By MICHAEL KITCH, LACONIA DAILY SUN
LACONIA — Drawing on a lesson from his mother, Henry Lipman, told the nearly 100 people gathered at the Beane Conference Center for the annual meeting of LRGHealthcare this week that "Nothing is as good or as bad as it seems."
It fell to Lipman, senior vice president of financial strategy and external relations, to present the financial report, which featured a $27.3 million decrease in the consolidated financial position of the organization, leaving a deficit of $29.9 million for the 2015 fiscal year ending on Sept. 30.
The not-for-profit company owns and operates Lakes Region General Hospital in Laconia and Franklin Regional Hospital, as well as the Laconia Clinic and other medical offices.
In March, LRGH signaled the gravity of its financial troubles by laying off 58 full-time employees after eliminating another 80 through attrition in the months before. Approximately a quarter of the layoffs were at Franklin Regional Hospital and the balance at Lakes Region General Hospital. The layoffs followed a regular weekly review of staffing begun in January to consider whether to fill any vacancies that arise as well as any requests for new positions or additional personnel.
Lipman was quick to stress that a one-time charge of $22.3 million incurred by refinancing the organization's outstanding debt of $133.3 million bearing an interest rate of 6 percent represents the lion's share of the decrease. By issuing $125.9 million Federal Housing and Urban Development Insured Mortgage Revenue Bonds at a fixed rate of 3.7 percent, LRGH will spare itself $46 million in debt over the life of the bonds and a savings of $3 million in the current fiscal year. The $22.3 million charge was required to secure the holders of the original debt as well as to retire that borrowing. Excluding the one-time charge, the loss to the company's consolidated financial position, Lipman said, was $7 million.
"We had an opportunity to make a long-term choice over a short-term choice," Lipman said. "We took a loss of $22 million to get a gain of $46 million."
At the same time, LRGH posted an operating loss of $11.3 million. A reduction in "disproportionate share" payments, which federal law requires states to make to hospitals serving large numbers of Medicaid and uninsured patients, contributed to the loss. Payments fell by more half, from $5.6 million in 2014 to $2.5 million in 2015. Lipman said that the decrease in disproportionate share payments reflects a change in federal policy, which is being challenged in court. Following a favorable preliminary ruling, he expects some $3 million in funding will be restored.
While total revenues slipped by less than a million to $217.8 million, expenses rose by $11 million. Salaries and benefits grew by $7 million, an increase of 5.7 percent, to $129.9 million, or 56 percent of operating expenses, which is in keeping with industry standards.
Lipman pointed to several factors weighing on LRGH's operating performance — a relatively high number of Medicaid and Medicare patients, an aging population and changes in private health insurance programs.
In 2014, 11.4 percent of the population of the Winnipesaukee Public Health Region was living at or below the federal poverty level, compared to 8.7 percent in the state as a whole. Among the patients served by LRGHealthcare, 14.4 percent were enrolled in Medicaid and 18.4 in Medicare, compared to 10.7 percent and 15.2 percent in the state. Lipman said that Medicaid and Medicare reimbursements represent about 70 percent of LRGHealthcare's gross revenues.
But, Medicaid reimbursement rates in New Hampshire are the lowest among the 50 states. And while nationwide hospitals lose on average about 14 cents on the dollar treating Medicare patients, in New Hampshire the average loss more than doubles to 30 cents on the dollar.
Meanwhile, the population of Belknap County, which represents much of the area served by LRGHealthcare, is among the most rapidly aging in the state. With a median age of 45.5, the third highest among the 10 counties. As the population ages, the demand for health care increases. But, at the same time, as people age and retire, they drop their private health insurance and enroll in Medicare. As result, the hospitals are treating a growing volume of patients but receiving less reimbursement — between a third and two-thirds less, according to the treatment and procedure — for doing so.
As private health insurers began offering plans that offset high premiums with high deductibles and co-pays, insurers seeking to enhance the competitiveness of their products and patients bearing a greater share of their health care expenses have begun exerting downward pressure on hospital charges. At the same time, when patients are unable to meet their high deductibles, hospitals are left with bad debt. Lipman noted that in the Lakes Region, with its large number of small businesses, employers tend to provide relatively less generous health insurance plans.
Lipman dismissed suggestions that the Affordable Care Act is responsible for the financial troubles besetting LRGHeathcare. He noted that the reduction in Medicare rates to finance the program have been offset by the New Hampshire Health Protection Program, which extended Medicaid coverage to some 48,000 people. "Without Medicaid expansion," he said, "we'd actually be worse off."
"It was a very tough year," Lipman said. But, without discounting the challenges, he added "there are lots of opportunities," listing the prospect of restoring disproportionate share payments, the reauthorization of the New Hampshire Health Protection Program and the federal investment in addressing mental health and substance abuse. Above all, he noted that LRGHeathcare has operated in the black for the past two quarters.
"I don't lose sleep," he remarked.
photo: Lakes Region General Hospital - Karen Bobotas photo.jpg
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