BRATTLEBORO-Brattleboro Memorial Hospital is hiring two outside advisers to help address an operating budget shortfall and related questions from state regulators.
The not-for-profit will work with Ovation Healthcare, a national support organization, and David Sanville, a former chief financial officer at Windsor's Mt. Ascutney Hospital, according to a social media announcement.
"Let me say this very clearly: Brattleboro Memorial Hospital is not closing," acting co-CEO Elizabeth McLarney, an orthopedic surgeon, said in a Facebook video posted on Oct. 17.
"We are fully engaged in ensuring that BMH remains a strong, independent, and trusted part of this community," added fellow leader Tony Blofson, a primary care physician.
Administrators are still calculating the exact shortfall in a $119 million annual budget that ended Sept. 30. They've usually offered updates through internal emails to the hospital's more than 500 staffers and 150 community "corporator" supporters.
To reach more people, McLarney and Blofson - who were appointed interim leaders after this month's unexplained leave of absence of CEO Christopher Dougherty - publicized their latest message on Facebook.
In a minute-long video, the two read a shared statement that aimed to reassure the 45,000 residents in the hospital's service area.
"For generations, BMH has been a cornerstone of care in this region," Blofson said. "We're going to keep it that way by adapting and innovating, doing whatever it takes to continue to provide you with the highest quality care."
"We're in this with you, and we are here to stay," McLarney added. "Thank you for your trust, support, and patience."
'Challenging to understand' hospital's financial health
Administrators at the 61-bed hospital, one of Brattleboro's three largest employers, have blamed their fiscal problems on everything from too many unpaid patient bills to their staff's rising health insurance costs. In response, they have launched a hiring freeze and let go of six administrators.
But regulators at Vermont's Green Mountain Care Board have questioned the budget numbers themselves, noting in an Oct. 1 ruling that "missing, incomplete and inaccurate information makes it challenging to understand BMH's current financial position."
The board ordered the hospital to revise its budget or risk becoming the first Vermont health care facility to receive state intervention under a new law.
In a written update to VTDigger, regulators noted that "it is our understanding that BMH is working diligently to address concerns" and the board would review the new numbers once received.
Hospital leaders hope the outside advisers will help. On its website, Ovation Healthcare says it has worked with more than 375 hospitals and health systems in 47 states, including the nearby Springfield Hospital, a 25-bed facility that had to reorganize its finances through the Chapter 11 bankruptcy process in 2019 and 2020.
"Springfield Hospital," the Ovation site says, "went from one day's cash on hand and millions owed to vendors and banks to a lower total debt, improved cash flow, and positive days cash."
Five years later, the Green Mountain Care Board noted in a recent ruling that "Springfield is an efficient hospital that can deliver care at lower-than-average cost."
That said, regulators added, "we are concerned about Springfield's financial health" because of smaller yet continued negative operating margins in the past three fiscal years.
How the crisis grew
"We fully recognize that we are in a very bad financial condition," one Brattleboro Memorial Hospital official said at an Aug. 6 budget review hearing. "We need to increase cash and decrease our payables and receivables."
Vermont health care regulators, for their part, cited a bigger problem: fiscal figures they say don't add up.
"BMH has not accurately or completely answered many questions," the state's Green Mountain Care Board wrote in an Oct. 1 decision on hospital spending.
At a Sept. 3 hearing, for example, the board said hospital filings were projecting a deficit of $2.8 million and, at the same time, reporting a year-to-date loss of $10.8 million.
The hospital is limiting comment on its finances, saying only that administrators are cooperating with regulators. But the extent of the challenge can be gleaned from Green Mountain Care Board records, reports, and recordings full of red ink.
BMH hasn't reported a positive operating margin since 2020, according to board figures. But regulators didn't initially see that as a red flag, as Vermont's 13 other community hospitals also faced budget problems during the pandemic and a subsequent boom in patients that drove up spending.
Brattleboro, which ranks eighth in the state for net patient revenue, isn't as large as Burlington's University of Vermont Medical Center, Rutland Regional Medical Center, or Berlin's Central Vermont Medical Center, all which can offer more profitable subspecialties.
On the flip side, BMH's 61-bed count isn't small enough to be one of the state's eight "critical access hospitals" (up to 25 beds in a rural location) that qualify for federal support.
Brattleboro's financial plight became public in May, when the hospital warned it had four months to find $4 million in reductions and new revenue to balance its budget by Sept. 30.
"Like rural hospitals here in Vermont and across the nation, BMH faces significant financial challenges that have been imposed on us in large measure by both the state and federal governments," Dougherty wrote in the email to community supporters.
