Connecticut hospitals struggle with economic downturn
Posted: 27 February 2009
WALLINGFORD — Ten years of emphysema and congestive heart failure came into play when Daniel Hunter had surgery to remove his gall bladder a few months ago. Because of respiratory-related complications, the 64-year-old former Niantic resident has been a patient at Gaylord Hospital since before Thanksgiving. He’s likely to remain at Gaylord a few more weeks, or until his condition stabilizes to the point where he can go to a nursing home.
As a long-term acute care hospital, Gaylord specializes in treating patients like Hunter, those with medically complex conditions. In early December, he was moved from within Gaylord to the hospital’s new Milne Pavilion, the result of a $22 million expansion project that was launched in much brighter economic times.
Gaylord broke ground on the project in June 2007. The new wing opened in December last year. In the meantime, the hospital posted a $2.5 million operating loss for 2008. There have also been layoffs at Gaylord, including the loss of 11 employees last month, and the hospital has cut for this year its contribution to employee 401K savings plans.
Gaylord also spent the year not knowing whether it could take full opportunity of the expansion, because of a slip up in federal legislation that kept the hospital from using the total number of beds the state had licensed.
And also in the meantime, the economy collapsed.
Gaylord officials now feel that the worst of the roller coaster ride is behind them. The recently passed federal stimulus package corrected the mistake that had kept Gaylord from growing. At one time facing the possibility of additional layoffs, the hospital now could add as many as 50 new jobs in the next year as it expands inpatient services from 109 to 137 beds.
Positions that will need to be filled include secretarial, physical therapy, occupational therapy and housekeeping, said Charlotte Hyatt, Gaylord’s vice president of clinical services.
Without the ability to expand to 137 beds, “we would have a very hard time avoiding an operating loss,” said Hyatt.
But difficult challenges remain, for Gaylord and hospitals across Connecticut, as the struggling economy continues to put a strain on heath care services.
However, after all it’s gone through, had Gaylord known then what it knows now, as far as the economy is concerned, the hospital would still have gone through with the expansion, said Hyatt.
“The answer is yes, we would have done it,” she said. “We needed to do this.”
The situation is somewhat similar at Meriden’s MidState Medical Center, which broke ground on a major $45 million expansion in September, just before the economy started to seriously tumble. The expansion doubles the size of MidState’s emergency department, which has been operating near or at capacity almost from the day the hospital opened at its Lewis Avenue location a decade ago.
“Definitely,” said Ralph Becker, MidState’s chief financial officer, when asked if the hospital would have gone ahead with the project knowing how difficult times would get.
Hospitals, which have to convince state regulators of expansion needs, are typically diligent when it comes to assessing those needs and developing ways to meet them.
They’re not likely to reverse course once those plans have been set, said Stephen Frayne, a senior vice president of the Connecticut Hospital Association, a Wallingford-based organization that represents the state’s hospitals.
But projects like the one Gaylord just completed and MidState is in the midst of would likely be much harder to get off the ground today, said Frayne.
“It’s going to take longer for individual institutions to have the wherewithal to meet that need,” he said.
The needs of patients, of course, are not going to go away. People get sick, or injured, and require medical care no matter the economic conditions. But they’re also more likely to put off elective procedures when times get tough, or even to avoid some they ought not to.
More unemployed also means more without employer-based health insurance coverage, and many of those still employed have been compelled to shift to high deductible plans. The added out-of-pocket expense of high deductible coverage makes many think twice, at least, before seeking medical care.
Meriden’s hospital is seeing a shift from employer-covered patients to government-sponsored programs like Medicaid, a shift Becker feels is connected to the economy.
Over the first four months of this fiscal year, inpatient volumes at MidState are down 1.3 percent compared to the same period last year. The state average is a drop of 1.4 percent. While 1.3 percent may not seem significant, hospitals typically anticipate a 4-percent increase, said Becker. Still, it’s too soon to tell whether that downturn is a result of the economy or some other factor, which could be fewer cases of influenza, for example.
Both the drop in inpatient volume and the shift from commercial to government sources of payment means less revenue for hospitals.
Every fiscal year, hospitals contend with an automatic initial budget deficit because government-sponsored programs don’t pay the full cost of what it takes to care for patients. For MidState, Medicaid pays 60 percent, said Becker.
To make up for it, hospitals pass on the expense to those who can pay and rely on non-operational funds, which include investments and endowments. What’s happening to your 401K account is also happening to hospitals.
For the 28 state hospitals represented by the CHA, non-operating revenue for 2007 was up $213 million, said Frayne. In 2008, it was down $202 million. That’s a shift of more than $400 million to the worse from one year to the next.
The operating margin for Connecticut hospitals overall dropped to 1.1 percent in the red in 2008, with 2009 expected to be another difficult year, according to the hospital association.
The number of Connecticut residents on Medicaid or general assistance is at around 425,000, up about 50,000 in the last year, said Frayne.
Frayne’s organization is urging the state legislature to use some of the funding from the federal stimulus package to accommodate that increase and to help hospitals shoulder the burden of “a health plan that doesn’t cover its own cost.”
Without help, some hospitals could face serious threats to their well being and find themselves on the list of the economy’s victims.
“We don’t want to be the next thing that adds wood to the fire,” Frayne said.
“All hospitals are concerned about the ability to generate enough revenue to cover the expenses of delivering high-quality health care,” said Helayne Lightstone, director of corporate communications for the Hospital of Central Connecticut. The hospital, which includes the Bradley Memorial campus in Southington, posted a profit margin of 1.3 percent in fiscal 2008.
Lightstone listed uncertainty about reimbursements and philanthropy as elements making it difficult for hospitals to plan for the future.
MidState, which posted an operating margin of $4.6 million in the 2008 fiscal year, was on solid financial ground before the economic downturn and when it launched the expansion, noted Becker, who is optimistic that the economy will rebound. The hospital’s new emergency department is expected to be at full capacity by June 2010.
“We’re in a good situation because we started in a good situation,” Becker said.
After getting past the scare when it opened the new wing in December, Gaylord is now feeling better.
“It was hard to celebrate the opening the way we wanted to do,” said Cindy Whitcomb, Gaylord’s public relations and marketing director. “We didn’t want to celebrate something we couldn’t count on. So now it’s time to celebrate as an organization.”
As well as the additional 36 inpatient beds, the Milne wing, named for long time supporters of the hospital, outfits Gaylord with much-desired technological enhancements. Those include a new CT scanner and upgraded x-ray equipment in the radiology suite and four critical care rooms that allow round the clock watch by medical staff.
Inpatient stays at Gaylord are at least 25 days, compared to the three or four in an acute care hospital. Many of Gaylord’s patients are referred from Connecticut’s acute-care hospitals. Along with long-term inpatient care, Gaylord runs sleep and rehabilitation services.
The new wing also includes positive and negative atmosphere rooms. A positive air room benefits organ transplant patients, while a negative pressure room is for infection prevention, said Dr. Muhammad Al Mounayer, interim director for the medical division, in inpatient care.
Even if Gaylord had not been able to expand by 36 beds, the new wing would have been worth it, said Hyatt.
“We did need to have the technology this building is going to provide,” she said.
When the wing opened in December, patients were moved there from the 26-bed Lyman 1 pavilion. The wait for the stimulus package to correct the legislation gave Gaylord the opportunity to make cosmetic improvements to the vacant Lyman wing. Patients head back to Lyman this week.
“We’re going to be adding staff immediately,” said Hyatt.
Submitted by Jeff Kurz on Fri, 02/27/2009 - 19:43
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