Critics who questioned the finances of the Bayonne Medical Center were proven right when the release of a financial assessment showed that the hospital lost significantly more money last year than was reported.
Jim Lawler, of JPL Healthcare Consulting, conducted the independent analysis over the last month as part of a compromise with the workers’ union and members of a citizens’ group called the Coalition to Save Bayonne Medical Center.
“We think the report was fair and accurate, and we have no major disagreements with it,” said Paul Swibinski, a spokesperson for BMC. “The board was not surprised by anything in the report. After [former CEO Robert Evans] left, we knew there were serious misrepresentations, and we made the same discoveries that the audit made.”
Due to several factors, the hospital lost $6 million in 2006, adding to the more than $12 million in revenue shortfalls from previous years.
But the report said hospital administrators underreported the losses in 2006, saying the hospital was running less than $1 million in the red, when the mounting debt was more than $18 million without taking some preventive action. The report said BMC could be short as much as $23.6 million by the end of 2007.
“It is clear from this analysis that the current operating losses are severe, and that immediate attention is required,” the report says.
In early January, the BMC Board of Trustees agreed to allow an independent review of the finances, after pressure from union officials and members of the community.
Mayor Joseph Doria brokered the deal, helping to ease previously escalating tensions resulting from the cuts and unanswered questions.
Doria called it the first step in a cooperative endeavor to ensure BMC’s continuity of service to the people of Bayonne.
Members of the Coalition have also pushed to get the board to expand its membership to include two Coalition members, Doctors Barry Elkin and Tobi Ippolito.
Finances a problem for several years
The report stated that BMC has had “structural financial issues” for several years that were made worse by recent declines in in-patient admissions.
Essentially, the report agrees with some recent statements by BMC that Evans had painted a rosy picture, and the hospital board failed to ask for the backup data to prove what he was saying.
The report also supported some of the claims of the hospital as far as losses, and was critical of some of the hospital’s operations and made suggestions for improving them.
According to the report, part of the misperception of finances was a result of several bookkeeping tricks such as misreporting abandoned contractual obligations as revenue in 2005, using investments to fund operating losses, and underreporting operational losses in internal financial statements.
But the report said BMC’s losses in 2006 seem consistant with a trend of losses dating back several years.
Hospital admissions were dropping
Admissions to the hospital dropped consistently over that time period. Admissions in 2005 were 727 fewer than 2004. In 2006, annual admissions dropped by an additional 1.064 percent.
“BMC has made some efforts to reduce salary costs, but the rate of decline has not matched the rate of decline in admissions,” the report said. While hospital officials blamed a change in law that allowed nursing homes to provide some of the services that hospitals traditionally provided, the report said a much more significant problem resulted from a change in Medicaid criteria to better determine a patient’s need for admission.
Hospitals were required to set up observational beds that did not count as admission, and this accounted for 86 percent of the loss of surgical admissions last year.
The report suggested that some of the drop in admissions may have been the result of the closing of certain operations, such as the birthing services.
Poor accounting for charity care
BMC, the report said, has a high level of charity care – but failed to keep an accurate accounting of this number. State charity-care aid to the hospital dropped from $7.8 million in 2003 to $6.6 million 2005. A better accounting of charity-care patients may have resulted in higher state aid.
The hospital also lacks adequate accounting when insurance or charity care is denied, and lacks verification for HMO payments. This means the hospital staff did not do enough to identify patients that might qualify for various financial packages.
The hospital also needs to look more closely at reducing expenses that would not have an impact on patient services, the report said.
Shared services with St. Vincent’s Hospital (now Richmond University Medical Center) will help reduce the $23.6 million shortfall to about $19.3 million, the report said.
But the turnaround plan being proposed at the hospital, the report said, would not cover the total loss by the end of the year, and partly depends on the uncertain results of negotiations with unions.
Don’t close those units
The report was critical of plans to close the Transitional Care Unit, which it believes could answer some of the problems that the hospital currently faces regarding the length of stay for in-patients.
The need to save $146,000 by closing the unit, the report said, could be made unnecessary because the unit could actually help improve the hospital’s overall financial situation.
The report also pointed out the closing of the psychiatry unit, which resulted only in a $342,000 savings. The reported noted that state reimbursements have been increased in this area.
Hope for recovery?
The report, however, noted areas of hope for BMC’s recovery.
“BMC is currently in a liquidity crisis,” the report said in reviewing the hospital’s cash-flow situation. “There are plans to sell and lease back the parking garage, and the financing of accounts receivable is also being explored. If consummated, BMC will have an infusion of working capital that will have an opportunity to implement a recovery plan.”
But the report went on to say that even with additional financing, the hospital will have to change some of the ways in which it operates.
As construed now, the present management at the hospital could actually impede a recovery plan, the report said. It suggested that “a team leader” be assigned to implement the plan. This person would be responsible to the CEO and the board for making written recommendations.
The report said that when the hospital works toward a consensus on ideas for recovery, all key management must participate in the recovery plan. The board should also demand more information when making decisions than it has asked for in the past.
A statement from the Health Professionals and Allied Employees (HPAE) union and the Coalition to Save Bayonne Medical Center pointed out that the Lawler Report is incomplete because some information was not provided by the hospital in the 30-day review period.
Jeanne Otersen, spokesperson for the HPAE, said the report validates the questions that union and Coalition members have raised for months about the financial condition of the hospital.
Swibinski responded, “Our turnaround plan is a work in process. It is not a rock-solid plan to good health. We’re optimistic, but we’re not out of the woods. We support full transparency and we want all the stakeholders to have a clear picture and to participate in the rescue of Bayonne Medical Center.”