The not-for-profit pointed to its status as the state's only Medicare-dependent hospital, meaning at least 60% of its admissions are Medicare patients age 65 or older. Brattleboro's Medicare reimbursements for professional services have declined by almost 3% annually, Dougherty wrote. At the same time, the hospital is paying $600,000 a month in Vermont health care provider taxes - charged to facilities statewide - to help fund Medicaid expenditures for people with limited incomes.
"While part of that money comes back to us," Dougherty wrote of the provider taxes, "the state recently reduced the percentage of annual return to less than 10%."
'System inefficiencies'
State regulators see the numbers differently. In last year's budget decision, they noted that Brattleboro Memorial Hospital's low Medicare payment-to-cost ratio, clinical productivity data, and higher-than-average wait times indicated "system inefficiencies" that could be reduced through better management of expenses.
Hospital administrators went on to launch a hiring freeze and let go of six administrators in hopes of lowering its staff count from 543 last spring to 513 this fall. The hospital also recently won selection to a Centers for Medicare & Medicaid Services' Rural Community Hospital Demonstration project that helps with financial reimbursements.
But during the state's annual budget hearings in August, hospital administrators detailed an even longer list of troubles.
Unpaid patient bills had risen as high as $50 million after the arrival of Covid, and BMH experienced a 2024 cyberattack on its electronic claims processor. And costs had increased for everything from a self-funded employee health benefit plan to salaries of travel nurses and other contract workers.
As for the future, administrators told the board the hospital could lose nearly $4 million a year if the federal government doesn't extend a subsidy provided to Medicare-dependent and low-volume facilities.
Another $700,000 is at risk annually if the hospital is dropped from a national drug pricing program, "340B," which offers financial help.
Administrators also are unsure about the impact of new U.S. tariffs and a coming switch from the OneCare Vermont accountable care organization, closing at the end of 2025, to another company.
In response, state regulators praised Brattleboro's high scores in patient satisfaction before pointing out their own problems receiving budget data.
Asked to submit management salaries, for example, the hospital didn't provide numbers but instead simply noted, "We were just recognized by the Lown Institute as the best hospital in Vermont for pay equity, which they measured using our CEO's comp in comparison to a median [support] employee."
'Survival of the hospital'
After repeatedly requesting other facts and figures to no avail, regulators began to make noise.
"It's not a surprise to Brattleboro Memorial Hospital that GMCB staff have been consistently concerned about the accuracy of information that's been submitted," Mark Hengstler, the regulators' attorney, said at a recent hearing, underlining the board's multiple inquiries.
"It is really hard to properly evaluate your budget when we just have discrepancies, inconsistencies, and unanswered questions," added board member Jessica Holmes, a professor of health economics and public policy at Middlebury College. "I don't think I've ever said that to a hospital in the 10 years that I've been doing this."
According to the hospital, its two staffers charged with helping regulators had been busy addressing the shortfall.
"Our financial condition has really interfered with preparing and submitting the documentation," Laura Bruno, the chief financial officer, told regulators in August. "I've been fully focused on the survival of the hospital."
The board wasn't swayed.
"I understand your financial condition, and we're very worried about it, and so we really need to ensure that the data that is submitted is accurate," Holmes said in response. "Your regulator is asking you questions, and it is your obligation to answer."
The state reiterated that in its Oct. 1 budget ruling.
"Stated as directly as possible, we are deeply concerned about BMH's solvency," the board wrote. "We believe that its leadership must make big strides to adjust course."
"While we do not yet have a budget resubmission date, we take the concerns in the budget order very seriously," McLarney and Blofson said in a statement to VTDigger earlier this month. They reported they were "in the process of evaluating the hospital's overall financial status" and working to hire a consultant, which turned out to be Ovation Healthcare.
"We will be working with the GMCB to address all questions," the acting co-CEOs added, "and will continue to do so moving forward."
The state, for its part, said it would review the hospital's revised budget once submitted - no date has been stipulated - and publicize any follow-up hearings.
"This is an important hospital, one that we feel very strongly needs to be there for the community," board Chair Owen Foster said at a recent meeting. "Some of the data may not seem that important on the hospital side, but we rely on this to make really important decisions. The data needs to be right."
This story was republished with permission from VTDigger, which offers its reporting at no cost to local news organizations through its Community News Sharing Project. To support this work, please visit vtdigger.org/donate.
This News item by Kevin O'Connor originally appeared in VTDigger and was republished in The Commons with permission.