Hospital healthy, but challenges loom

By Nelson Sigelman
Published: July 17, 2008

The Martha's Vineyard Hospital, which includes the Windemere Nursing and Rehabilitation Center, is in healthy financial shape. As a combined total the institutions finished the fiscal year with a $1.6 million profit on revenues of $51 million.

Those fiscal year end numbers made available to The Times are part of a consolidated statement of operations for Windemere, which ended its fiscal year on Dec. 31, 2007, and the hospital, which ended its fiscal year on March 31, 2008.

"I think we did a pretty good job," said Tim Walsh, hospital chief executive officer. "We came out where we wanted to be and better than the budget plan, but health care is a tough business."

Looking ahead, the hospital plans to hire a new OB-GYN physician in order to better provide women's health services and has begun a search for an orthopedic surgeon to provide services that patients now often seek off-Island.

In an interview in his office last week, Tim Walsh, hospital chief executive officer, said the year-end numbers reflect two significant changes.

Massachusetts Department of Public Health officials recognized the additional costs faced by the Island's only nursing home and upped reimbursements retroactively. And the state's new comprehensive health insurance plan known as Commonwealth Care helped to reduce bad debts. As a result, the provision for uncollectible accounts dropped from almost $3 million in 2007 to $1.5 in 2008.

Mr. Walsh said he was pleased with the numbers but challenges loom for all hospitals and Martha's Vineyard is no exception.

The hospital's financial picture is shaped to a great part by state, federal, and private insurance reimbursement rates. Government reimbursements rarely cover the actual costs of service. That is particularly true with regards to Windemere.

The Island nursing home received the same Medicaid rate as nursing homes across the state. However, last year hospital representatives successfully argued that costs are higher on the Island. The state recognized the so-called Island differential and increased payments retroactively.

In the previous fiscal year, Windemere ended the year $92,868 in the red. This fiscal year Windemere, which had expenses totaling $6,323,604, ended 2007 with profit of $234,792.

The Martha's Vineyard Hospital is designated a critical care access facility, a designation that provides for higher reimbursements in rural areas. But the Vineyard's hospital is unlike most rural hospitals.

Most rural hospitals do not have a staff anesthesiologist but rely on a high level nurse, Mr. Walsh pointed out. Another example is nearby Nantucket Hospital, which does not have a full time obstetrician. Martha's Vineyard Hospital has one and will soon have two.

Martha's Vineyard Hospital provides a more sophisticated level of care than what might be found in similar sized institutions because people demand it and are willing to support it, Mr. Walsh said. "If you do it right," he said, "you can generate enough business so you can support a sophisticated model like Martha's Vineyard and then you are much better off."

Martha's Vineyard Hospital, like hospitals across the country, is bolstered by payments from private insurers. When patients seek elective care on the Vineyard rather than elsewhere on the mainland it helps the hospital's bottom line and patients are able to remain closer to home.

Mr. Walsh said hospital volumes have increased because over the past five years the hospital actively recruited primary care doctors and increased the level of rehabilitative services available on the Vineyard. "Those have been critical factors in our financial health," he said.

Hospital expenses rose from $42,785,955 in fiscal year 2007 to $43,858,793 in 2008. Mr. Walsh said the jump is attributable in part to new services, such as a dental clinic, and increased expenses associated with new physicians.

The hospital expects its new OB-GYN physician, Linda Stewart of New Hampshire, to join the staff in September. Mr. Walsh said there is a need to expand the availability of women's health services on the Island.

The hospital is also actively recruiting an orthopedic surgeon. Mr. Walsh said much of that business now goes off-Island. In April, West Tisbury orthopedic surgeon Dr. Rocco Monto ended his private practice and joined the staff of the Nantucket Cottage Hospital where he had worked for eight years while maintaining an office in West Tisbury.

He continues to maintain his Vineyard office.

One significant hospital cost continues to be free care. While the state's new insurance plan has done much to reduce the number of people who the hospital previously classified as bad debts (people it expected would pay but did not), that program has not affected the amount of free care the hospital provides people who walk in the door.

The state mandates that all hospitals must provide free care to people who cannot afford it. People in need of free care apply to the state for an ID card that entitles the holder to care.

All hospitals pay into what is known as the free care pool, a state fund used to compensate hospitals for the cost of providing free care. Martha's Vineyard paid $472,612 in 2007 and received approximately $1 million in return.

The net $600,000 was far less than the cost of services the hospital provided.

In 2007, the hospital provided approximately $4 million in free care, Mr. Walsh said. The emergency room accounted for approximately 25 percent of that care because many people rely on the ER for what would normally be considered primary care services. The hospital gave away approximately $460,000 in operating room services, $670,000 in free laboratory services and $200,000 in radiological services.

Mr. Walsh said the health care industry as a whole is under pressure to contain costs. At the same time, costs continue to rise, particularly on the Vineyard. "I think the industry is generally getting squeezed right now," he said. "As a result the industry is trying to respond by focusing on the cost side.

The Massachusetts Hospital Association is placing greater emphasis on preventive care, Mr. Walsh said. By intervening earlier, hospitals could help patients reduce the need for more costly care. Diabetes, for example, can be very costly when people do not take care of themselves. Helping people manage their disease better can often reduce later complications, he said.

Another strategy that can reduce costs is information management. Providing physicians and health care workers with better access to up-to-date information helps to avoid repeat testing and procedures.

This spring work began on the new $42 million hospital building foundation. Mr. Walsh said the hospital has taken advantage of the relationship with its parent owner Partners HealthCare, and affiliate Mass General Hospital (MGH) in the design of the new hospital's information technology systems.

Earlier this year Partners technology specialists met with the hospital architects to review all wiring plans. The purpose was to make sure the systems will be the most technologically advanced. Mr. Walsh said, "Everything in the new hospital will be compatible with MGH information systems."

Mr. Walsh said he was pleased with the progress on the new building. The hospital recently received one piece of very good news. In a letter dated July 8, the Department of Public Health approved design plans for the core and shell of the new hospital building. "We're very excited about it," said Mr. Walsh.