Health System Posts Profit But Faces Ailing Economy
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The health system had a gain of $1.43 million on $85.4 million in revenue, the second consecutive year it's shown a profit in more than a decade. Only two years ago, it was trying staunch the bleeding of a $4.5 million deficit.
But the news isn't all good, President and Chief Executive Officer Richard T. Palmisano II told NBH corporators earlier this week. The health system faces multiple challenges because of the declines in the national economy and financial markets.
NBH has already begun trimmimg back, including freezing nearly 20 positions (seven of them management), cutting or reducing nonunion raises, slashing expenses and seeking new revenue for a total savings of $3.5 million.
There were several factors for the health system's banner year, which ended Sept. 30, 2008, said Dianne Cutillo, vice president of external affairs, on Friday, among them settlements with vendors and Medicare, and a high volume of patients.
But those were one-time revenue streams and patient admissions are already dropping off, by 11 percent in November. A recent study found nearly half the hospitals surveyed saw a significant drop in overall admissions in the latter part of 2008.
"People might have lost insurance coverage, they may be deferring care and putting off elective surgery," said Cutillo, pointing to a just-released report by the American Hospital Association, which can be found in pdf form on its home page.
"As the economic downturn continues, hospitals will see an initial decline in patient care volume as patients put off elective procedures. At the same time, hospitals will care for an increasing number of patients with immediate needs who are unable to pay their bills," the report states.
In speaking to the coporators at NBH's annual meeting, Palmisano pointed to the region's poorer and generally older population that requires more health services, and a greater reliance on public funding sources including Medicare and Medicaid.
Medicare, Pension Losses
Cutillo said the hospital expects to see a $370,000 drop in Medicare reimbursements for 2009. The health system is also taking a hit in its pension fund to the tune of $1.2 million. Pension and retirement funds across the nation dropped dramatically as the stock market lost 40 percent of its value last fall. NBH has to make up the difference in obligations to employees and retirees in its plans.
NBH is trying to divest itself of Sweetwood Retirement Community, which it put on the market last spring. Demand for the luxury-living home has declined along with the real estate market. The hospital is still waiting to here if it has again qualified for a $2 million state community health grant, funding that may be in jeopardy as the state tries to close a $1.4 billion budget gap.
Both those figures wipe out the gains made last year. The health system has approached both Service Employees International Union 1199 and the Massachusetts Nurses Association to renegotiate aspects of the contracts for more savings. The nurses' union rejected the proposal.
Economic Impact
There have been rumors of pending layoffs at North Adams Regional Hospital but Cutillo said, "One of our primary goals in budget cutting is to avoid layoffs."
NBH is the area's second-largest employer, with 950 workers and more than $49 million in salary and fringe benefits in fiscal 2008. The not-for-profit system is very aware of its impact on the community, she said.
"Every dollar we spend as a hospital creates more than $2 in additional business activity, according to the Department of Commerce," said Palmisano. "With almost $27 million in expenses last year, we helped to create about $54 million in economic activity.
"Similarly, each hospital job supports about 1.6 additional jobs in the community. We have 580 employees at the hospital, whose employment supports more than 900 jobs in North Berkshire. Clearly the financial health of the hospital is crucial to stimulating the local economy."
It isn't all bad news: the health-care system is adding more physicians, particularly primary-care practitioners through its addition of Northern Berkshire Healthcare Physicians Group; earned high scores in patient satisfaction and quality; turned Reach Community Health Foundation into its education arm; added cutting-edge digital imaging capabilities; expanded its electronic health records program; partnered with the state Department of Public Health to help people stop smoking; lead a communitywide emergency preparedness effort and was recognized by the American Heart Association for its stroke and cardiac program.
There's also the fact the health system is financially sounder than it has been in years.
"We're in a much stronger position that we have been in the past," said Cutillo.
NBH entities include North Adams Regional Hospital, the Visiting Nurse Association and Hospice of Northern Berkshire, the REACH Community Health Foundation, Sweet Brook Care Centers, Sweetwood Retirement Community, and NBH Physicians Group.
