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Massena hospital CEO pitches nonprofit status as financial savior

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MASSENA — Looking at a projected $15 million loss in reimbursements over the next 10 years and a directive by the state commissioner of health to explore options such as collaborating, affiliating, merging or sharing with other facilities, Massena Memorial Hospital has no choice but to investigate converting from a municipal hospital to a private, not-for-profit facility, according to hospital CEO Charles F. Fahd II.

Speaking at Tuesday’s Massena Rotary Club meeting, Mr. Fahd said its options as a municipal hospital are limited, and it cannot absorb the projected losses they’re facing in the years ahead.

Mr. Fahd said, as a result of the federal Accountable Care Act, which took effect in April, the hospital expects to see a reduction of more than $10.5 million in Medicare reimbursement, or $1.05 million a year, over the next 10 years.

The hospital is also facing a $1.9 million reduction in Medicaid reimbursement, or $193,000 annually, over the next 10 years as a result of sequestration.

In addition, he said, it is looking at a $2.7 million reduction in Medicaid reimbursement, or $265,000 annually, over the next 10 years because of inpatient coding adjustments.

“Congress made the decision to remove $1 trillion out of the health care spending budget” while adding 30 million new people into the health care system, Mr. Fahd said.

“That math doesn’t work,” he said. “That’s almost $15 million in cuts for our little hospital over the next 10 years.”

On top of that, he said, the hospital’s contributions to the state’s pension program was $124,200 for approximately 350 employees in 2002. That skyrocketed to $3.8 million in 2012, and their contribution in December 2013 will be $4.4 million. Mr. Fahd said the state is projecting that the hospital’s December 2014 contribution for the more than 400 employees will be $4.8 million.

“Last November I wrote a check to the comptroller for $3.8 million,” he said. “The hospital continues to face staggering unsustainable increases to the required contributions to the New York state pension program on behalf of its 400-plus employees. These unprecedented increases have placed the hospital in serious financial jeopardy. Those increases are not sustainable.”

The CEO said the hospital is putting away $400,000 a month to help absorb what they face financially, with the $4.4 million pension plan payment due later this year. Meanwhile, another local hospital with approximately 650 employees is paying about $700,000 a year toward their employees’ 401(k) retirement plan.

“If we had the ability to make similar payments, we would be in the black big time,” Mr. Fahd said.

In addition to the loss of Medicaid and Medicare reimbursements and the increased pension costs, he said the state Department of Health also wants north country hospitals to seek formal affiliations, collaboration, merger or other sharing agreements to reduce duplicated services such as capital equipment acquisition and overall health care expenses in the region.

He said hospital CEOs had met with the commissioner of health about a year ago at Lake George to discuss those options. The effort is underway to force hospitals to work with other facilities and, if they don’t, they’ve been told, “We will do it for you,” Mr. Fahd said.

“Most people don’t realize how much authority the Department of Health has,” he said. “We are taking it very seriously.”

Collaborating or affiliating with other facilities, Mr. Fahd said, would mean the availability of specialized services, sharing of resources, greater negotiating power with insurance companies, access to more doctors for recruiting purposes, group purchasing power, reduced retirement costs and no civil service requirements.

But the problem, in Massena’s case, is that the hospital can’t explore any of those options as long as it is a municipally-owned hospital because of the taxpayer money involved.

The facility was established by the Massena Town Council on Dec. 18, 1950.

“There are only two municipal hospitals left in the state,” Mr. Fahd said, MMH and Lewis County General Hospital, Lowville. There are also four teaching-center hospitals that are owned by the state. All the others are private, not-for-profit.

“We are kind of a dinosaur, only two out of 220. We are experiencing problems because of this. Because we are a municipal and because we are bound by the New York state Constitution and municipal law, we’re unable to do joint ventures and collaboration. It’s against the law. We’re unable to place taxpayer dollars at risk,” he said. “We want to do it. We can’t do it.”

As a result, Massena Memorial cannot participate in joint ventures, such as a mobile MRI machine that could be put in a van and shared by hospitals to save money.

Massena Memorial was also asked to provide seed money for Northern Lights, a certified home health agency in St. Lawrence County. That organization is a partnership of Canton-Potsdam Hospital, Potsdam; Claxton-Hepburn Medical Center, Ogdensburg; United Helpers Management Co.; and Hospice and Palliative Care of St. Lawrence Valley.

“Massena was unable to participate in that kind of activity,” Mr. Fahd said.

Because of the obstacles the hospital faces, he said that on April 22 the hospital’s Board of Managers voted unanimously to direct the administration to start an information gathering process that would evaluate the possible restructuring of the facility to become a nonprofit. That would solve the pension problem, as well as address the commissioner of health’s directive, he said.

The firms of Nixon Peabody, Rochester, and Hancock Estabrook, Syracuse were invited to make a formal presentation to the Executive Committee on July 8, and Mr. Fahd said they anticipate one firm will be recommended to the full hospital board for their approval.

Once they have legal counsel on board, he said they will request meetings with representatives from the state Department of Health and state Pension System.

Mr. Fahd said they anticipate submitting a Certificate of Need to the Department of Health in the next six to 12 months that would allow them to become a private, nonprofit facility.

New York state does not allow private for-profit hospitals, according to the CEO.

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