Cape Cod Healthcare will acquire Island VNA

The Vineyard Nursing Association new headquarters building in Vineyard Haven has added to the agency's outstanding debt. — File photo by Ralph Stewart

The Visiting Nurse Association of Cape Cod (VNACC), part of Cape Cod Healthcare, will acquire the assets and liabilities of the financially pressed Vineyard Nursing Association (VNA), in a transaction worth more than $2 million. The target date for closing the deal is the end of February.

Cape Cod Healthcare confirmed the deal in a press release issued Wednesday morning. “The nationally recognized Visiting Nurse Association of Cape Cod has entered into an agreement to acquire the Vineyard Nursing Association, in order to provide services on Martha’s Vineyard and Nantucket. The two non-profit organizations have executed a letter of intent outlining the VNA of Cape Cod’s proposal to acquire the assets of Vineyard Nursing Association.”

“Patients will see a seamless delivery of care,” Dianne Kolb, President and CEO of the Visiting Nurse Association of Cape Cod said in a press statement. “We are excited to join the Martha’s Vineyard and Nantucket communities, and look forward to a long and rewarding partnership with patients, providers and community leaders.”

The VNA turned to the Cape Cod affiliate as it explored ways to escape a changing health care landscape that has reduced its revenues, even as the Island agency’s costs grew. VNA chief executive Robert Tonti has had discussions with Martha’s Vineyard Hospital and with Martha’s Vineyard Community Services but ultimately turned to VNACC. The Cape agency comes with financial strength — a budget of $50 to $60 million annually, 4,700 employees making more than 300,000 visits each year, more than 2,000 patients — and it is a unit of Cape Cod Healthcare, whose revenues are more than $700 million. The Island VNA’s budget is about $4 million.

In a conversation Tuesday afternoon, Mr. Tonti said that VNACC’s financial strength and the similarity of its services to those offered by VNA made the deal a good match.

The sale is expected to breathe new financial life into the VNA, which has been struggling to maintain its financial health. The VNA took a revenue hit of about $466,000 in the first half of 2013, largely because of changes in insurance reimbursement rules, federal spending reductions, and a decline in the agency’s patient census.

The income loss led the agency to reduce staff and trim hours for administrators. But it did little to reverse the agency’s financial fortunes. Mr. Tonti said that VNACC experienced similar revenue hits, but its strength made it better able to absorb them. He also said that VNACC’s salary and benefits packages make it more competitive than the Vineyard Nursing Association, under relentless financial pressure, has been able to be.

The VNA opened its spacious, new headquarters on Breakdown Lane in Vineyard Haven in November 2012. It currently owes a total of $1.25 million in mortgage debt on its new building, which includes a construction loan and equity line of credit, according to Mr. Tonti.

According to records on file in the Dukes County Registry of Deeds, the VNA has one mortgage for $720,000 recorded on Jan. 10, 2012. They also have a Promissory Note for, not to exceed $300,000 and an additional Promissory Note for $540,000. The total indebtedness is $1,560,000. In addition, they owe $117,489 to the Commonwealth of Mass. for unpaid overdue contributions or payments in lieu of contributions, with interest to the Department of Unemployment Assistance.

Asked to comment on the VNA mortgage debt, Fielding Moore, president and CEO of Edgartown National Bank, holder of the VNA mortgage, according the Dukes County Registry of Deeds, said customer information is confidential and the bank is not allowed to make it public. In an email to The Times, Mr. Moore said, “I can tell you that we have been very supportive of VNA and will continue to be supportive of their new direction. We feel that VNA provides a vital service to the Island and are very pleased that they have found a solution that works for them and will ensure the long term sustainability of this important service for the community.”

VNA operates on a budget approaching $4 million a year, almost all of that from third party payors, including Medicare and Medicaid, the balance from private insurance and private pay. Fundraising supplements reimbursement income. Since 2009, homecare organizations have had Medicare reimbursement rates cut. In the next four years the cuts proposed will chop 13.5 percent off reimbursement rates.

In May 2011, the VNA, doing business as the Nantucket Visiting Nurses Association, began providing home health care services on Nantucket, after Nantucket Cottage Hospital ended its home health care and visiting nurse program.

“This year,” Mr. Tonti wrote in a November 19 statement, “revenue for patient services has decreased 13 percent, with Medicare and third party insurance programs responsible for 84 percent of our shortfall.

“The drop in revenues and increase in expenses over the past year are due to Affordable Care Act reductions in reimbursement rates by two percent, sequestration reductions on Medicare reimbursements by two percent, increased compliance and regulatory systems and policies that make accessing home care benefits more restrictive, and seasonality of workforce demands and balance of having the right workforce at the right time.

“The long-term financial stability of a small home care agency like the VNA is increasingly difficult with reimbursement reductions and the high cost of providing health care services, largely in the area of clinical salaries and benefits.”

In November, Amy Houghton, VNA business and development director said they were engaging in conversations with other organizations on- and off-Island, to see if there are economies of scale that might be achieved through partnership or affiliation. “Home care is not going away on Martha’s Vineyard,” Ms. Houghton said.

