Essay: VNA board describes the events that led to the agency’s demise

By Michael A. Goldsmith, chairman; Patti Young, secretary; Jack Law, vice president; Mort Fearey, treasurer; and members Allan Keith, Karen Kennedy, Ursula Kreskey, Diane Nordin, Joan Coles Potter, Edie Radley, and Robert Tonti, the chief executive of the board, of the Visiting Nursing Association.

On March 27, The Martha’s Vineyard Times published an editorial posing “unanswered” questions to the Vineyard Nursing Association’s (“VNA”) volunteer board. The board welcomes the opportunity to provide details regarding the events of the past 18 months, and we believe our experience will provide insight as to why the VNA’s plight is representative of the rapidly evolving changes in patient medical care — specifically homecare.

On March 11, 2014, we closed our doors after 30 years of service on Martha’s Vineyard, and three years of serving Nantucket. Cape Cod Health Care (“CCHC”) is now treating all of our patients who qualified for and desired continuing care. Our patients have not witnessed a change in personnel — CCHC hired all clinical staff who applied for jobs, as well as some administrative employees.

The end of VNA’s 30-year run is a sad reality. But the board’s sole focus during the last 18 months has been on finding a viable alternative. Specifically, we looked for an organization to: (a) provide for the safe transfer and care of existing and new patients; (b) assume our moral and financial obligations to a capable staff who have remained loyal throughout this arduous period; and (c) bring to bear the expertise and the financial stability to withstand the vicissitudes of future Medicare reimbursement.

Since 2010, when the Affordable Care Act (“ACA”) became the law, homecare agencies have been the target of progressive reductions in reimbursement rates. In November 2013, Centers for Medicare Services (CMS) outlined its plan to reduce homecare reimbursements by 14 percent by 2017. CMS acknowledged that its planned reductions would force net losses affecting about 75 percent of homecare agencies, primarily smaller agencies.

We were aware of these changes, but the ACA initially included some temporary safeguards to help small nonprofits weather the financial storm. Unfortunately, as reimbursement reductions progressively took hold, our losses mounted more rapidly than anticipated.

Between 2010 and 2012, management and the board identified several specific strategies to mitigate the impact of future losses. These measures included:

  • Increasing fundraising efforts;
  • Seeking new board members;
  • Implementing cost-cutting measures; and
  • Reducing facility costs by acquiring our own building.

Additionally, we diversified our business by offering private care, partnering with HopeHealth Hospice, opening an office on Nantucket, and seeking more grant funding. We constantly walked the line between controlling costs and meeting the needs of the growing senior population.

In the fall of 2012, we retained a nationally renowned homecare consultant to review our alternatives. Our efforts to define a strategy came none too soon: in the first quarter of 2013, revenue fell 17 percent below expectations, a clear indication of the severe impact of the ACA cost-saving measures. The precipitous revenue decline can be traced to a decrease in Medicare patients (20 percent), a reduction in reimbursement rates (4 percent), and stricter application of Medicare regulations governing who qualified for homecare services.

Our consultant made a presentation to the full board in April 2013. In brief, he advised us that the days of the small health care organizations were numbered, and he recommended that the VNA look for a partner to ensure the future of homecare on the Islands.

In June of 2013, we approached Partners Healthcare as the most logical affiliate. For the next five months, we responded to endless requests for information, held conference calls with a cadre of Partners professionals and underwent on-site reviews. Partners’ stated objective was the need to be satisfied that they could operate our businesses in accordance with its financial model. Since we were not asking for any remuneration or imposing any conditions, we believed a favorable outcome was most probable. In communications as late as November 4, Partners stated that “things were moving in a positive direction.” Throughout this period, we continuously updated Partners’ decision-makers of our impending negative cash flow predictions.

Our continued optimism was a mistake.

On November 26, 2013, Partners advised us that no alliance would be forthcoming. Partners offered to assist us by ushering the VNA through a “structured bankruptcy,” but was non-specific as to which liabilities would be assumed, which employees would be hired, or which assets would be taken over.

