Alecto Healthcare Services

Alecto Healthcare Services is not only in the business of providing care, but also of breathing new life into hospitals, CEO Lex Reddy says. “We often seek out communities that are underserved,” he says, and where its healthcare services are considered essential.

Based in Irvine, Calif., the healthcare system and management services organization has a portfolio of hospitals in West Virginia, California and Texas. A 30-year veteran of the healthcare industry, Reddy started Alecto in 2012.

Previously, he served as the president and CEO as one of the county’s largest health systems. Under his management, the organization became a 15-hospital system that Thomson Reuters ranked as one of the top 10 health systems in the nation.

When Reddy formed Alecto, the healthcare industry saw rampant mergers of health systems, but some communities were being ignored. Although they had hospitals, “They didn’t make sense to the systems,” he recalls, “since they were either not profitable or it made no sense to acquire as they added no synergies to the bigger systems.

“Alecto thought it might be good to identify 50 community-based hospitals that are critical to those communities and sustain them,” he says, noting that this includes the St. Rose Hospital in Hayward, Calif., which Alecto manages and has the option to buy. “It serves a lot of Medicaid and uninsured patients in its communities.”

Another is the Fairmont Regional Medical Hospital in Fairmont, W.V., which was once bankrupt. “We acquired it close to nine months ago, and now they’re able to sustain that hospital,” Reddy says.

The company also acquired Olympia Medical Center, which is located in Los Angeles and staffed by more than 600 physicians that represent more than 40 specialties.

Olympia Medical Center was a physician-owned hospital and was in negotiations for almost two years with a local hospital system, but was not able to consummate the transaction due to the terms and conditions.

“Now, we are seeing an increase in the underinsured patients that are being cared for,” he says.

Alecto also has the Wilson N. Jones Regional Medical Center in Sherman, Texas, which is a Level III trauma center with 237 licensed beds. “It has been in existence for more than 100 years,” Reddy adds.

Important Traits

Alecto evaluates several factors when acquiring hospitals for its portfolio. “It takes as much effort to run a 40-bed hospital as much as a 200-bed hospital,” Reddy says. “The traits we look for include an active emergency room, because the patients need access to care.

“Second, they have to have critical mass with the number of beds they have,” he continues. “More importantly, they have to be facilities that the members of the community and independent physicians’ practices want to sustain.”

Alecto also prefers public/private partnerships when bringing hospitals under its umbrella. “The community has to take responsibility for their healthcare,” Reddy says.

When hospitals cannot be sustained, patients in the community are transported to healthcare centers many miles away. “There are quite a few hospitals that are shutting down,” he says. “Almost 70 to 80 percent of the hospitals are not making it.”

When Alecto adds a hospital, the company implements equipment and systems updates to ensure patients will want to come there for care,” Reddy says. “Most of Alecto’s changes consist of investments in technology.

“We have brought them all up to current standards,” he says, noting that the company has added diagnostic and radiology equipment to its hospitals, as well as new beds. The company also focuses on ”providing patients with a hospital that is well maintained and clean, because quality of care depends on it,” Reddy adds.

Alecto forms partnerships with paramedic companies in each of its hospitals’ communities. Hospitals also partner with nonprofit healthcare associations. “We provide health education to the community through all our hospitals on a regular basis,” Reddy says.

Thinking Locally

Alecto distinguishes itself with its decision-making process, Reddy says. In larger health systems, decisions are made at the corporate level, “Whereas at Alecto, the decisions are made at the local level,” he states.

“The decisions that have to be made depend on each of the communities,” Reddy continues, noting that the company provides management training to each location. “Each individual hospital should be able to sustain on its own, even if we are not there.”

But that does not mean Alecto lets its locations operate without any guidance. “While we do not micromanage, we are on top of things,” he asserts. “We take appropriate measures rather than have big meetings. That’s what our local hospitals like about us.”

Nurturing Loyalty

Like many in its industry, Alecto is coping with staffing shortages. “Because these are community-based hospitals, it’s hard to recruit,” Reddy admits. “Everyone wants to work in the bigger systems.”

This makes it even more important for Alecto’s hospitals to develop a loyal staff. “When people are part of a community, they look for stability in the organization,” he says. “We’ve been able to provide that by controlling costs and increasing financial stability. There are a lot of programs where we work with the staff very closely.” He notes that these include continuing education and training programs.

This defies a common misperception, that people leave jobs because of low pay. “Seventy to 80 percent stay because the institution respects what they do for the community,” Reddy asserts.

Reddy is proud of his team at Alecto. “It’s very hard to find good healthcare leaders because this is a demanding business,” he admits.

“Aletco’s future,” he notes, “is hard to plan for. We don’t know which way the healthcare industry is going to turn. It’s pretty dramatic and everybody keeps talking about quality in all that we do. Although it can be hard to maintain a high level of quality in the face of higher costs, one of the advantages we have at Alecto is we’re very fluid. We have to be as fluid as we can to sustain these institutions. I do believe each of our hospitals provides good, quality healthcare.”

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