Founded by the Woods Hole Women’s Club in 1916, The VNA of Cape Cod provides care for patients 24 hours a day, seven days a week for patients from Plymouth to Provincetown, a service area spanning 1,000 square miles, according to the organization’s website.

The Cape Cod Healthcare group includes Cape Cod Hospital, Falmouth Hospital, a skilled nursing and rehabilitation facility, an assisted living facility, the Cape’s only local laboratory service (C-Lab), and numerous health programs.

Healthy deal

According to the VNACC press statement, the agency’s nurses, therapists, home health aides and staff make more than 300,000 home health and hospice care visits annually. The agency also offers screenings, immunizations and wellness programs through its public health initiative.

“The stellar reputation and top quality services the VNA of Cape Cod provides make it a good fit for Martha’s Vineyard and Nantucket,” VNA board chairman Michael Goldsmith said in the press statement. “We are confident that patients and members of the community will experience the same high level of services they have received from the Vineyard Nursing Association for the last 30 years. The VNA of Cape Cod is, like us, a community-based operation, but also has the experience and the resources to address changes in the rapidly evolving homecare market, as well as the financial wherewithal to insure quality care on the Islands for the long term.”

Under the terms of the letter of intent, following a period of review of Vineyard Nursing Association’s assets and operations, and the completion of applicable regulatory filings and procedures, the VNA of Cape Cod will acquire Vineyard Nursing Association’s unrestricted assets, including the agency’s present building.

Once the transaction is complete, the VNA of Cape Cod will also assume management of Vineyard Nursing Association and will conduct an operational review and assessment of the business.

“Our VNA team provides high-quality, evidence-based care to home health and hospice patients in our region,” said Michael Lauf, president and chief executive of Cape Cod Healthcare. “Island residents can now look forward to the same level of services our team provides in the other 29 towns in our service area.”

Hospital watched closely

In comments last November following news of VNA’s struggles, Tim Walsh, chief executive at the Martha’s Vineyard Hospital, said the challenges facing VNA are common in the home care sector.

“The VNA is an important part of the whole continuum of care for patients after they leave the hospital,” Mr. Walsh said in November. “Their struggles reflect the larger industry-wide dilemma of increasing demand and costs, and lower payments. Windemere is caught in the same vise that is affecting the VNA, and we are watching the VNA situation carefully.”

This week, Mr. Walsh, said hospital administrators and Mr. Tonti met several times to discuss the VNA’s serious financial problems and how the hospital might assist. Mr. Walsh said the hospital’s primary focus was how to provide continuity of care for patients.

Mr. Tonti told hospital officials he was in discussions with Cape-based organizations and Martha’s Vineyard Community Services about a purchase.

Mr. Walsh said the alliance with Cape Cod Healthcare will be a benefit for Islanders. “It’s an excellent system,” he said.

Asked if there was any discussion with the hospital about absorbing the VNA, Mr. Walsh said, “Internally we had worked out a scenario to continue the service through Partners Home Care without absorbing the substantial debt carried by the VNA.”

Community Services disappointed

Juliette Fay, executive director of Martha’s Vineyard Community Services (MVCS) , said that up until last week the Island’s umbrella social services agency was actively in discussions with the VNA to take over the health care agency.

Ms. Fay said community services did “due diligence” on the company during the month of December and hired a consultant to help with its examination, which continued through the first weeks of January.

“We were getting ready to make a proposal and in the meantime what had happened, and they had alerted us to the fact that it might happen, another merger partner had resumed interest,” she said.

At that point, the discussions stopped. Ms. Fay said the turn of events was a disappointment.

She said Community Services’ interest in the VNA was strategic as opposed to business. “We felt that the two entities together could bring about some growth of service for the long haul, that other opportunities would surface as a result of our cross-licensure.”

Ms. Fay added that on-Island governance brings a degree of local accountability. “So that was also a bit of a disappointment,” she said.

Bringing the VNA under the Community Services umbrella would have allowed the agency to gain much needed space. Ms. Fay said from her view there was much to gain in a pairing of the two organizations, particularly in light of health care reform.

“I think the most strategic aspect of the two entities coming together is that integrated health care systems, health and behavioral health, is what is going to be required in the next three, four, five years under Obamacare,” she said, “and this would have enabled Community Services and VNA to move in that direction rather nicely.”

Ms. Fay said she could not answer why the VNA bypassed MVCS in favor of Cape Healthcare. “You would have to ask them that,” she said. “I think probably the other merger partner was looking at this as a financial interest. They, having very similar services and much more of them and they could very easily absorb what was going on on the Island and they could bring their best practice to it. This was not a service that we were offering at the time.”

That was not always the case. At one time, the Island hosted two visiting nurse services, the VNA and the Visiting Nurse Service (VNS). In June 2008, Community Services announced the end of the agency’s Visiting Nurse Service and an end to what the MVCS board termed “a costly duplication of service and not a small amount of confusion for the public.”

On Tuesday, Ms. Fay said she wished the VNA well. “There’s a good group of people over there, and we wish them the best. It’s a very necessary service and a huge part of the health care landscape.”