After year’s loss, Martha’s Vineyard Hospital trims costs

After year’s loss, Martha’s Vineyard Hospital trims costs

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Martha’s Vineyard Hospital anticipates an operating loss of approximately $500,000 once an audit of the institution’s performance for the fiscal year that closed on March 31 is complete. It marks the first time in more than a decade the hospital has ended its fiscal year in the red.

The expectation of a loss has led to planned cuts to the operating budget, one of them, worth about $100,000, to a program that supplied on-call English-speaking Portuguese medical interpreters.

Tim Walsh, hospital chief executive officer, said this week that the hospital will end its contract with Island Medical Interpreter Services, beginning on May 1. The interpreter service has been in place since 2006. In its place, the hospital will rely on the AT&T Language Line, a telephone-based service the hospital relied on before engaging Island-based interpreters, and continued to use alongside the interpreter service. Mr. Walsh said the cut was announced last week.

The medical staff was part of the decision-making, Mr. Walsh said, and cost was the determining factor. “They were surprised when they heard the number,” he said of the medical staff.

The hospital’s financial health reflects state, federal, and private insurance reimbursement rates. Government reimbursements rarely cover the actual costs of service. Mr. Walsh said the new budget reflects the new health care reality and a shift in the payer mix that previously helped subsidize some services, shifting some costs, not reimbursed by government programs, to private pay or privately insured patients.

“Medicaid pays me less than cost and there is very little I can do about that,” Mr. Walsh said this week. “But that is made up for by commercial insurance that pays me more than cost, and in the end I expect to come out above break-even. Well, now the pressure is on all the insurance companies to push down the premiums, and the only way they can do that is to pay me less.”

Mr. Walsh said hospital utilization volumes declined this past winter, in part, he estimated, because mild weather limited flu-related illnesses. And, as people switch to health plans with higher deductibles, they are less likely to seek medical care at the Emergency Room.

Mr. Walsh sees a trend.

“As health care changes, we are feeling the brunt of those changes, and for the first time in a long time we are going to be in the red,” he said. “If I thought the drop was a one-time fluke and everything would return to normal, it would be fine, but I think we are seeing changes in the volumes in the ER and changes in the payer mix that are going to have an impact on our finances going forward. We are just at the beginning stages of it.”

Martha’s Vineyard Hospital is unlike many rural hospitals. A member of the Partners Healthcare group, which includes Massachusetts General Hospital, the Island hospital supports a heightened level of care compared to what might be found in similar size institutions, and it must ramp up staff each summer to handle the seasonal increase in patient volume.

Mr. Walsh said additional savings have been squeezed from the FY2013 budget by cutting back on summer help and delaying the start of summer jobs. He said cuts were made throughout the budget, and more are on the way. In total, $1 million was removed from budget requests.

Mr. Walsh said he could not itemize those cuts because they remain under discussion among senior management and the board. The situation is not unique. Board members, appointed to the Island hospital’s board from Massachusetts General Hospital and its parent, Partners Healthcare, have told Mr. Walsh that they face the same challenges, he said.

Sad news

The interpreter services program exists under the corporate umbrella of Island Health Inc., a community-based health program that operates a clinic in Edgartown. Cynthia Mitchell, executive director, said she got a call last week telling her of the hospital cutback, part of approximately $1 million in cuts in the hospital budget.

Ms. Mitchell said the interpreter service relies on the hospital contract for 95 percent of its funding. The end of the contract will mean the end of a program that furnished interpreter services for the hospital and other organizations, including Martha’s Vineyard Community Services, Head Start and the Department of Social Services, she said.

“We understand the problem the hospital is having financially, and the need to make cuts,” Ms. Mitchell said. “For us, it will mean we have to close the service.”

Ms. Mitchell said the service would not be able to break even without the hospital as a client. She said the interpreters and clients have been informed.

Asked about their reaction, she said that the interpreters, most of whom are Brazilian immigrants, are very sad. “For many of them, it is significant income, and for absolutely all of them it is a service that they are professionally trained to deliver and take huge pride in participating in. It is a service they provide for their community”

Miryam Gerson, program coordinator, said the news is unfortunate. “I am very sorry to see the program go,” she said. “I have been there since the beginning.”

ER is most used

The Massachusetts Department of Public Health requires hospitals to furnish interpreter services. Island Medical Interpreter Services bills the hospital $32.45 per hour for its services, with a two-hour minimum. The hospital also pays a monthly contract fee of $500.

