NARH Ends Year In the Black

By Tammy DanielsPrint Story | Email Story
Richard T. Palmisano II
NORTH ADAMS - After years of bleeding budgets, Northern Berkshire Healthcare has staunched the flow of red by posting its first profit in more than a decade.

The nonprofit health-care system ended the fiscal year in September with a balance of $325,000 just two years after struggling to treat a $4.5 million deficit.

"To go from $4.5 million to $325,000 in the black in a two-year period of time that's dramatic, in health care, in any industry, that's an incredible turnaround," said President and CEO Richard T. Palmisano II on Thursday. He cautioned that the pre-audit gain was small against the $78.4 million total taken in, but added "we had an excellent year, last year."

Palmisano was hired in 2006 to head the floundering the health-care system and its flagship North Adams Regional Hospital. Some of the organization's top management had resigned or had their positions eliminated and a health-care consultant group had been brought a year earlier to help solve its fiscal woes.

Palmisano credited a strategic plan implemented the year of his arrival that emphasized access to services, greater community involvement, measurable quality of care and responsible financial stewardship.

An increase in patients, which is expected to continue, cost-control efforts were significant factors in last year's profitability.

He stressed that the nurses, doctors and quality of care hadn't changed, rather that administrative systems had been put in place to respond more effectively to patient and market demands. The previous structure "had prevented the organization from realizing its potential."

"We're not out of the woods," Palmisano said of the dramatic turnaround. "We'll continue to have challenges going forward in terms of profitability."

Challenges Ahead

Those challenges include ensuring the hospital can survive without the $4 million its received over the past two years through the Essential Community Provider Trust Fund. The competitive state grants are designed to help medical organizations provide more effective and efficient community-based care.

While the hospital has become profitable, Sweetwood Retirement Community and Sweet Brook Care Centers had total losses last year nearing $1 million. Projected revenue growth for the coming year is pegged at .5 percent while costs are going up with rate of inflation.

The health care system is also struggling under pressure from insurers to make medical care more efficient and from the low-reimbursement rates from Medicaid that have bedeviled hospitals across the nation for years.

Commonwealth Care, created for low-income earners under the state's new health insurance reform, alleviates the burden of free care but only reimburses at about the same rate as Medicaid - 60 cents on the dollar.

Changes in Medicare, the federal insurer for the elderly, are expected to help academic medical centers but not small community hospitals, said Palmisano.

He cited the continuing need to be more efficient as one of the challenges in the coming year, along with the need to recruit more specialists and primary-care physicians to the area.

Doctors in the House

The hospital has 71 active physicians on staff but could use 13 more in a range of specialties. A high number of local physicians are above the age of 50 and nearing retirement so the hospital is trying to recruit ahead of the those departures.

<L2>"For every physician who retires we have to hire 1 1/2 to replace them," said Palmisano, because styles and expectations have changed. It has become difficult to find primary-care physicians who fit into the area's rural character, he said.

Doctors can nearly double their salaries by becoming specialists and more urban areas can far be more lucrative - a strong attraction for anyone carrying a $100,000 or more college loans. Family practitioners also "bear the brunt" of the demands of managed care.

"Economic incentives in health care are driving people away from primary care and yet it's the primary-care physician who's in the best position to integrate and coordinate care among specialists and to decrease the utilization of expensive specialist care," said Palmisano.

The health-care system has found a partner in McCann Technical School in developing nursing opportunities. The revived licensed practical nurse course is expected to provide a steady stream of employees over the coming years. Six recent graduates have already been hired and NBH is sponsoring the education of six more.

The hospital has gone through $22 million in renovations and construction in recent years, but that's not the end, said Palmisano. "We are continuing to look at what kind of facility enhancements need to be made here to provide the most efficient care." 

More space is need for doctors' office space and specialty services, he said. "We are outlining a master facility plan to modernize and expand the physical plant here and in Williamstown and everywhere else."

