Michael Halstead, interim CEO of Springfield Hospital, testifies before the Green Mountain Care Board on Wednesday. Photo by Glenn Russell/VTDigger
[E]ven after months of cost-cutting and leadership reorganization, Springfield Hospital still is expecting $5.5 million to $6 million in operating losses this fiscal year, administrators told Vermont’s health care regulator Wednesday.
Hospital administrators also told the Green Mountain Care Board that they're still considering a potential partnership with Dartmouth-Hitchcock or another health system. And they haven't yet ruled out filing for Chapter 11 bankruptcy reorganization.
After hearing those updates, the care board granted Springfield a budget adjustment that may allow the hospital to collect nearly $500,000 in additional revenue this year. But the hospital still has a steep hill to climb as administrators try to deal with debt and generate new revenue.
Asked whether he would call the hospital's future “uncertain,” Interim Chief Executive Officer Mike Halstead said he'd instead use the word “tenuous.”
“We know what we're trying to do, but it's tenuous as to whether we can pull it off,” Halstead said.
Springfield Hospital has been struggling for years, but the severity of its problems came to light late last year in news reports that showed the hospital wasn't paying its bills. The hospital's chief executive officer quickly resigned, following in the footsteps of the chief financial officer.
Since then, the governor has appointed former Rutland Regional Medical Center Chief Executive Tom Huebner to “evaluate, monitor and assist” with Springfield's recovery and also has bailed out the hospital with $800,000 to prevent imminent closure.
Both Halstead and Interim Chief Financial Officer Wayne Scholz are employees of Quorum Health Resources, a Tennessee-based company that's been hired by Springfield to get through the current quagmire.
In a lengthy hearing before the care board on Wednesday, Halstead and Scholz reiterated that a forensic audit found “no misappropriation of funds” but instead pointed to a “a greater need for transparency of information throughout the whole organization...and that there were some financial policies that weren't followed.”
They also said budget planning for fiscal year 2018 – which ended Sept. 30 for hospitals – and fiscal 2019 was “significantly overly optimistic.”
That's especially true on the revenue side. For example, acute patient admissions through the end of February are 35 percent less than had been budgeted, and operating room cases are running 29 percent under budget. (Regulatory budgets for hospitals in Vermont are based on expected revenue, not expenditures).
Overall, administrators said, Springfield's expenses have increased by 11 percent over the past three years while revenues have grown by only 0.7 percent. Big factors in the hospital's expenses include employee benefits and physician costs, in part because Springfield – like other Vermont hospitals – has been forced to pay a premium for temporary doctors due to shortages.
Kevin Mullin, chair of the Green Mountain Care Board, listens to discussion about the Springfield Hospital on Wednesday. Photo by Glenn Russell/VTDigger
The Green Mountain Care Board has taken heat for being blindsided by December's revelations about Springfield's finances. But board staff at Wednesday's meeting detailed the discrepancies between former Springfield administrators' projections last August and the hospital's actual results when the fiscal year ended.
For instance, hospital leaders last summer said they expected a negative 1.6 percent operating margin, for a loss of $921,697. They then revised that number to a loss of $2.5 million in response to questions from care board staff.
The hospital's actual operating loss for fiscal 2018 ended up being nearly $7 million.
“What we were presented was a completely different forecast,” care board member Maureen Usifer said.
Halstead said better communication with the care board is part of the hospital's plan.
“We're trying to be more transparent with the community, with the (hospital) board, with your organization,” he said. “That's our intent – to be as transparent as we possibly can be.”
Care board members on Wednesday decided not to take any regulatory action over Springfield's fiscal 2018 variances from its board-approved budget. Members did order “monthly monitoring” of the hospital's finances, which will include meetings with administrators either by phone or in person.
But the hospital's future – rather than its past performance – is a much bigger concern.
Halstead told board members that administrators are trying to “save this organization,” in part through a focus on expense reductions. The hospital's presentation detailed $4.78 million in savings including $1.73 million from job cuts.
Michael Halstead, interim CEO of Springfield Hospital. Photo by Glenn Russell/VTDigger
In addition to layoffs, staffers also have left due to the hospital's financial situation, Halstead said. In all, there have been 77 departures since Feb. 2, hospital documents show.
Halstead said Springfield is looking to replace lost clinical staff and also is “doing everything we possibly can to try to maintain the staff that we have.”
“We're running extremely tight right now in all of our patient care areas, in terms of staffing,” Halstead said. “We've had a couple of days where we had to limit the number of admissions, and that's not what we want to do, because that hurts the revenue side, obviously. But we're not going to do anything that risks patient safety.”
Springfield also has switched operators in the hospital's emergency room and has terminated its birthing center in an effort to cut costs. Brattleboro Memorial Hospital is establishing obstetric services in Springfield, though no babies will be delivered there.
But slashing expenses won't get the hospital anywhere near a positive operating margin this year. “We're not going to be able to do this alone. We're not going to be able to cut ourselves to sustainability, if we can't find ways to generate additional revenue,” Halstead said.
That's where a partnership could factor into Springfield's future.
“We might be able to share some of that cost and make the organization sustainable by being part of a larger system,” Halstead said, while adding that “those kinds of negotiations don't happen overnight.”
Springfield administrators have had preliminary talks with Dartmouth-Hitchcock, though Halstead said it's not clear where those talks might lead.
“Now that we can show them that we are getting our financial shop in order, let's sit down and have more definitive discussions around what a relationship might look like,” he said in an interview after Wednesday's care board meeting.
While Halstead said he doesn't want it to appear that Springfield is pressuring Dartmouth, he acknowledged that there are time pressures. By late summer or early fall, “we'd have to have a pretty good definition of what a partnership or relationship would be between the two organizations, if there is one,” he said.
Wayne Scholz, interim CFO of Springfield Hospital. Photo by Glenn Russell/VTDigger
He added that Springfield has had “some very preliminary discussions” with University of Vermont Medical Center, though it appears that Dartmouth might be a better match.
Chapter 11 bankruptcy, under which the hospital could reorganize without dissolving, is another possibility. Halstead said the hospital is searching for “some strategy to deal with existing debt that's accumulated over the last several years.”
He told the care board that Chapter 11 is “a strategy that we've looked at from the moment I got here.” But he said no decision has been made.
The care board decided to lend some support by granting Springfield's request to potentially double – from 5 percent to 10 percent – the hospital's rate charged to insurers. That could bring in $488,924 for the remainder of the fiscal year.
However, Scholz acknowledged that he doesn't yet have any commitments from insurers to collect that additional revenue.
Board members warned that charge increases won't solve Springfield Hospital's problems. But given “the situation that you're in right now, we're trying to pull all the levers that we can,” Usifer said.
Care board Chair Kevin Mullin thanked Halstead and Scholz for their efforts to try to turn around Springfield. He also urged residents to keep using the hospital for their health care.
“My biggest fear is the flight of people from Springfield to other institutions,” Mullin said. “I just hope that the community itself can rally and come together, and the word can be spread throughout the community that, every time they go to Springfield versus someplace else, they've actually done something to save their hospital and keep those services in their community.”
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