August 2015 Feature Story: Health Care

A golden anniversary

Carthage Area Hospital Chief Executive Officer Richard A. Duvall and Hospital Board of Directors President Gary E. Rowe in the hospital emergency room last month. After a fiscally challenging four years, the celebrates its 50th anniversary this year. Photo by Justin Sorensen, NNY Business.

Carthage Area Hospital Chief Executive Officer Richard A. Duvall and Hospital Board of Directors President Gary E. Rowe in the hospital emergency room last month. After a fiscally challenging four years, the celebrates its 50th anniversary this year. Photo by Justin Sorensen, NNY Business.

Facing challenges, Carthage Area Hospital perseveres

By Lorna Oppedisano, NNY Business

Carthage Area Hospital has had a rocky past couple years, 2011 putting the organization on particularly bumpy ground. In October, the hospital board of directors was presented a statement citing a $1 million gain in profit. After reevaluation, it was found that hospital had actually lost money that year. By the end of December, it was about $7.6 million in debt.

Now, a mere four years later, the light at the end of the tunnel seems to finally be in view for an institution that was established as a rural community hospital in 1965. And the positive trajectory couldn’t have come at a better time, as employees and the community mark the hospital’s 50th year with an eye toward celebrating a future that was in doubt little more than a year ago.

“It was a fast turnaround, but it’s because a lot of people stepped up to the plate,” Gary E. Rowe, president of the hospital’s board of directors, said.

The financial free-fall really began in 2010, Chief Executive Officer Richard A. Duvall explained, and was caused by a few different factors that led to the hospital’s instability.

First, the organization had spread itself too thin. It simply couldn’t sustain the nearly 30 clinics it operated under its umbrella sprawled across just 50 miles.

There was a reduction in reimbursements from TRICARE, the health care program of the Defense Department’s Military Health System, and also a change in reimbursement philosophy on the part of Medicare, both of which delivered negative impacts. At that point, the hospital wasn’t really set up to handle those reimbursements, Mr. Rowe said.

On a larger scale, the nation was shifting focus from acute to primary care.
The hospital was also in the midst of implementing a new electronic medical record system, the issue to which Mr. Duvall said most of the public attributed its struggles. With this change, another issue became apparent: there were problems in the billing department.

“Because of that, there was a large amount of care that was delivered and wasn’t actually billed,” Mr. Duvall explained, adding that the problem was noticed in 2011, and traced back to 2010. In November 2011, the Watertown Daily Times reported that former patients owed the hospital more than $15 million.

Finally, a great amount of change in leadership poured salt in the wound. In 2011, Chief Information Officer Philip “Skip” Edie, Chief Financial Officer Mark B. Hills, Primary Care Administrator Zachary K. Chapman and Administrator of Patient Care Services Roger E. Bull each resigned. At the end of the year, then-CEO Walter S. Becker retired under pressure from the board after working at the institution for 14 years.

CAH / By the numbers

Annual Operating Budget:
$44 million

Year Operating Loss:
2015 $1 million (projected)
2014 $2 million
2013 $4.1 million
2012 $5.7 million
2011 $7.6 million

Annual Payroll:
$22 million

Staff:
430 hospital employees
333 full-time
55 part-time
42 per diem
114 RN/LPNs
21 providers

In-patient beds
25 — down from 78

Clearly, there was need for change before the situation would improve. Short- and long-term strategic plans were implemented.

“The first thing we did was right-size the organization to a point where we could gain control,” Mr. Duvall said.

This meant transferring control of a number of hospital clinics to other organizations, such as its Harrisville outreach clinic to Lewis County General Hospital and clinics in Adams and Cape Vincent to Samaritan Medical Center. In some cases, like the its Sackets Harbor Clinic, officials chose to close facilities all together.

In the end, what should prove to be the No. 1 saving grace is the hospital’s recent designation as a critical access care facility, Mr. Duvall said. Such institutions are rural hospitals that maintain 25 or fewer beds and receive federal reimbursement funding of 1 percent above the cost of providing care.

Carthage Area Hospital applied for this designation in April 2014 and received it a few months later in July. To meet the criteria, the organization had to make a few changes.

First, it had to shrink the bed count from 78 to 25. Next, officials had to pay mind to a mileage restriction, limiting the number of clinics they could operate. By this point, officials had already cut the majority of these clinics, Mr. Duvall said.

He explained that the hospital took a number of other steps to fix its fiscal house that had the organization hemorrhaging cash. A benefit program was restructured from the rich plan the hospital had previously offered to meet statewide benchmarks, he said. Performance-based contracts with providers replaced standard employee agreements that had been the norm in the past.

“There’s a certain level of production that is expected of the providers to meet,” Mr. Duvall said.

Its 340B contracts, a program that requires certain drug companies to sell outpatient products at a discount to eligible health care organizations, including critical access hospitals, were expanded to include emergency room and some surgical procedures.

