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Hospital officials: MMH could be bankrupt by next year

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MASSENA - A report issued by Massena Memorial Hospital officials late Thursday afternoon says the facility will likely be forced to close it doors within the next year and a half unless dramatic changes are implemented to the corporate structure of the lone municipal hospital remaining in the state.

Hospital officials also said wage freezes and a switch in health insurance plans would not keep them from going bankrupt and recommended the hospital continue to move toward becoming a non-profit facility.

The report also says that, based on current projections, the hospital would face bankruptcy earlier than predicted - 2015 rather than 2017.

The report suggests if town officials don’t take any action the result will be significant for health care delivery in the Massena area.

The hospital will run out of money and cease to operate, likely in the next 18 months, unless the hospital changes its status.

There will be reductions in services and staff in the coming months, the town of Massena may be liable for the hospital’s debt, adding additional costs to the town’s annual tax rolls and more good jobs will be lost if Massena Memorial remains a municipal facility, according to the report.

“MMH, which is currently the town’s second-largest employer, cannot continue on current path of losing more than a million dollars a year,” the report added.

Hospital officials had been asked by the Massena Town Board to look at options other than bankruptcy or becoming a non-profit facility, and among the recommendations by Civil Service Employees Association members was a three-year wage freeze and a switch to a new health insurance plan.

They said they are reviewed a number of health insurance plan options to see if they would provide any significant savings while still providing quality coverage to hospital employees and their families.

A three-year wage freeze, however, would not allow the facility to stay solvent, according to hospital officials, who said that was “at best a stop-gap solution.”

“According to an analysis by financial consultants Freed Maxick, a three-year wage freeze would save $7.6 million, but it is not enough to allow MMH to remain a municipal hospital,” the report notes. “Even while the wage freeze was still in place in 2016, MMH would lose more than $2 million in 2015 and more than $1.5 million in 2016, leaving the hospital in the red in 2016 by nearly $900,000 and more than $2.4 million in 2017. The hospital could not continue to operate under that kind of debt.”

Freed Maxick Healthcare had been hired by the hospital’s Board of Managers in 2013 to assist them with the study toward possible privatization. They had prepared projections of the hospital’s finances in future years, with bankruptcy initially looming in 2017 at its current pace.

But, the report says, for the first half of 2014 the hospital is losing money faster than predicted in the projections by Freed Maxick, and bankruptcy is closer than expected. Those numbers were based on budgeted numbers rather than actual operations through the end of 2013.

“Updated projections show that if MMH continues down its current path as a municipally owned hospital, the hospital will go bankrupt next year - not in 2017,” it notes.

“MMH lost $3.3 million last year and is projected to lose more than $3 million a year in 2014 and 2015 and more than $4 million a year beginning in 2016. By 2016, the hospital will be $4.4 million in debt having exhausted all cash reserves, even with the special grant from the Department of Health. Without definitive action, MMH will be forced to close no later than 2017 and perhaps much sooner,” the report says.

Hospital officials said the facility’s current fiscal crisis will likely result in layoffs and service reductions.

“MMH’s financial situation is becoming increasingly dire. We are already at the point where we will be making cuts to staffing and services in order to keep the hospital open,” the report said.

A three-year wage freeze would give the hospital “some time to get on its feet as a nonprofit and establish the needed collaborative relationships with other health care institutions. However, because of the mounting pension fund obligations, this would still not be enough to forestall bankruptcy unless MMH sheds its municipal status and affiliates with a larger hospital,” according to the report.

“Even with the wage freeze, as a municipal hospital burdened with more than $4 million a year in NYS pension contributions, the analysis projects the hospital would lose $4.1 million in the three years from 2015 to 2017,” it says.

The report suggests it would only get worse financially in the coming years.

A chart contained in the report projects that this year the hospital will have a loss of $3 million in net income and $2.9 million in cash and equivalents. In 2015, the report says, they would have a loss of $3.3 million in net income and a loss of $273,000 in cash and equivalents. That number increases to a $.1 million loss in net income in 2016 and a loss of $4.6 million in cash and equivalents.