Through the press we alerted the community to our financial needs and consequently received approximately $100,000 from the general public. The board contributed $100,000, with a commitment for more, if required. Cottage Hospital (Nantucket) gave us a generous five-figure amount. The MV Hospital did not respond to our request for financial support.

We quickly mobilized to find other potential partners and opened dialogues with CCHC, Martha’s Vineyard Community Services, and HopeHealth. We decided to focus on CCHC (Cape Cod) because of its size, diverse programs, and financial stability. We firmly believed that CCHC had the financial wherewithal to withstand the impact of further reimbursement reductions, and we found CCHC’s management to be of the highest caliber and capable of making timely decisions. Senior management, including the chief executive officer of Cape Cod Healthcare, travelled to the Island to express their interest in an association and advised us that they intended to take over all of our assets and assume all of our liabilities, pending due diligence. These discussions took place in early January of 2014.

We embraced the VNA of Cape Cod’s interest as the best option for providing this community with a comprehensive array of homecare services. Ultimately, CCHC decided, at the 11th hour, not to acquire our assets, including the building (or directly assume our liabilities).  CCHC’s stated reason was that it was unwilling to accept the normal successor liability associated with acquiring any VNA, citing a change in CMS Region I management, which CCHC appears to have understood would sanction its proposed acquisition of our assets without successor liability, given our impaired financial condition.

In the end, CCHC established the infrastructure necessary to serve our patients; made arrangements to take control of our patient records; and hired all clinicians who wanted a job.  CCHC’s affiliated charitable foundation made a significant contribution, which we used to satisfy accrued employee wages and our financial responsibility to the Commonwealth for unemployment liability. While we wish the deal had turned out differently, CCHS stepped into the void.

In summary, after closing:

  • All patients on both Islands are being cared for;
  • 85 percent of the VNA staff are now employed by Cape Cod VNA;
  • 100 percent of our former employees received their full pay, including accrued vacation;
  • We are working to sell the building and to collect all outstanding receivables, to satisfy our financial responsibilities.

Our closure is a regrettable consequence of changes in the Medicare landscape and is unfortunate in that it marks the end of a community agency. However, the transfer of critical health care services to a large, well-financed agency was forced on us by external events and, ultimately, was the right decision. It is the health care system, nationwide, that is the “mess.”

We wish to make a few other points:

We reject the idea that the board failed to move in a timely or decisive manner. We acted immediately as events required. Beginning as early as June of 2013, cost reduction plans were implemented, which included pay cuts, reduced hours, and hiring freezes.

We reject the inference that we suffered from “inexperienced, informal, casual and self referential governance.” Like most Island nonprofits, the board had representation from the Island’s medical, fundraising, business, legal, and financial communities. Board support included the contributions of  approximately $1 million in personal funds since 2010. We have never shirked “our responsibility.” In fact, most board members have remained involved despite the risk of personal liability. The VNA board, like any nonprofit board, faced the real possibility of personal liability if the organization was unable to meet the payroll obligations.

We reject the notion that acquiring “an expensive new headquarters” was instrumental in causing our closure. The rationale for a new home was (a) to respond to growth in existing operations and planned future programs, and (b) to seek improved financial stability. Our plan called for purchasing a building and paying it off within five years, through donations, thus saving $100,000 a year in operations. At no time did we expect, nor did we incur, higher operating expenses in our new building.

For obvious reasons, we were constrained from commenting publicly prior to the transfer of patients/staff. To the extent legally permitted, we shared information with both papers to keep our community apprised of the rapidly deteriorating financial situation.

And, for other privacy and legal reasons, we are not free to comment on “personnel” issues, which some have whispered contributed to our demise. To be sure, like any business that grows from 40 to more than 100 employees in a brief span, changes in staff are likely to be necessary, but we can say, with certainty, that no employee issue drove us to look for a more financially sound partner.

To our donors: We are grateful to all who supported the VNA during the past 30 years. With the exception of the capital campaign, which we stopped last spring when our future became uncertain, all donated funds were applied to patient care. We returned all donations that came in after we knew the organization was going to close.