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Kaleida Health seeks further growth

Kaleida Health will continue to try to grow beyond its base on the Buffalo Niagara Medical Campus as the region’s largest hospital system seeks another year of profits, CEO Jody L. Lomeo said Monday.

The system has in the last two months reached affiliation agreements with hospitals in Dunkirk and Lockport, is close to a similar agreement with a hospital in Irving and is in talks with a hospital in Cuba, Allegany County. That comes as Kaleida works at improving its relationship with the primary care physicians who refer patients to the system’s specialists. And it follows the system’s acquisition in July of two medical practices.

Kaleida is not trying to get bigger for the sake of getting bigger, but because size and scale matter for an institution that has seen two straight years of income after half a decade of inconsistent gains followed by losses, Lomeo said in a meeting with The Buffalo News editorial board.

“We’ve shifted the Queen Mary, we think,” Lomeo said of Kaleida, which with 10,000 employees is the region’s largest private employer.

Last month, Kaleida reported earning $23.2 million in operating income in 2015 on $1.395 billion in revenue, a 1.6 percent margin. That’s up from the $15.2 million it earned in 2014, and from the $15 million that the system lost in 2013, the year before Lomeo became president and CEO.

Gains in scale allow for improvements in efficiency, for example, he said. Another area that shows promise is drawing Canadians to Kaleida’s Gates Vascular Institute on the Medical Campus for heart and stroke procedures, he added.

In March, Kaleida announced that it had reached an affiliation agreement with Brooks Memorial Hospital in Dunkirk and was close to a similar arrangement with TLC Health Network in Irving. The announcement followed the state’s awarding of a $57 million grant to help with restructuring the smaller Chautauqua County hospitals, both of which have struggled financially recently.

Kaleida said last month that it was affiliating with Lockport’s Eastern Niagara Hospital, and Lomeo revealed Monday that the health system is in talks with Cuba Memorial Hospital on a similar arrangement. Lomeo said Kaleida Health had moved too slowly in the initial round of affiliations among larger hospital systems and rural hospitals in the region, a time when Catholic Health, University of Pittsburgh Medical Center and the two Rochester-based health systems were active.

“I consider this Round Two. Kaleida Health did not do well in Round One,” Lomeo said.

Lomeo said that this is not a matter of Kaleida coming in to solve all of the problems of the smaller hospitals. “Rural knows rural best,” he said.

Kaleida also has grown by reaching out to primary care physicians, who refer to the system’s specialists, and by acquiring Western New York Urology Associates and Cancer Care of WNY.

That’s part of an approach that Lomeo laid out after becoming president and CEO, he said, to steer the system away from its focus on the Medical Campus, where both Buffalo General Medical Center and Gates Vascular Institute are located, to reaching patients where they are in the community, and increasing outpatient volume, too. “We need to cover the map,” Lomeo said. “We need outposts.”

Other items covered by Lomeo included:

• The system has made a concerted effort to lower its rate of hospital-acquired infections, but he acknowledged that the results of that improved performance won’t show up in statistics reported by the Centers for Medicare and Medicaid Services for at least two years. Medicare has penalized Kaleida for fiscal year 2015-16 for having high rates of infections or other patient-safety problems, but the penalties are based on prior years’ results, he said.

• The hospital system doesn’t expect to have much trouble in wrapping up its recently launched negotiations with its master collective-bargaining agreement. The contract covers three of its unions, representing 8,000 workers, and expires May 31. Lomeo has made building close ties with hospital workers a priority since taking over.

• Kaleida plans to expand the emergency room of DeGraff Memorial Hospital in North Tonawanda. He cited the age of the facility as driving the need but did not offer details.

• The system’s board of directors is getting closer to making a decision on the reuse of the Women & Children’s Hospital site in Buffalo’s Elmwood Village. Kaleida is choosing from among proposals submitted by four area developers for reusing the site, which Kaleida will vacate once it opens the John R. Oishei Children’s Hospital on the Medical Campus next year. The board is expected to select the winning proposal this summer.

email: swatson@buffnews.com