“By the end of 2016, MMH would have exhausted all cash reserves and be $895,000 in debt. Under this scenario, that number would grow to $2.4 million in debt in 2017 (if the hospital could find a way to stay open) and nearly double to $4.2 million in debt in 2018 when the wage freeze expired,” it says.

“Again, the IAAF grant represents only a Band aid - it does not solve the problem,” the report says, referring to a $4.2 million from the federal government’s Interim Access Assurance Fund that was announced earlier this week.

According to the report, their option to avoid bankruptcy are limited. If they take no action, it says, “MMH runs out of money and ceases to operate, like in the next 18 months.”

They could also merge or be sold, but given its current financial state and projected losses, “management believes MMH is unlikely to find a buyer that would commit to preserving the hospital and all of its services,” it said.

They could also look for a state or federal bailout, the report notes, but they said that’s unlikely given the number of challenges shared by so many hospitals.

Conversion to a public benefit corporation, is another option. Those organizations are sponsored by a municipal entity to provide services that are important to the community as a whole.

“Because, as a public benefit corporation, MMH would remain part of the New York State Pension system this transition would not allow MMH to stabilize its finances and adapt to the changing health care environment,” the report says.

The final option is what hospital officials continue to recommend - conversion to a financially independent non-profit, which they say “would set MMH on a course to strengthen its financial operations and collaborate with other health care organizations while ensuring continued access to quality local health care and preserving jobs.

“The MMH Board of Managers has recommended and continues to support converting MMH to a nonprofit because we believe it is the best option for our patients and community,” officials said in the report.

They said their report was developed based on what they had learned during public meetings with community organizations and groups, including the Greater Massena Chamber of Commerce, Massena Rotary Club and Massena Senior Citizens Club.

“Over the course of 2 1/2 months, we have met with a number of community organizations and groups, including the chamber of commerce, Rotary Club and local senior citizens, to share information and hear their views and suggestions. The Public Information Program, PIP, meetings ultimately confirm that the hospital board’s difficult decision to change the corporate status is needed,” hospital spokeswoman Tina R. Corcoran said in a statement.

MMH officials say they recognize how important this decision is to the entire community “and wanted to make sure we had the best thinking from the entire community. We thank everyone who attended a meeting, visited www.futureofmmh.org, took a survey or made a suggestion.”

The report has been delivered to the Massena Town Board, posted to www.futureofmmh.org, given to the department managers to share with the staff and is available at hospital.

“Becoming a nonprofit is the only solution that allows MMH to do the two things it needs to do to survive: drastically reduce operating costs by exiting the NYS (New York state) pension system with its more than $4 million a year obligation; and fully collaborate with other health care institutions, which MMH can’t do as a municipal entity,” hospital officials said.

Town Supervisor Joseph D. Gray said the report, however, doesn’t mean that the Massena Town Board, who has the ultimate say in the hospital’s status, will choose to go the non-profit route.

“I don’t think the report the hospital put out today changes the discussion. I think it’s good information. It’s good that we see it. It answers some of the questions that I believe some of the town council had,” he said.

Councilman John F. Macaulay had asked officials to come up with a “Plan C” that would explore other options recommended by the hospital’s bargaining units to save money. Another meeting will be held between the town board and hospital on Tuesday.

“I’m anxious to see what they come up with,” Mr. Gray said. “Will something come up on the 22nd that changes it? I don’t know. We’ll have to see. Projections in Plan A and Plan B are not good.”

He said that one of the questions posed by the town council was, even if they privatize, how would that change the current financial situation.

“I think the short of it is, it won’t until and if we’re able to offer some sort of a partnership or relationship with some other institution or institutions,” he said.

A call seeking comment from CSEA spokesman Mark M. Kotzin was not immediately returned Thursday evening.

The full report can be found at http://wdt.me/Massena-Memorial-report.

Massena Memorial Hospital report

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