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  • Staff file photo
    St. Joseph Hospital in Nashua.
  • An endoscopy suite at St. Joseph Hospital. The endoscopy department opened in March 2006. Staff photo by Bob Hammerstrom
  • A staircase leading to the four-year-old ambulatory wing of St. Joseph Hospital. Staff photo by Bob Hammerstrom

  • Southern New Hampshire Medical Center President Tom Wilhelmsen, left, and St. Joseph Hospital President David Ross. Staff photo Don Himsel.
  • A SurgiCenter operating room at St. Joseph Hospital, opened March 2006. Staff photo by Bob Hammerstrom
  • An operating room in the SurgiCenter at St. Joseph Hospital. Opened March 2006. Staff photo by Bob Hammerstrom

  • Staff file photo

    A walkway links Southern New Hampshire Medical Center's main hospital to another medical office building.
  • Medical Oncology and Surgical Unit at St. Joseph Hospital. Opened June 2009. Staff photo by Bob Hammerstrom
  • Medical Oncology and Surgical Unit at St. Joseph Hospital. Opened June 2009. Staff photo by Bob Hammerstrom
  • Merrimack Medical Center, as part of Southern New Hampshire Medical Center. Opened 2008. Staff photo by Bob Hammerstrom
  • The emergency room at Southern New Hampshire Medical Center was expanded in 2005. Staff photo by Bob Hammerstrom.
  • The emergency room and ambulance bays at Southern New Hampshire Medical Center were revamped in 2005. Staff photo by Bob Hammerstrom
  • Southern New Hampshire Pediatric Rehabilitation Center, as part of Southern New Hampshire Medical Center. Located on George Street in Hudson. Opened December 2008. Staff photo by Bob Hammerstrom

Sunday, August 7, 2011

Local hospitals don’t regret growth, even in the face of cuts

NASHUA – The city’s two hospitals face tough decisions as they lay off hundreds of workers and cut services after losing millions of dollars in Medicaid funding.

But one decision that executives at St. Joseph Hospital and Southern New Hampshire Medical Center don’t regret is the one to expand their physical footprints.

Over the last two decades, the hospitals have grown by leaps and bounds, embarking on multimillion-dollar construction projects, opening satellite health practices and hiring employees.

This growth included a $25 million ambulatory wing that, coupled with an expansive new lobby, put a modern face on St. