Justina Sawyer was born at Lakes Region General Hospital, as was her son, Colton, who was born on Friday. In fact, both she and her son were delivered by the same doctor. If she and her partner, Don Miller, have another child, they’ll have to go to Concord Hospital, as LRGHealthcare will close its Family Birthing Place as of May 30. See their story in Health & Wellness. (Adam Drapcho/Laconia Daily Sun)
By RICK GREEN, LACONIA DAILY SUN
LACONIA _ A decade ago, LRGHealthcare announced it would finance a $65 million project to build a 90,000-square-foot addition at Lakes Region General Hospital, make improvements at Franklin Regional Hospital and replace the Belknap Family Health Center in Meredith.
Now, the Laconia hospital finds itself with more space than it needs and more debt than it wants.
The nonprofit health care provider announced last week that labor and delivery services would end at Lakes Region General Hospital on May 30, operating rooms at Franklin would close, several of its other facilities in the region would be shuttered and 16 administrative positions would be cut.
There have been other cutbacks in recent years, including layoffs and the sale of buildings.
Like many medical institutions, Lakes Region General Hospital is struggling with the cost of providing expensive medical services to patients without health insurance or who are covered by Medicaid, which pays only a fraction of costs.
Chief Executive Officer Kevin W. Donovan said the hospital has close to twice the average debt of like-sized institutions. The U.S. Department of Housing and Urban Development insures $117 million of that debt and demands adequate financial performance to ensure repayment.
“Do we have space that is underutilized that I wish we didn't have? The answer to that is, 'Yes,'” Donovan said.
“A good example of that are the operating rooms in Franklin. They were used 33 percent of the time. They are absolutely beautiful. That was probably a multimillion-dollar investment that I'm sure made a lot of sense at the time, but as we look at it now, it is just space that we don't need.”
He also said the hospital industry has changed and procedures are increasingly being done on an outpatient basis, so the need for inpatient space has declined.
“Ten years ago, you'd be in the hospital for five to seven days for a hip replacement,” Donovan said. “Now you're out by the end of the day.
“A lot of the space that we have that is empty is just a factor of changing use rates and demographics.
“Yes, we have extra space. Yes, I wish we did not have as much extra space as we did. Yes, I wish we did not have as much debt as we have, but it's also my reality, so we're trying to deal with our reality as opposed to trying to question decisions made previously.”
Tom Clairmont, who retired in 2014 after 25 years as chief executive of LRGHealthcare, said debt is not as big a concern as it might seem.
“There's enough cash flow in the business to take care of the debt,” he said.
In its last yearly operating statement, the not-for-profit charitable trust showed $222.2 million in net operating revenue and about $5.5 million in costs for interest on outstanding debt.
“As a percentage of annual operating expenses, that's a little high-norm, but doable,” Clairmont said.
He also said such debt would not necessarily be an impediment to any potential sale of LRGHealthcare, should that ever be considered.
“The bigger issue with mergers is anti-trust,” he said. “If the other hospital is too close geographically, there are federal rules that don't allow this to happen.”
As an alternative to such mergers, hospitals often enter into relationships with other hospitals to handle certain procedures, Clairmont said.
LRGHealthcare will continue to offer prenatal and postnatal care, while labor and delivery will be done at Concord Hospital through a cooperative agreement.
The two hospitals have a similar agreement concerning emergency cardiac care.
Last April, LRGHealthcare, reported a $1.8 million operating loss in 2016, an improvement over the prior year loss of $11.3 million.
It lost about $2 million on operations from October of 2017 through January of this year.
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