Claremont Hospital In Hard Times

Claremont — Things may get worse before they get better for Valley Regional Hospital’s finances.

Coming off a year in which it had a $1.6 million operating loss, the Claremont health care provider expects to have an even bigger loss this year.

In fact, CEO Peter Wright is counting on it.

If Valley Regional stays on budget, then its operations will end up $1.9 million in the red for fiscal year 2014, which ends Sept. 30.

It was the first time in Wright’s career that he drew up a budget with a loss. But hospital leaders must face reality if Valley Regional is going to regain its financial health, Wright said.

“It was very difficult for everybody involved. Who budgets for a loss?” Wright said Wednesday. “We could have put together the numbers in a manner that would have made it a break-even, per se. But that wasn’t our real view of what was going to happen.”

Declining patient volume and high costs of temporary employees have put pressure on Valley Regional’s finances, Wright said. And the hospital carries a heavy burden for bad debt and charity care, which accounted for $6.7 million, or 11.4 percent of revenue, last year.

Valley Regional still has plenty of cash on hand to support itself, officials said, but administrators are searching for ways to move its bottom line into the black.

Sullivan County’s only hospital can’t rely on additional revenue from newly insured individuals through the Affordable Care Act. It was left out of Anthem’s “narrow network” of providers in the plans offered through the new online insurance marketplace in New Hampshire.

In the meantime, Valley Regional has made itself “lean” by becoming more efficient and shedding staff, Wright said. It closed its birthing unit several years ago and has cut its workforce 10 percent in the past five years, now employing around 450 people. Meanwhile, Wright is focused on recruiting doctors and nurses who have an interest in staying long-term, so that the hospital isn’t forced to hire high-priced temporary wokers.

However painful, the financial losses are short-term ones, hospital officials said. The changes being considered now could yield gains that they hope will sustain the 121-year-old institution amid a rapidly changing health care marketplace.

Hospitals throughout New Hampshire, and the nation, are struggling with the same pressures to control costs and improve quality, said Steve Norton, executive director of the Concord-based New Hampshire Center for Public Policy Studies.

Demand for health services dropped during the Great Recession, he said, and reimbursements from Medicare and Medicaid have continued to be squeezed. Also, new requirements under the Affordable Care Act have disrupted the old ways of doing business.

The 2010 federal health reform law, known as Obamacare, has incentives for hospitals to collaborate on patient care rather than compete for those dollars. And the payment mechanisms are shifting away from a fee-for-service world, in which doctors are paid according to the volume of care they provide, and toward a model in which they are paid to keep people healthy and out of the hospital.

Such changes are needed to create an affordable, effective health care system, according to health experts. But the shifting environment has been especially hard on small hospitals operating on thin margins, forcing them to scale back and find niches rather than offer a gamut of services.

Many health experts believe the days of standalone community hospitals are coming to an end.

“It’s hard for small hospitals with these fixed costs and (declining) reimbursement rates to keep going,” said Norton, who previously was New Hampshire’s Medicaid director.

Some providers have responded by linking themselves with larger organizations. Last week, two Upper Valley hospitals — Mt. Ascutney in Windsor and Alice Peck Day in Lebanon — said they were pursuing formal affiliations with Dartmouth-Hitchcock, similar to one New London Hospital established last year. Partnering with Dartmouth-Hitchcock would help the hospitals streamline care for patients and eliminate redundant costs, officials said. For example, back-office functions, such as billing, could be shared.

Dartmouth-Hitchcock is not talking with Valley Regional about affiliating at this time, said Dartmouth-Hitchcock spokesman Rick Adams. But no one is ruling it out.

“The (community) hospitals have been coming to us,” Adams said Wednesday. “If and when Valley Regional is ready to have that discussion, we’ll sit down and talk with them.”

Valley Regional is not at that point, Wright said. The hospital is putting the final touches on its strategic plan for the next couple of years, and soon will consider whether it should “look at the pros and cons of affiliation.”

“If the answer is yes ... then the next question is, Who do we do that with?” Wright said.

Dartmouth-Hitchcock is the most obvious option, Wright said, due to its proximity and existing relationship with Valley Regional. In fact, Wright is a Dartmouth-Hitchcock employee who is then leased back to Valley Regional through a management service agreement. Still, Valley Regional would have to investigate all of its options before committing to an affiliation, Wright said.

Since he was hired last year, Wright has been a vocal proponent of collaborating with other hospitals. Valley Regional works with Mt. Ascutney and Dartmouth-Hitchcock to recruit and share some specialists. It also has agreed to send routine outpatient lab services to Dartmouth-Hitchcock starting sometime this spring or summer.

Valley Regional should finish its strategic plan in the next two months, Wright said. Primary care will be a key focus for the hospital, and officials are looking at other niches where Valley Regional can meet the local demand and not compete with neighboring hospitals. Wright expects the plan to outline six or seven “core services.”

The budget shortfall is a temporary one, Wright said. Next fiscal year the hospital should be back in the black.

Valley Regional’s board chairman, Michael Fuerst, said he was optimistic that the hospital would “turn this thing around.”

“The hospital feels confident that this isn’t a long-term issue,” Fuerst said. “This is a short-term, difficult time that we are going to get through. It’s not at any crisis point.”

Chris Fleisher can be reached at 603-727-3229 or cfleisher@vnews.com.