Highpoints

Last year's successes included recruiting six physicians, including two new primary-care doctors; the installation of the most advanced and fastest computed tomography scanner in the area; completion of the digital radiography room (no more X-ray film); a digital archiving system expected to save thousands of dollars in film processing and storage costs; expanded cardiac coverage in partnership with Berkshire Medical Center in Pittsfield; and a pediatric palliative care program at Visiting Nurse Association and Hospice of Northern Berkshire.

The hospital reported an inpatient satisfaction rating of 92 percent and a similar high rating by patients in its short-stay unit.

The goal is to make the hospital as self-sufficient as possible by continuing along the strategic path laid out two years ago: increase patient growth, provide the physicians and care to serve the aging population and to provide that care more efficiently.

But that may difficult because of the current state of health-care financing; Palmisano described it as a "vicious cycle" in which the failure of public programs to pay the full freight puts more pressure on private providers.

The fear, he said, is that small businesses, which make up the bulk of employers in Berkshire County, may be forced to push their employees onto Commonwealth Care that will, in turn, mean higher premiums on larger employers to make up the difference. Hospitals, meanwhile, will be reimbursed at lower rates.

The attorney general's office has named a panel to examine how the new health insurance reform will affect acute care facilities - and it needs to start with how much medical care costs, said Palmisano.

"The problem with health care financing right now is that all of the approaches are piecemeal," he said, "instead of stepping back and saying,'to make the system work, how do we make it work?'

"If we change the model of how we finance health, if say, we went to a public model, we could level the playing field. I'm not advocating that necessarily, I'm just saying we really have to look at the system as a whole."
If you would like to contribute information on this article, contact us at info@iberkshires.com.

How is your retirement income taxed?

Once you're retired, you will likely need to draw on several types of income for your living expenses. You'll need to know where these funds are coming from and how much you can count on, but you should also be aware of how this money is taxed — because this knowledge can help you plan and budget for your retirement years.  

Here's the basic tax information on some key sources of retirement income:

  • Social Security – Many people don't realize they may have to pay taxes on their Social Security benefits. Whether your benefits will be taxed depends on how much other taxable income you receive from various sources, such as self-employment, stock dividends and interest payments. You'll want to check with your tax advisor to determine whether your income reaches the threshold where your Social Security benefits will be taxed. The lower your total taxable income, the lower the taxes will be on your benefits. The Social Security Administration will not automatically take out taxes from your monthly checks — to have taxes withheld, you will need to fill out Form W-4V (Voluntary Withholding Request). Again, your tax advisor can help you determine the percentage of your benefits you should withhold. 
  • Retirement accounts – During your working years, you may have contributed to two basic retirement accounts: an IRA and a 401(k) or similar plan (such as a 457(b) plan for state and local government employees or a 403(b) plan for educators and employees of some nonprofits). If you invested in a “traditional” IRA or 401(k) or similar plan, your contributions may have been partially or completely deductible and your earnings grew on a tax-deferred basis. But when you start taking withdrawals from your traditional IRA or 401(k), the money is considered taxable at your normal income tax rate. However, if you chose the "Roth" option (when available), your contributions were not deductible, but your earnings and withdrawals are tax-free, provided you meet certain conditions. 
  • Annuities – Many investors use annuities to supplement their retirement income. An annuity is essentially a contract between you and an insurance company in which the insurer pays you an income stream for a given number of years, or for life, in exchange for the premiums you paid. You typically purchase a “qualified” annuity with pre-tax dollars, possibly within a traditional IRA or 401(k), so your premiums may be deductible, and your earnings can grow tax deferred. Once you start taking payouts, the entire amount — your contributions and earnings — are taxable at your individual tax rate. On the other hand, you purchase “non-qualified” annuities with after-tax dollars, so your premiums aren't deductible, but just like qualified annuities, your earnings grow on a tax-deferred basis. When you take payments, you won't pay taxes on the principal amounts you invested but the earnings will be taxed as ordinary income. 

We've looked at some general rules governing different sources of income, but you should consult your tax professional about your specific situation. Ultimately, factors such as your goals, lifestyle and time horizon should drive the decisions you make for your retirement income. Nonetheless, you may want to look for ways to control the taxes that result from your various income pools. And the more you know about how your income is taxed, the fewer unpleasant surprises you may experience. 

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