MetroWest Medical May Be Headed For A Turnaround

Matt Pilon/Emily Micucci Leonard Morse Hospital in Natick and Framingham Union Hopsital compose MetroWest Medical Center. The for-profit health care system is having an above-average fiscal year, according to state records.

MetroWest Medical has struggled with deficits, but it saw a lower deficit in 2012 and is in the black through the first half of 2013.

Vanguard's other Massachusetts Hospital, Saint Vincent in Worcester, is one of the best-performing hospitals in the state financially.

Through the first half of fiscal 2013, MetroWest Medical is running a surplus of $207,000 compared to a deficit of $4.35 million during the same two quarters in 2012.

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MetroWest Medical Center has been a for-profit hospital for more than a decade, but profits have been elusive.

The two-hospital, 319-bed medical center, which is owned by Tennessee-based Vanguard Health Systems and has hospitals in Natick and Framingham, lost more than $54 million dollars over the past decade, according to state records.

But its steady streak of annual deficits may be broken this year, according to preliminary financial reports filed with the state. If a trend through the first half of the year holds, MetroWest Medical will post a profit in the fiscal year that ends in June. It would be the first profitable year since 2003, around the time the hospitals changed ownership.

MetroWest is running a $207,000 surplus through the first two quarters of 2013. Financial filings with the state's Center for Health Information and Analysis are typically published several months after a quarter concludes.

It may not sound like much for a medical center that had nearly $255 million in patient revenue in 2012, but the small surplus compares to a deficit of $4.4 million in the first half of last year.

Vanguard Health Systems, a publicly-traded company, bought the medical center and Saint Vincent Hospital in Worcester in 2004 for $127 million from fellow for-profit operator Tenet Healthcare Corp.

What's Making The Difference?

MetroWest's net patient service revenue — which includes patient premiums — has seen an uptick in the first half of the fiscal year. In the first quarter, patient revenue was $62.2 million, up from $60 million in the same quarter of 2012. The gap narrowed in the second quarter, with patient revenue reaching $126.4 million, up just over $1 million from $125.3 million over the same period last year.

The hospital also trimmed expenses in the first half of the year by about $3 million, or 2.3 percent.

Those factors explain some of the difference, but not all. And there were no answers from Vanguard.

Spokesman Dennis Irish, who handles communications for the company's New England hospitals, declined to comment for this story on what is driving the changing picture for the first half of the fiscal year at the two hospitals.

The Road Ahead

At least one factor is likely to impact financial performance at MetroWest in the remainder of its fiscal year. The federal government instituted a 2-percent cut to Medicare reimbursement on April 1 – the start of the center's fourth quarter – under the budget sequestration arrangement made by Congress.

MetroWest received a combined $127 million from Medicare in fiscal 2009 and 2010, so the cut could amount to roughly $1.3 million for a full year.

MetroWest responded with a round of layoffs, which CEO Andrei Soran told the MetroWest Daily News amounted to less than 2 percent of its 2,450-person workforce.

The hospital also opened two patient service center laboratories in Framingham and Rutland in March.

Saint Vincent Bolsters Vanguard's Massachusetts Operations

While MetroWest may be working towards a financial rebound, Saint Vincent Hospital in Worcester – Vanguard's only other hospital in New England – has been one of the best-performing hospitals in the state. Its earnings have reduced some if not all of the sting from MetroWest Medical.

In fact, Saint Vincent zeroed out MetroWest losses over the past decade with its performance in just 2012 and 2011. The 321-bed hospital earned nearly $200 million between 2006 and December 2012, according to the state.

MetroWest and Saint Vincent are Vanguard's two New England hospitals. It has 26 others in Texas, Michigan, Arizona and Illinois. Vanguard had $5.95 billion in revenue and $55.9 million in profits in 2012.

MetroWest Medical is not the only Vanguard hospital that has shed staff recently. From the end of 2011 to the end of 2012, Vanguard cut 500 of its 40,900 workers. As of the send of March 2013, it had further reduced the count to 39,800, a total cut of 2.7 percent.

Correction: The original version of this story incorrectly attributed the hospital financial data. The data was collected and provided by the state Center for Health Information and Analysis.