Monthly figures provided by the hospital show consistent use throughout 2011. On average, 124 patients per month requested interpreter services in the last calendar year. The busiest month was February, when the hospital recorded 147 encounters, and the lowest use occurred in April, when 99 patients used the service.

Most of the use was in connection with emergency room visits. Broken down by categories for the year, the ER accounted for 711 patients; OBGYN 292; rehabilitation, 149; and other, a category that includes laboratory and primary care visits, accounted for 339 visits. In total, there were 1,491 requests for interpreters in 2011.

By contrast, the cost to maintain the ATT language line in fiscal year 2012 was $3,000, according to the hospital. In 2005, the cost was $13,000. The new budget projects a cost of $25,000 for the language line in anticipation of increased use.

A personal touch

The ability to call on Island-based Portuguese speaking interpreters has comforted the medical staff on the front lines of emergency medical care. Dr. Jeffrey Zack, hospital emergency department director, said requests for interpreters occur daily, in the emergency room where even those patients who are modestly conversant in English often request the presence of an interpreter. “It just makes them feel more comfortable during a difficult time,” Dr. Zack told The Times in a telephone conversation Monday. “The advantage is the personal touch.”

Dr. Zack said the ER staff works well with the interpreters, and their presence will be missed. “I think all of us in the ER are disappointed. We have become very comfortable with the translators, and in general they are a great group of people,” he said, “but it is certainly understandable given the economic issues.” Dr. Zack said the cutback is part of the larger economic picture affecting health care services.

Dr. Zack said in a sense, access to on-call interpreters was a luxury.

“I think we will certainly be able to do our jobs using the AT&T line,” Dr. Zack said. “If for a moment we felt that we would not be able to do our jobs effectively, we certainly would have raised the issue. This is standard for most small hospitals. Most utilize the service, and we in fact did for many years. It works. It is not optimal, but it works.”

He said the AT&T line provides a wide range of language services. That is an advantage during the summer months when visitors and seasonal workers arrive from many different countries.

“All of us are very disappointed,” he said, “but we do have the resources to be able to do our job effectively, and we are just going to have to adapt, like every other business has to when something gets cut.”

Future uncertain

More cutbacks may be in the offing as the Vineyard hospital and medical institutions around the country have to adapt to a changing health care landscape, hospital leaders say. The elimination of the interpreter service is just a symptom.

“Health care and hospitals in particular are beginning to go through, once again, trying times as reimbursements are configured on the national level,” Tim Sweet, the hospital chairman, told The Times in a telephone call Monday. “Quite frankly, we are being squeezed, and we are not unique in that regard, from all sorts of directions for reimbursement for our services.”

The hospital’s first significant loss in more than a decade, coupled with uncertainty about what lies ahead, dictated a prudent course, Mr. Sweet said. Rather than dismiss the loss as a one-time event he added that the hospital must look at all expense categories, with the goal of returning to profitability. Mindful of the hospital’s not so distant, troubled financial history, including bankruptcy, Mr. Sweet said hospital leaders “do not ever want to be caught flat-footed when there’s a possibility that the economics are going to turn worse.”

Budget cuts require reordering services. “Clinically, we want to maintain as much as we can, so it is the ancillary services we have to look at carefully,” he said.

Mr. Sweet said smaller cuts have been made throughout the budget. “We have to be prepared going forward that there may have to be more cuts,” he said. “We are looking carefully at everything we do and how we do it.”

Margins are slim. Last year, the hospital ended the 2012 fiscal year on March 31, 2011 with a gain of $155,620 on total revenue of $55,470,141 and expenses of $55,314,521. In the previous 2010 fiscal year the hospital ended with a gain of $66,260.

The board will re-examine utilization volumes, costs, and reimbursements in six months rather than 12 — that is, half way through its fiscal year. Mr. Sweet said the examination would indicate whether the hospital has experienced a limited downturn, or is it seeing a trend.

However, despite the pressures on reimbursements, the half a million dollar loss, and the need to cut costs, the institution continues to be financially healthy, Mr. Sweet said. There is cash in the bank and an endowment that may be turned to only in an emergency.

“There is no one who has not been looking at their budget in any and every business for the last two years,” Mr. Sweet said, “and we are no different from the rest. And we have all had to make changes that we would rather not, and that is reality.”

With regards to the quality of care, Mr. Sweet said, “I do have absolute confidence that we can continue to serve, not just Brazilians, but any member of the English or non-English speaking community equally well. And if we were not confident of that, we would not do it.”