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Financial losses prompt LRGHealthcare's leadership to make tough decisions

Dr. Peter Doane was the recipient of this year's Sally Proctor Award. (Photo by Erin Plummer) (click for larger version)
April 17, 2018
LACONIA — LRGHealthcare started 2018 with huge financial challenges requiring major cuts, though administrators are looking toward improvements for the future.

LRGHealthcare held its annual meeting at Laconia Country Club on Wednesday, giving members of the organization an update on its financial status and presenting awards.

The year 2017 ended on a high note, with financial gains following the implementation of a multi-year plan and despite the bumps of the new electronic records system. LRGHealthcare CFO Wayne Bennett said they saw operating gains of $1.39 million, which he said was a significant improvement from the loss of $11.3 million in 2015.

The organization, however, was still in a financially vulnerable place. Bennett said LRGHealthcare ended last year with an 84.4 percent debt to capitalization ratio. He said as a result, they can no longer borrow money. The organization also ended 2017 with just seven days worth of cash on hand.

"It's that combination of the really high debt and the really low cash that makes us particularly vulnerable," Bennett said. "We have no margin for error."

Bennett said they put together a financial forecast with the assumption that patient volume would come back to the point it was before the electronic system was implemented. Instead the patient volume increased in smaller numbers than anticipated and there has been a decrease in charges for different services.

As a result, they saw a loss of $3.4 million. Bennett said that consequently, they needed to make some significant sacrifices.

LRGHealthcare President and CEO Kevin Donovan said they reduced 15 full time equivalent positions and closed a number of services. These included the closure of Moultonborough Health Care Center, Newfound Family Practice, the Laconia Clinic pediatric practice, and the processing lab from the Laconia Clinic.

The major decisions were closing the Family Birthplace at Lakes Region General Hospital and the operating rooms at Franklin Regional Hospital.

Donovan said utilization for the FRH operating rooms was around 33 percent. While they examined options such as having it open only on certain days, the decision was made to close the operating rooms at FRH.

The Labor and Delivery unit at LRGH was also closed down.

"As we look at that unit, that service, it was probably our largest financial loss," Donovan said, adding that shuttering the maternity unit will save the organization a projected $1 million annually.

Donovan said around 60 percent of births were from Medicaid patients and the hospital will be reimbursed for half of birthing expenses. He said while private insurance used to be willing to absorb those costs in the past, in recent years those amounts have significantly decreased.

Another major consideration was the aging of the population and the drop in births. In 2015, the hospital had 346 births, and that number dropped to 283 in 2017. Additionally, he said the young obstetricians entering the field do not want to be on call seven days a week for long hours, which would require hiring more staff.

The organization examined options such as moving the birthing place to Franklin. This would require renovating space at FRH to do it, though they do not have the capital to do that. The organization was also unsuccessful in requesting an increase in reimbursements from Medicaid.

LRGHealthcare had extensive talks with Concord Hospital about options. Following these discussions, it was agreed that LRGHealthcare will continue to offer pre and post natal care as well as other women's health services and birthing care will go to Concord Hospital. An obstetrician will be on call at LRGH in case of an emergency delivery.

Donovan said this wasn't a decision they made lightly.

"We literally had to make decisions: did we want to have a labor and delivery unit for a year and half or did we want to have a hospital for the future?" Donovan said.

Donovan said LRGHealthcare with help from a private firm has taken a look at the most important services for the community. Orthopedics is one major need. They also opened an inpatient psychiatric unit at FRH to address the area's mental health needs. Due to the lack of beds at the state hospital, Donovan said there were patients waiting in the emergency room for several days. Last year, they created a seven-bed pod at FRH to provide services to patients in need of psychiatric services.

They are also redesigning practices in the emergency department, creating different zones of care based on case and priority that has resulted in decreased wait times.

LRGHealthcare is also pursuing ISO 9001 Certification. Donovan said their survey is coming up in June and they are excited about the prospects. He said while they might not get certification now, they will continue to pursue it in the future.

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