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Northern Berkshire Healthcare Reorganizes Leadership

By Tammy Daniels
iBerkshires Staff
09:27PM / Wednesday, June 08, 2011
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NORTH ADAMS, Mass. — Northern Berkshire Healthcare has named Bill Frado Jr., former senior vice president of Harvard Pilgrim Health Care and member of the board of trustees, as president. The move comes as part of NBH's reorganization of its leadership structure while it grapples with fiscal woes.

While Frado focuses on operations and patient care, current President and CEO Richard Palmisano will remain as chief executive officer and take on the role of "chief restructuring officer."

Palmisano will focus on restructuring finances, including bond debt and pensions, as well as pursuing federal "critical access hospital" status. Both he and Frado will report to the board of trustees.

The decision was prompted by the health-care system's need to restructure its bond debt and pension liabilities, said board Chairman Dr. Arthur Turton in a letter sent to staff on Wednesday.

The hospital missed a reserve account payment on $40 million in bonds issued in 1996 and 2004, and $423,000 in February on another $18 million bond. That bond, issued in 1999, was used to purchase Sweet Brook nursing home and Sweetwood Retirement Community in Williamstown. Rather than becoming the expected revenue generators, the facilities became a significant drag on the health-care system and were off-loaded for $6 million last year.

In his letter, Turton said he, Frado, Palmisano, Chief Financial Officer Christopher Hickey and trustees Richard Jette and Bruce Grinnell had been meeting almost weekly with bondholders over the last year to work out a consensual agreement about NBH's debt obligations.

"We have been patient, we have tried to deal with them," said Turton in a phone interview on Wednesday about the bondholders. "They have been not realistic as to what the hospital can afford."

He said the discussions have stalled over bondholders' expectations that health-care reform will lift hospital revenues.

Most experts in the field don't agree because the basis of reform is reducing payments, said Turton. "There is no expectation that health-care reform is going to be a boon to hospitals."

The hospital has submitted a plan this week detailing what the hospital can afford; if it's rejected, the matter will move into the courts. A resolution is expected in four to six months.

The health-care system has been struggling to meet its obligations while being squeezed between the global financial crisis and declining Medicaid payments and patient volumes. It reported revenues of $68 million but a loss of $6.8 million in fiscal 2010, which ended Sept. 30, 2010. North Adams Regional Hospital reported an operating loss of $2.9 million.

Over the past few years, the hospital has sought to impose efficiencies and reduce costs as it faced recurring deficits. There have been a number of layoffs, including of administrative staff, and two very contentious contract negotiations with the Massachusetts Nurses Association and Service Employees International Union 1199.

The hospital had been able to fully fund its pension but took a massive hit when stocks collapsed in 2008. It has continued to sustain losses in its pension funds and is working to move administration of its pension benefits to the federal Pension Benefit Guaranty Corp.

"It's a significant liability and we're working on getting it taken over by PBGC. They take on pension plans for distressed institutions," said Turton. "It's a way of really protecting those benefits so [employees and retirees] will receive their full benefits."

Frado will also take on the role of CEO and president of NARH and its affiliates, Visiting Nurse Association & Hospice of Northern Berkshire, Northern Berkshire Family Medicine and Northern Berkshire OB/GYN, all of which have shown an increase in patient activity.

While the Williams College graduate does not have direct experience in hospital administration, he has 37 years in corporate and health-related fields and retired six years ago. Turton said the position is not interim or acting. "We consider ourselves very lucky to find someone like him in-house."

Dr. Jonathan Cluett will be the medical staff liaison, reporting to Frado. His role will be to engage physicians more in hospital affairs and work toward rebuilding primary-care services in the area.

No other administrative changes are being made at this time.
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