Is Westerly Hospital The Next Landmark?

Thursday, September 01, 2011


Years of operating with a deficit may have finally caught up with Westerly Hospital. Opened in 1925, the 125 bed facility that serves Washington County residents, along with neighboring Connecticut communities, finds itself in dire financial straits, and quite possibly, unable to sustain itself into the future. As a result, difficult decisions loom that promise to have widespread impact on employees and those who depend on its services.

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The Hospital claims to have not turned a profit in 20 years while its current financial struggles seem to be exacerbating. Recent reports have varied, with losses for the current year ranging from as high as $5.2 million to around $4 million. However, according to one local media outlet, year-to-date loss has actually increased from the $5.2 million reported in April to $5.7 million today.

Rhode Island’s Smaller Community Hospitals Struggling

Recent changes in healthcare, and an economy that continues to struggle with high rates of unemployment, have made it more difficult for community hospitals to survive. In fact, according to American Hospital Association data, the number of community hospitals has dropped by 290 over the past decade.

These hospitals face challenges that their larger counterparts do not. By not being part of a larger entity, community facilities face struggles in securing higher payments from insurance companies, smaller discounts from suppliers due to less volume purchasing, and more.

Here in Rhode Island, this trend is impacting more than just Westerly Hospital. In Northern Rhode Island, Landmark Medical Center, a facility similar in size to Westerly Hospital, has been experiencing massive struggles of its own. Between 2007 and 2008, the most recent years in which data is available, Landmark’s revenue less expenses grew from a hole of $4.6 million to one of $5.1 million.

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In early August, Landmark announced plans to lay off staff and shut down an outpatient therapy center. Making matters worse, as Landmark deals with bankruptcy, the facility lacks the staff necessary to ensure quick turn-around time in the emergency room – resulting in a number of diversions to medical centers better equipped to respond. This puts additional strain, and limitations, on the revenue coming into the Hospital.

According to a January 2010 report by Rhode Island’s Office of the Health Insurance Commissioner, data confirms the variation in payments made to unaffiliated hospitals such as Westerly Hospital and Landmark Medical Center. Westerly receives 32% less than the average across all state hospitals, while Landmark receives 22% less. In comparison, Kent County receives 20% more, while Rhode Island Hospital receives 12% more.

Smaller payments make it difficult for hospitals to cover costs and have very well contributed to their current financial struggles.

Westerly Hospital Hires Canadian Firm to Handle Staff Changes

This past May, Westerly Hospital took a step towards narrowing its deficit gap by laying-off 29 employees. According to William G. McKendree, Westerly Hospital Healthcare Board of Trustees Chairman, the staffing changes were driven by reduced patient volumes which are running 9% below 2010 admissions to date.

What is perhaps most surprising, however, is how these decision came about. To aid in determining the best course of action to fix its financial woes, the Hospital added fuel to the fire by contracting with Carpedia, a management-consulting firm with offices in Canada, to the tune of more than $1 million. Despite this hefty sum, Westerly Hospital’s Executive Vice President and Chief Operating Officer, Jeanne LaChance, is on record saying that the Hospital expects to break even on its payment by September. They also anticipate the staffing changes to provide $4 million in annual savings.

Financial Discrepancies Abound

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Though the Hospital’s deep financial hole is well-documented, it wasn’t long ago that their financials looked to be trending upward.

In the fiscal year that ended September 2010, Westerly Hospital lost $800,000, an $83,000 improvement over the previous year and nearly $300,000 better than 2008. This shows the organization’s finances, albeit is slowly, seemed to be moving into safer territory.

As recently as 2007, the Hospital’s total revenue exceeded its expenses – with revenue growing by 8% over the previous year. Revenue also outpaced expenses in 2006. And, looking at the Hospital’s 2009 Annual Report, that fiscal year ended better than forecasted with revenue ahead of budget, and expenses less than expected.

Hospital Favors Creating a Partnership

According to reports, the hospital has been ‘aggressively’ seeking partnership opportunities with potential institutions of various sizes and types for quite some time; though no merger was imminent. The Hospital has also refused to disclose which institutions have been involved with discussions.

According to McKendree, the Hospital appears firmly entrenched on the position that a partnership is necessary to sustain its services to the community into the future.

However, Jan Salsich, President of the United Nurses and Allied Professionals Local 5075, a union that represents Westerly Hospital staff, feels differently.

“Our union strongly believes, and I think the community would support this, that a full service community hospital is needed. These changes are being forced upon staff without taking into account what we can do, and what needs to be done, for patients.”

In an attempt to survive, and respond to the major changes taking place in the delivery of healthcare, Westerly Hospital plans to continue investigating its options in regard to creating a partnership. Whether it comes to fruition, and works, remains to be seen.

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