David Benfer is making the rounds at the state Capitol pleading for help with a sudden $35.5 million loss that has forced the hospital he runs to default on $88 million in debt.
St. Raphael Healthcare System is now diving in to a plan to try to plug that $35.5 million gap. It is hustling to please the company that insures its debt, which has the legal right force the hospital to take more cost-cutting and revenue-gaining measures..
The 102 year-old hospital’s emergency plans include closing an ambulatory surgery center, ramping up its physician billing system, negotiating harder with medical suppliers, merging its visiting nursing care with an outside outfit, and reexamining its money-losing mental health services. Through attrition and overtime cuts, it will also trim its 4,200-member workforce, New Haven’s third-largest.
“We don’t want to frighten people. We are a strong employer,” Benfer, the hospital’s president and CEO, said Tuesday afternoon in an interview in his office, seated in front of a painting of the Last Supper. (On the back of his office door hangs a poster for Michael Moore’s film, Sicko.)
“We are not planning any large-scale layoffs,” Benfer stressed. “Our plan is to do it through attrition.”
Most of all, Benfer is appealing to the state to change the way it reimburses Catholic hospitals like St. Raphael’s for caring for poor people under the Medicaid program.
70 Cents On The Dollar
Catholic hospitals in cities tend to get less money than other hospitals. That’s because the reimbursement formula was set in 1982 when many more nuns and priests were working in those hospitals on a volunteer basis. Healthcare and technology costs have skyrocketed since then.
So the state paid Yale-New Haven Hospital (which also loses money serving a large Medicaid population) $1,812 more per patient in the last fiscal year, a 21.8 percent difference, according to Benfer.
St. Raphael’s loses $20 million a year on treating Medicaid patients — 15 percent of the people it sees — because state government pays it only 70 cents on the dollar.
Seeking to help, three New Haven state legislators — State Sen. Toni Harp and State Reps. Toni Walker and Pat Dillon — are pushing a bill to pay the same rates to Catholic hospitals and other hospitals.
“It’s not just St. Raphael’s. All the Catholic hospitals are in desperate trouble. It’s because of the Medicaid rates,” Toni Walker said.
Pat Dillon called on local elected officials to unite in an emergency quest to rescue Benfer’s hospital.
“St Raphael’s employs over 4,000 people, is a good corporate citizen, and some
of its issues stem from flawed government policy,” she said. “If Hartford-area lawmakers rallied [to save] the Bristol Press [newspaper], and Democratic leaders successfully fought for a $23 million bailout of the UConn Health Center last spring, New Haven officials should do the same for our own city. We should all — all — work together to develop a plan for St Raphael’s.”
The proposal, House Bill 5419, would require the state to pay hospitals in the same city the same Medicaid rates. Benfer, who testified on behalf of the bill last week at a hearing before Toni Walker’s Human Services Committee, stressed Wednesday that St. Raphael’s isn’t asking for any money to come at the expense of hospitals like Yale-New Haven.
In his testimony, Benfer cited precedent for parity, including a $57 standard state rate for outpatient clinics at all Connecticut hospitals.
Benfer has made his case face to face with New Haven-area legislators, with the heads of the state budget and social service departments, and, this week, with the lieutenant governor. He said he has received a sympathetic ear.
However new money to raise or modify Medicaid rates was not included in the budget Gov. M. Jodi Rell proposed last week.
And the Department of Social Services (DSS) came out against the proposal at the hearing last week.
In written testimony the department said the bill would boost Medicaid “at least $12.4 million” — in a crisis budget year.
“While the goal of parity in program payment rates is worth discussing, we suggest that any such public policy discussion include a review of rate setting methods for hospital services not only for hospitals located within the same city but for each service type provided by hospitals throughout the state,” the department argued.
For now, DSS spokesman David Dearborn said Wednesday, “in the current fiscal environment, options are extremely limited.”
Ambac At The Door
Meanwhile, St. Raphael’s is working closely with Ambac Financial Group, the insurer backing two-thirds of the $88 million in debt on which the hospital defaulted last Sept. 30.
The hospital has asked Ambac for a waiver on the debt. Ambac, which is wrestling its own financial crisis, hasn’t given a response yet.
Under terms of the debt, Ambac could decide to overrule the consultants the hospital has hired to undertake its emergency plan to close the $35.5 million gap. It could demand the hospital take more steps to cut costs or bring in more revenue.
“We have a policy. We do not comment on the transactions that we insure,” an Ambac spokeswoman said when asked about the insurer’s plans.
So far, Ambac has responded positively to the dramatic steps the hospital has taken, Benfer reported.
“They don’t want to run a hospital,” he said.
The hospital’s emergency plan has included:
• Trimming its workforce. It currently employs just over 4,200 people, or 3,800 full-time equivalents. Benfer hopes to save $6 million a year through leaving some vacancies unfilled, moving existing employees into other empty slots, and reducing overtime and hours contracted for with agencies.
• Demanding lower prices from vendors of supplies like catheters, gloves, knee and hip replacements. Goal: Up to $7 million in annual savings.
• Boosting revenues by $2 million at its faculty practice plan by improve billing procedures and paying more attention to documentation on charts.
• Partnering with an existing visiting nursing care company rather than continue running its own operation, which lost $1 million last year.
‚Ä¢ Closing an ambulatory surgery center in Hamden. The center made money a decade ago. But it has lost business to surgery rooms opened directly in private physicians’ offices. The hospital is awaiting state approval to close the center, which loses between $600,000 and $1 million a year.
Depending on the state’s response to its Medicaid plea, the hospital will also have to look hard at its behavior health, or mental health, department, Benfer said. St. Raphael’s 10 years ago expanded its children’s behavioral health department to 20 beds, including the only spaces in the state for kids as young as 2; plus a host of outpatient services. It has another 25 beds and menu of outpatient programs for adults. That operation accounts for a full $6.7 million of the $20 million the hospital gets shorted on Medicaid reimbursements every year, Benfer said.
DSS spokesman Dearborn noted that the state did approve, in response to St. Raphael’s pleas, a $600,000 increase over two years in behavior health reimbursements.
How It Happened
A “perfect storm” produced the unexpected $3t.5 million loss in the fiscal year that ended last Sept. 30 and subsequent fiscal calamities, Benfer said.
Because of the Wall Street crash, the cost of borrowing jumped far higher than predicted — an extra $3 million just for the last three months of 2008. Altogether the hospital has run $6 million in extra borrowing bills.
The hospital had to write down $10 million in assets on two insurance companies it owns. Those companies have half their assets in the stock market.
And an unexpected drop in patient volume (which has since shot back up) contributed to an extra $14.5 million in losses.
Endgame?
Before the Wall Street meltdown, the hospital was pursuing one long-range response to its economic challenges: affiliating with a national or statewide group of Catholic hospitals.
It was in negotiations with Ascension Health, a national not-for-profit chain which owns Bridgeport’s St. Vincent’s Hospital. Ascension was talking with seven potential affiliates. Then Ascension suspended those talks in the fall when it had to confront its own sudden market-driven financial woes.
Long term, such an affiliation could help St. Raphael’s save money on backroom and purchasing efficiencies, Benfer said. For now, the hospital is on its own — with whatever help it can muster from the beleaguered budgeters in Hartford.
“Everyone,” Benfer said, “now is focused on how we weather this current crisis in health care.”
This shouldn't be an issue. The only real solution here is to nationalize the entire health care system of the United States. Health care costs are crippling our economy.
The real priority should be improving public health, though, which can only be done by raising cigarette and gas taxes even higher, and getting people out of their cars for every single trip. That would keep people out of the hospitals in the first place.