Mr. Duvall also cited revenue cycle improvement as a corrective action taken. This essentially began in 2011 when the issues in the billing department were brought to light and experts were hired to address the situation.

“I think there’s always room for improvement,” he said, “but we have the problem 97 percent fixed.”

The last fix Mr. Duvall cited is affiliations with other local health care organizations and consulting groups. Carthage Area Hospital has partnered with St. Joseph’s Hospital with its Franciscan Group Sleep Lab and Durable Medical Equipment and with SUNY Upstate Medical University for its Stroke Center. The hospital shares a nursing home administrator with Lewis County General Hospital, and hopes to work with other regional partners soon, the plans for which should pan out in the next six to 12 months, Mr. Duvall said.

Carthage Area Hospital worked with Stroudwater Associates, a Portland, Maine,-based firm that works with critical access hospitals across the country. The hospital was also involved with the New York State Critical Access Hospitals Performance Improvement Group.

“We were able to sit with the same designated hospitals and we’ve worked together as a group to start benchmarking performance,” Mr. Duvall explained, adding that the group has looked at how hospitals should deal with regulations.

So will these remedies fix the problems for the long-term? Carthage Area Hospital is not the only rural hospital in the region to suffer from a pattern of financial ups and downs.

“Honestly, I’m not sure it ever will stop,” said Thomas H. Piche, president of Carthage Savings & Loan.

Mr. Piche served on Carthage Area Hospital’s board for about 10 years prior to 2007. When he was involved with the organization, it reached a low, but then bounced back to achieve the position of one of the most financially stable hospitals in the state by 2007, he said.

“It’s not unique to Carthage Area Hospital,” he explained. “It’s just the [health care] business model.”

Mr. Piche said that he’s happy to see that hospital administrators didn’t “just throw in the towel,” and that the organization seems to be on a good path once again. He explained that the larger region, including Fort Drum, needs more than just one hospital.

Mr. Rowe agreed that the hospital is on an upward path, mentioning that it’s the most stable and optimistic he’s seen things since he began serving on the board in 2007. He was named president of the board last October.

So far this year, the hospital has seen positive cash flow, he said. He added that the next step is to make the organization stronger, so it actually shows a profit.

Positive effects from the critical access hospital designation should start to become apparent at the beginning of 2016, Mr. Duvall said. It should equate to $7 million to $10 million in funding from Medicare, Medicaid and military insurance that will replace grant money that has kept the hospital afloat in the past, he said.

Mr. Duvall cited funding from the state’s Interim Access Assurance Fund as particularly helpful. The program was designed to sustain hospitals while they work toward a more sustainable model. The hospital had originally been awarded $10.3 million but, after improving operations, it required just $8.5 million.

Mr. Rowe agreed that state funding helped with the transition of the hospital to the new designation.

“They gave us the money so we could pay National Grid,” he said. “They gave us the money so we could pay payroll.”

Since efforts began to move the institution to solid ground, the numbers have improved. In 2014, the hospital shows a loss of $2 million, as opposed to the $7.6 million loss in 2011. Following its pattern of improvement, the forecasted financial outcome for this year is $1 million, so the gap to profitibility is closing.

Patient satisfaction has also improved. Based on internal reports, Carthage Area Hospital was rated “good” or “great” for overall satisfaction by 100 percent of patients surveyed in obstetrics and surgical, 95 percent in orthopedic and 87 percent in the emergency department. When the hospital’s future was murky in past years, staff and patients alike were concerned, Mr. Duvall said, explaining that, “the psychological effect on customers is if they’re losing so much money, are they able to provide good health care?”

Looking to the future, money from the critical access hospital designation will play an especially important role in keeping the hospital’s technology updated. In a small, rural hospital, affording state-of-the-art equipment is a challenge.

“There’s a need to do that to provide high-quality care,” Mr. Duvall said. “You have to find a balance between what’s right, and if you don’t offer that, who can you send those patients to to receive that care?”

Throughout the struggles, one constant has remained: community support.

“The community has stuck behind us,” Mr. Duvall said. “They recognize the importance of keeping the facility here and keeping care here.”

People have given money, showed support at events and lobbied political leaders, he said.

As one of the largest employers in the community, if the hospital dramatically changed form or closed, the community would no longer be the same, Mr. Piche said. He added that it wouldn’t absolutely devastate the town and surrounding areas, but that at this point, the health care center is an important part of the community’s economic structure.

With no hospital on post at Fort Drum, the base also relies heavily on Carthage Area Hospital, both for care and employment of soldiers’ family members, Mr. Rowe said. If the community as a whole didn’t support and utilize the services of the organization, there would be no need for the hospital, he said.

The community will always rally behind the hospital, Mr. Piche said.

“If the chips are down, people in this community get behind it,” he said. “And I don’t think that has changed, and it never will.”

Lorna Oppedisano is a staff writer and editorial assistant for NNY Magazines. Contact her at loppedisano@wdt.net or 661-2381.