Hospital considers cutbacks in response
By RICK GREEN, LACONIA DAILY SUN
LACONIA — LRGHealthcare, which runs Lakes Region General Hospital and Franklin Regional Hospital, is considering potential cutbacks in services, including maternity care, after three months of poor financial performance.
The not-for-profit organization had an operating loss of more than $1 million in October and November and is expecting further losses when December numbers are compiled.
President and CEO Kevin Donovan said action is needed to stem the losses, but no firm decisions have been made.
Maternity services are under the microscope because they lose money.
“We lose $2 million to $3 million per year on the program today and 2018 is projected to be worse,” Donovan said.
“Second, the birth rate in our program and service area is dropping rapidly. Births have dropped from 348 in 2015 to 283 in 2017 and we are projected to deliver around 270 babies in 2018.
“Finally, it is proving close to impossible to attract providers to cover the services with a sustainable call frequency.”
Medicaid pays for 60 percent of the program's births, which are declining locally amid an aging population and a preference by some women to have their babies elsewhere.
“Belknap County is one of the oldest in the state and is projected to continue to age so that by 2020, 32 percent of the population will be over the age of 65,” Donovan said.
For a normal newborn, direct costs associated with the delivery of a baby amount to $10,700. Medicaid pays $2,250 of that total.
Also, LRGH sees more than double the state average of babies born with drug dependency, or neonatal abstinence syndrome, a condition that greatly increases costs for medical care.
The company has had financial challenges for several years.
In 2016, it recorded an operating loss of $1.8 million, an improvement over the prior-year loss of $11.3 million. In the 2017 fiscal year, which ended with Sept. 30, the organization was $1.5 million in the black on operations.
The finances seemed positive until light patient volume combined with low payments in October through December hurt the bottom line.
In a memo written to employees, Donovan said the U.S. Department of Housing and Urban Development, which insures $117 million in the company's debt, “is worried.”
The federal department has a role in making sure the company's financial performance allows it to live up to its obligations.
“Because the U.S. government is insuring that debt, they have controls over us to mandate performance,” he said. “They get very nervous when our performance starts to go in wrong direction.
“They could bring in consultants to turn things around. My belief is we would much rather be thoughtful about our own situation with local control.”
Likewise, decisions made on the national level about the Affordable Care Act also affect financial performance locally.
Congressional action to eliminate the individual mandate, which penalized people for not buying medical insurance, will lead to fewer people having insurance and a greater number of patients who will not be able to pay for services, Donovan said.
Meanwhile, smaller hospitals across the country have been feeling financial stress, and maternity programs, which are expensive to maintain, have been closing.
A University of Minnesota study shows that more than half of rural counties in the U.S. have no hospital where women can give birth.
At the same time, many communities feel strongly that those services should be available.
“That's an emotional discussion for people, and rightfully so, as it relates to family birthplace,” Donovan said.
He said a range of options are being examined.
One possibility is a partnership arrangement that would allow maternity services to be provided in a more economical way.
Lakes Region General Hospital has 132 beds. Franklin Regional Hospital is a 25-bed hospital. The system also has 22 affiliated medical practices and service programs.