NBH Details Financial Issues11-29-2009
To the Communities We Serve:
As trustees of Northern Berkshire Healthcare, we believe it is important for our community to understand the financial challenges we face, and why it is critical that union contracts at North Adams Regional Hospital be modified to make them affordable.
NARH currently has among the highest compliance with national quality of care standards, and patient satisfaction scores, of hospitals nationwide. As community members and trustees, our purpose is to ensure that high-quality health care continues to be available for our community, now and in the future. We also recognize the economic significance of NBH in our community: more than 900 jobs and $125 million in 2009.
Our ability to maintain and grow services is challenged by many factors, several specific to our community.
■ The economic crisis has negatively affected hospitals across the nation, with 70 percent reporting a decline in their overall financial health and about half reporting a significant decline in elective procedures and inpatient admissions. Across the nation, 117 hospitals had mass layoffs — affecting 50 or more people — in the first eight months of 2009. Small facilities are especially vulnerable. NBH had about a $4 million operating loss in 2009. We anticipate another loss, though smaller, in 2010.
■ The community we serve is more elderly than most in Massachusetts. In fact, North Berkshire has the state's oldest population. The percentage of residents 65 and older is 5 to 7 percent higher than the state average. As people age, they require more health services. Medicare, the federal payer for services to the elderly, reimburses us 80 cents for every dollar of care. It does not cover the cost.
■ North Berkshire has a lower socioeconomic standing than most communities in Massachusetts. The average income for a family of four in Adams, Florida and North Adams is $40,000 less than the state average. The community has high rates of serious health issues associated with poverty, such as obesity, smoking rates, and teen pregnancy. MassHealth, the state Medicaid program, reimburses us 85 cents for every dollar of care. It does not cover the cost.
■ NARH pays higher wages and benefits than comparable hospitals in our state.
A Call to Action
We must act quickly and aggressively to reduce costs and restore NBH's financial health. We are taking action on many fronts. These include negotiating competitive contracts with insurance companies; selling underperforming services; and controlling costs. This is why we have directed our management team to secure collective bargaining agreements that share in the cost savings essential to our survival, guided by the values of respect, fairness, competitiveness, and affordability.
Why are costs higher at NARH? Here are some examples:
■ Overtime to replace workers. NARH has union contracts that require the hospital to replace a worker who is out by offering the work to full-time employees at overtime rates before calling on per-diem staff. In other hospitals, trained per-diem workers earning regular hourly rates fill available hours first. Also, NARH pays union employees overtime after eight hours in a day, in addition to paying overtime after 40 hours in a week, exceeding federal requirements. The result of these practices is that some employees earn as much or more in overtime pay than the average annual income for the North Adams area of $36,452.
■ No cap on sick leave accrual for union employees at NARH. Plus, employees may "buy back" sick time when they leave or retire. One union member received a buy-back payment of $24,492.
■ Inflexibility. Employers of all types have saved money and preserved jobs through changes such as slightly higher co-payments for health insurance, or reduced retirement contributions. NARH's union contracts do not allow us to make such changes.
Executives, managers, and nonunion employees at NBH have already contributed to cost savings through changes such as elimination of the sick leave buy-back, reduced or no wage increases, reductions in paid time off, expanded responsibilities, a freeze on participation in defined benefit pension plans, and overtime only for working more than 40 hours in a week.
We have asked our unions to join these NBH employees to take actions necessary to preserve our community hospital.
We don't know what shape health-care reform will take in the end. What is clear is that there will be less money for hospitals. Hospitals agreed with President Obama to make $155 billion in savings available over the next 10 years. The bulk — about $100 billion — would come through even lower Medicare and Medicaid reimbursements.
Our Commitment
Ninety years ago, a NARH board member, Mary Hunter Williams, wrote that to her peers "the word Hospital has meant opportunity, a sacred obligation to work for the best welfare of patients, to help reduce the burdens of sickness and pain."
Today's trustees share that sacred obligation. It means we must and shall pay fair and competitive wages and offer fair and competitive benefits in order to retain highly qualified employees. It also means we must ensure we have the resources to continue to improve quality of care and restore the financial health of Northern Berkshire Healthcare.
Thank you,
NBH Board of Trustees
Jane Allen
Ellen Bernstein
Julia Bolton
Dr. Jonathan Cluett
Dr. Paul Donovan
Stephen Fix
Willard Greenwald
Bruce Grinnell
Richard Jette
Stephen Klass
NBH President Richard Palmisano
Stephen Pagnotta
Denise Richardello
Bryon Sherman
Martha Storey
Dr. Erwin A. Stuebner Jr.
Dr. Arthur Turton
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