Springfield Hospital and its health centers are splitting up as a result of bankruptcy.
The hospital and the health centers filed Chapter 11 bankruptcy as separate organizations last June and they’ll file separate exit plans. The two organizations will be governed by separate boards going forward.
“The belief was that if that was the direction we were moving in — to have both the organizations operate on their own — then that would be the best way to file bankruptcy petitions,” interim CEO Michael Halstead said.
Halstead said despite the governmental changes, there were no plans to close any of the health centers.
“We have projections that we are a viable organization running just as we are today,” Halstead said. “We’re not going to have any significant changes in services in the foreseeable future.”
Springfield Hospital is believed to be the first hospital in the country owned by a Federally Qualified Health Center. The FQHC now comprises nine facilities in Londonderry, Springfield, Chester, Rockingham, Ludlow and Charlestown, New Hampshire. Services include eye care, dental care and walk-in visits.
The joint operation in Springfield, where the hospital is owned by the health centers, allows the two entities to share employees and resources. Springfield Hospital transfers significant funds to the health centers every year to keep them sustainable.
A February 2019 audit showed Springfield Hospital gave the health centers $1.7 million in 2018 and $600,000 in 2017. Springfield Hospital has transferred another $630,000 to the health centers since June.
The hospital and health centers currently operate under the parent corporation, Springfield Medical Care Systems. They entered bankruptcy after they stopped paying vendors last year after losing about $14 million in 2017 and 2018. There have been efforts to find savings since then.
Springfield Hospital closed its childbirth center last summer. Dozens of employees were terminated and pay reductions were made across the organization about a year ago. The hospital also hired a different emergency room vendor last April to save money.
Halstead said the organizations are performing better than they did last year.
“We’re very close to having a break-even operation,” he said. “Our projections indicate that we’ll continue to work in that direction.”
Halstead anticipated no more cuts to services would be needed.
“The plan is we continue providing all the services we’re providing today,” he said. “We believe that we’ve taken the steps necessary to have an organization that can be … stable”
But reports show the hospital and health centers are still losing money. Springfield Hospital lost $9 million in fiscal year 2019, which ended Sept. 30, according to a Feb. 26 report from the Green Mountain Care Board. The hospital has lost another $1.4 million since Oct. 1, according to bankruptcy documents. Meanwhile, the health centers have lost about $620,000 since October.
Former Rutland Regional Medical Center CEO Tom Huebner, who was appointed by Gov. Phil Scott to guide Springfield Hospital through its financial turmoil, wasn’t sure if Springfield Hospital and the health centers could be sustainable as separate entities.
“We’ll find out,” he said.
Court documents show the FQHC profited $75,000 in January for the first time since filing for bankruptcy. Huebner attributed the health center’s profit to better cost control, but there has also been staff turnover within the organization.
Chief Medical Officer Chip Beehler, who was the organization’s top earner, with a salary and benefits totaling more than $360,000 a year, according to 990 filings, left the organization in December. The board voted in February to hire Katrina Taylor to replace him.
Under statute, health centers and hospitals are required to have an ongoing referral relationship, but relationships between the two vary from community to community.
Huebner said there may be some advantages to them being on their own. He called the joint structure “uncommon” across the country.
Gifford Medical Center in Randolph and Springfield Hospital are the only two hospitals in the Northeast owned by an FQHC, he said.
Health centers and hospitals have different financial models and different regulatory requirements, Huebner said. FQHCs are not required to report financial documents to the Green Mountain Care Board like hospitals are.
“Hospitals tend to be highly regulated,” Huebner said. “FQHCs are leaner — and need to be successful. They need to be entirely focused just on primary care.”
Springfield Medical Care Systems board member John Bond called the separation a “business move.”
He said part of the problem with breaking even now is the cost of bankruptcy itself.
“The cost of bankruptcy is not cheap,” Bond said.
Attorney fees have totaled more than $300,000 since June, according to court records. Quorum Health Resources, a firm that’s been managing the hospital and providing financial services, costs more than $100,000 a month.
The organization recently requested an extension until June 20 to file an exit plan from bankruptcy. How various debts will be repaid, including the hospital’s $800,000 loan from Berkshire Bank and an $800,000 loan from the state, are unclear.
“We’re putting final touches on numbers we’ll have to present to the bankruptcy court,” Halstead said.
