Officials: Numbers turning upward at Clinton Hospital

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By Christina P. O'neill Special To The Worcester Business Journal

The past two years haven't always been good for small community hospitals. Challenged to keep up with technological advances and squeezed by competition from larger health systems as they struggle for reimbursement, three have closed across the state.

Clinton Hospital, at 41 beds the smallest hospital in the UMass Memorial Health Care system, has experienced a drop in patient volume in recent years. But that's edging back up, and the hospital is doing better operationally than it appears on paper, UMass Memorial officials contend.

Figures from the state's Center for Health Information and Analysis (CHIA) show negative operating margins at the hospital since the 2012 fiscal year. But those numbers don't tell the whole story, according to Douglas Brown, president of UMass Memorial Community Hospitals and chief administrative officer for UMass Memorial Health Care.

Brown says the hospital's operating expenses, excluding overhead, have been improving over the last three fiscal years. In the last fiscal year, which ended Sept. 30, 2014, Clinton Hospital took on a greater share of UMass' system overhead, which includes direct and indirect costs such as legal services, compliance, audit, finance, government relations and human resources.

A new methodology changed the allocation of those resources, with some entities taking on more than they had in the past. “That accounted for a significant increase in [the hospital's] expenses and thus the change in its margin,” Brown said. “It is for this reason that when we look at true operating performance for an entity we often factor these costs out of the equation, and when we do so for Clinton, we see continued operating improvement over the past three years.”

In fiscal 2013 the hospital's net operating margin was negative 2 percent, attributed to a large downward spike in patient volume. A year later, it broke even, implementing many cost-savings initiatives to offset revenue loss. For fiscal 2015, which ends Sept. 30, patient volume is returning, Brown said. Net patient revenue is forecast at $25.2 million. The hospital's board forecast an operating loss of $1.32 million. But that has improved and that projection has been lowered to just over $924,000.

Brown: System steering patients to Clinton

Brown cited the cohesion of the hospital's staff and its patient satisfaction levels — which can influence payments hospitals get from the federal Centers for Medicare and Medicaid Services — and says the hospital's goal is to provide the best care at the lowest cost, particularly for the many patients who don't need high-end services. He said the UMass Memorial system is steering patients to Clinton, and that the hospital's service area now extends far beyond that town. That hasn't been the case in other parts of the state. In June, for example, Partners Healthcare said it would close its 126-bed Union Hospital in Lynn and divert the hospital's patients to its Salem facility.

Clinton Hospital's new 28,000-square-foot emergency department, which opened in 2013, drew 1,000 more visits from January through June, compared with last year. And in March, the hospital combined its medical/surgical and special care units, reportedly cutting 3.5 full-time-equivalent nursing jobs, but the nurses were said to have been reassigned and remain employed.

At the time of that consolidation, the nurses' union, the Massachusetts Nurses Association, cited the rate of Clinton Hospital's Medicare readmissions within 30 days. This measure tracks Medicare patient discharges and determines if they're readmitted to any hospital within that time frame for unplanned reasons. CHIA's numbers cite a 16.9-percent readmission rate for 2011-2012, above the 16.2 percent average for hospitals of similar size and the 16 percent national mean. Brown notes that the higher figure for Clinton is the result of its small size; one or two readmissions increase the percentage far more than they would with a larger patient base.

Meanwhile, the hospital's longtime CEO, Sheila Daly, is scheduled to retire later this year. UMass Memorial said it plans to announce a successor in the coming months.

Overall, Brown characterizes Clinton Hospital's finances as “quite stable.” He says it's current on all payments within the UMass Memorial system, as well as those to outside vendors, and that it meets its other cash obligations without having to borrow. The driving factor behind the hospital's forecasted operating loss for fiscal year 2015 is the increase in allocated overhead.

Additionally, Brown says, “the fact that Clinton Hospital is coming in better than what was expected … is good news for UMass Memorial.”