Hospital faces winter quarter and a deficit
By Nelson Sigelman
Published: December 24, 2008
Martha's Vineyard Hospital has been hit by the slowdown that is affecting the global economy. The overall prognosis remains good, but for the first time in seven years, the hospital expects to end its fiscal year in the red.
The hospital had projected a $750,000 budget surplus before gifts and endowment income, when the hospital ends its fiscal year on March 31, 2009. Hospital chief executive officer Tim Walsh said that lower than expected patient volume, coupled with rising costs, would likely erode the slim margin counted on to result in a profit.
Looking ahead, Mr. Walsh said there is little likelihood that the numbers will change for the better.
"We are really going to try to hold the line, but with four months left it is a little late," said Mr. Walsh, referring to the hospital's actual financial performance through November of this year.
The hospital has an operating gain through November of $1,223,000 said Mr. Walsh, $1 million less than he expected, as the hospital enters the money-losing winter months.
Mr. Walsh said the hospital has experienced an eight tenths of a percent drop in revenue. Last year through November the hospital had total operating revenues of $32,947,000. This year the figure is $32,700,000.
Like many institutions, the hospital has seen its endowment shrink along with the stock market from approximately $6 million to $5 million. That has affected endowment income.
At the same time, expenses continue to go up. "We have been trying to hold the line but our expenses are up 3.8 percent from last year," said Mr. Walsh.
The hospital has been seeking to cut costs in all areas. The hospital currently employs approximately 320 people. Windemere adds another 100 positions.
Mr. Walsh said that when possible vacant positions would not be immediately filled, and he did not rule out layoffs, but only as a last resort. "Patient care remains the priority," he said.
Like hospitals across the country, Martha's Vineyard Hospital provides some services that do not make money - the emergency room, for example, which is staffed 24 hours a day seven days a week.
Until this year, hospital volumes had increased as the hospital actively recruited primary care doctors and increased the level of rehabilitative services available on the Vineyard.
Elective care paid for by private insurers and the ancillary services associated with those procedures is one area where the hospital does make money. Mr. Walsh speculates that when the economy slows people are more apt to hold off on those procedures.
"It is very hard to figure out what is happening," said Mr. Walsh, "but I know that all my diagnostic volumes are down." For example, he said radiology is down two percent. He said that is not a huge amount, but it is enough to affect what is a small margin of profit.
Citing another drop, he said the swing bed program, which provides hospital beds for patients to recuperate from procedures performed on or off-Island such as knee surgery in order to be closer to home has seen a big hit. Last fiscal year, to the end of November, he said the hospital counted 1,957 days of use. This year the figure is 1,096, a drop of 44 percent, he said. At $1,000 per day per bed it is a big dent in the budget, said Mr. Walsh.
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. Although Dr. Monto continues to maintain his Vineyard office, Mr. Walsh said the lack of a full-time orthopedic surgeon has affected patient volumes.
The hospital recently hired orthopedic surgeon Dr. Willie J. Cater to fill that niche and provide elective procedures. Dr. Cater, a famed Northeastern University sprinter in his youth and an orthopedic surgeon on the staff at Carney Hospital in Boston, begins work on January 1.
Mr. Walsh said the overall picture is not nearly as bleak as it was when he arrived on the Vineyard in 2000, hired to be the hospital's chief financial officer. Then the hospital was struggling to survive in a leaky, outdated wooden building, and there was a very real concern that Martha's Vineyard's only nursing home would close.
Windemere, which follows the calendar year, is expected to end its fiscal year on December 31 with a surplus. Asked for a figure, but with two weeks still to go, Mr. Walsh said only "comfortably in the black."
Mr. Walsh said the nursing home also benefitted from a retroactive increase in state reimbursements and a remodeling of the assisted living wing that resulted in increased occupancy rates.
Previously, the Martha's Vineyard nursing home received the same Medicaid rate as nursing homes across the state. However, hospital representatives successfully argued that costs are higher on Martha's Vineyard. The state recognized the so-called Island differential and increased payments retroactively for residents covered by Mass Health, approximately 70 percent of the Windemere population.
"They agreed with us that we did have extraordinary costs here that are above and beyond what you would normally see," Mr. Walsh said. State cutbacks could affect nursing homes across the board, but he hopes that the Vineyard rates would still be tied to recognition of higher costs.
Renovations overseen by Windemere administrator Ken Chisholm, which included the creation of a separate dining area and more private rooms, also made a difference. "The unit is filling up," said Mr. Walsh.
At the same time, work on the new hospital building is on target and slightly ahead of schedule. Workers have begun to wrap the building and install windows. The next step will be the installation of the various systems unique to hospital operations.
A successful fundraising campaign that resulted in outright cash donations and pledges provided the $42 million needed. Mr. Walsh said the economic slowdown has not affected construction.
Despite some advice to invest the money in equity funds while they waited for the start of construction, hospital leaders chose to be conservative and placed the money in money market funds where it remained protected from the vagaries of the market.
Mr. Walsh said there are approximately $10 million still due in pledges. He said so far there has been no retreat on the part of donors who pledged to contribute on a regular schedule.
Another important difference between when he arrived and the present, said Mr. Walsh, is that the hospital is no longer on its own but is owned by Partners HealthCare, and is an of affiliate Mass General Hospital (MGH).
At the time of the deal there was some public uneasiness that the Vineyard hospital was giving up its independence. Mr. Walsh said that it is reassuring during the current slowdown to know that the hospital could turn to Partners for help, if it is needed. "Absolute total security," said Mr. Walsh. "You know that you have someone there that would come in and really step up to the plate so that things could be maintained here."
Mr. Walsh said he remains confident that the Martha's Vineyard hospital, as it has done so often in the past, will weather the storm. "Right now we think we can manage our way through this," said Mr. Walsh. "The services by and large that we have been able to build and offer are going to be here. We don't have any plans to dismantle any programs. We just need to tighten our belts and be smart about how we operate going forward."
