiness. Two credit rating agencies assigned investment-grade ratings to a $135 million bond issue in August by the Miami Beach Health Facilities Authority on behalf of Mount Sinai. The hospital used the proceeds to refinance older, more expensive bonds issued in 1998 and 2001.
Moodys Investors Service assigned a Baa2 rating to Mount Sinai Medical Centers fixed-rate bonds and cited, among other reasons, the multi-year trend of improved financial performance that demonstrates the durability of MSMCs recovery. Fitch Ratings, which put a BBB rating on the $135 million bond issue, reported that Mount Sinais improved market position was a key factor: Due to its excellent clinical reputation, the organization has been able to expand its reach in the market and maintain or improve clinical volumes and market share, particularly in cardiac services.
Healthcare reform under the federal Affordable Care Act is a major challenge for Mount Sinai and the rest of the hospital industry. It is likely to reinforce downward pressure on the number of hospital-patient admissions, the length of hospital stays and the amount of reimbursement from patients insurers. A tighter squeeze on hospital finances, in turn, could ignite a new round of mergers and acquisitions in the industry.
Three hospitals in Miami Beach have closed in the last 20 years, leaving Mount Sinai as the citys only one, and there will be another consolidation of the market in the foreseeable future, Sonenreich said. Asked if he expected Mount Sinai to acquire another hospital or be acquired, he suggested that the hospital would remain independent as long as its winning streak endures: We expect to grow. Consolidation is all about winners and losers.