LACONIA — Last year, LRGHealthcare closed its birthing center, consolidated medical practices and laid off 16 administrative employees — all in an effort to stem operating losses and eventually break even.
Those efforts didn’t stem the red ink.
Speaking Wednesday at the not-for-profit organization's annual meeting at the Laconia Country Club, President and Chief Executive Officer Kevin W. Donovan said LRGHealthcare is still losing $1 million a month.
The company, which includes Lakes Region General Hospital and Franklin Regional Hospital and is the area’s largest employer, posted a $13.3 million loss on operations in the fiscal year that ended Sept. 30, 2018.
“That is clearly not what we had expected,” Donovan said. “Last year was a tough year. We didn’t fall where we wanted to be.”
He said the belt-tightening did reduce some expenses, but he also said costs associated with an expensive electronic medical record system were recorded last fiscal year, greatly boosting the losses.
Another major expense for LRGHealthcare last year was the more than $5 million it paid to service outstanding debt. The company has nearly $110 million in long-term debt.
“Part of the reason we can’t produce a margin is because we have approximately twice the average debt of a hospital our size in the United States of America,” he said.
Losses continue this fiscal year.
LRGH has recorded $5 million in losses from October through February, Donovan said. Final March numbers are not yet available.
The first six months of the fiscal year are typically slow.
“Our hope is and our expectation is that we will have busier months coming up here and we will get back on the budget, which our budget again this year is about a break-even operating margin,” he said.
LRGHealthcare officials hope its financial problems will be solved through a merger with another organization.
Ideally, they would like to have a 3 percent operating margin that would allow more investment in equipment and programs, but that isn’t realistic, given nationwide pressures on community hospitals, unless it can find a partner, Donovan said.
A partnership could allow to LRGHealthcare to expand services, utilize the latest clinical technologies, and improve recruitment of clinical staff while benefiting from a partner’s resources, infrastructure, and best practices.
“And ultimately it would be good if we could secure some type of significant capital investment,” Donovan said.
LRGHealthcare engaged a national firm, Kaufman Hall, to help in its search for a partner. It contacted 49 potential partners, heard back from 15, narrowed it down to five, and then began to concentrate on one particular organization.
However, LRGHealthcare is now re-assessing its options through a due diligence process and reconsidering some of the other organizations, Donovan said.
“The great news is we could have gone out and talked to 49 organizations and we could have heard, ‘No, we don’t have any interest in partnering with you,’ he said. “The good news is we’ve had many organizations that are interested in talking to us.”
He said there has been a lot of public interest in learning the name of the ultimate partner for LRGHealthcare, which has more than 1,000 employees.
“There won’t be a reveal tonight because I don’t know the answer to that,” Donovan said. “What I always say to folks is, ‘As soon as we know and we can say something, we will.’”