Martha's Vineyard Hospital weathers economic storm; Nantucket struggles
By Nelson Sigelman
Published: November 19, 2009
Martha's Vineyard Hospital continues to weather the economic storm that has buffeted other medical centers across the country. Half way through the hospital's fiscal year, which began on April 1, the hospital's financial condition, based on operations, remains healthy despite a lag in state reimbursements.
Set to open in February, the new Martha's Vineyard Hospital is on solid financial ground, CEO Tim Walsh said this week. Photo by Susan Safford "I am cautiously optimistic," Tim Walsh, hospital chief executive officer, said this week. "I think we are doing okay right now. Even though we are off from budget, given the circumstances I think we are doing pretty well."
Donors continue to make good on their commitments to the new $42 million hospital building, which is on schedule to open in February. "We have not borrowed any money yet for that new building," Mr. Walsh said.
The news is not so good on Nantucket, where the Nantucket Cottage Hospital projects a $4 million deficit. Both island hospitals are affiliates of the Massachusetts General Hospital (MGH) and members of Partners HealthCare, a nonprofit founded in 1994 by MGH and Brigham and Women's Hospital. In addition, the group now includes Newton-Wellesley Hospital, North Shore Medical Center, Faulkner Hospital, McLean Hospital, and Spaulding Rehabilitation Hospital.
Nantucket Cottage Hospital is coping with a $4 million loss.Mr. Walsh said that year-to-date through September, the hospital had net income of $1,431,000 against a budgeted expectation of $2,092,000. Mr. Walsh attributed the $600,000 shortfall in part to a cutback in state reimbursements.
Massachusetts has held payments for free care the hospital provided, as well as Medicaid payments, Mr. Walsh said. "We are still trying to recoup it, but that is what really drove the number," he said.
Martha's Vineyard Hospital patient volumes have remained strong, about even with last fiscal year, and emergency room traffic was up two percent during the period, the busiest part of the hospital's fiscal year. The hospital has also seen a strong increase in physical rehabilitation and therapy service volumes, up about 15 percent.
Mr. Walsh said the increase is due in part to the elimination of physical therapy in the West Tisbury offices of orthopedic surgeon Rocco Monto, a Nantucket Hospital based surgeon who also practices on Martha's Vineyard.
The hospital hired physical therapists from Dr. Monto's office. Mr. Walsh said once the move is made to the new building, the plan is to renovate and expand the physical therapy department. "It is a huge service for us and the community," he said.
Despite the lag in state payments, the hospital remains on track to end the fiscal year in March 2010 with a net surplus, Mr. Walsh said. However, the state's continuing budget woes remain a cause for concern.
The state's free care pool, which compensates hospitals for free care provided to people without the means to pay for health care, is in trouble, according to Mr. Walsh. "And the problems that the state is having, those usually trickle down to us at some point, because the Medicaid program is such a big part of the state budget," he said. "So it is a tough time, and we have to be careful and prudent about what we do."
Against the backdrop of managing costs for the existing building, hospital officials also must plan the move into the new building, expected to open in February. "We are sharpening our pencils to manage our way through it," Mr. Walsh said.
One major resource the hospital can rely on is Partners, which employs experts in moving medical offices. "It is really a good resource, because there is a lot that goes with moving in a hospital setting," Mr. Walsh said. For example, medical equipment and laboratory equipment that is shifted must be recalibrated and tested.
Partners will also help finance the move. Mr. Walsh said the hospital had expected to borrow money in October to bridge the gap until pledge dollars arrived at the end of the year. But the flow of money has been so strong now that he does not expect to need to borrow until December. When the hospital does borrow, Partners will advance the money needed to bridge the time period until the pledge money arrives, so there is no need to borrow outside the partnership. "And that happens with just a request and a signature," he said. "It just makes things real easy when you can do that."
Beyond the Island and the state
The ever shifting state and national debate over health care and the ramifications of pending legislation for small hospitals leave Mr. Walsh wary. Martha's Vineyard Hospital is currently designated a critical care access hospital, which results in higher reimbursement rates.
"My concern is that they continue to recognize that a rural hospital has unique circumstances that result in higher costs compared to a big hospital that can get productivity gains because they have higher volumes," Mr. Walsh said.
So far, there appears to be a willingness to maintain critical access, Mr. Walsh said. But he admits there is no way to know what the future will bring.
Mr. Walsh does not need to look far to see how bad things could get. Nantucket Hospital had projected a loss of $1 million on a budget of $36 million. That number is now expected to be $4 million.
A drop in insurance reimbursements, philanthropic donations, and return on investments from the hospital endowment all combined this year to fuel the deficit, according to a published report in the Nantucket Inquirer and Mirror.
Asked to describe the difference between the two hospitals, Mr. Walsh cited population, patient volume and the increased distance to the mainland. "It is hard on the Vineyard; I can't imagine what it is like on Nantucket," he said.
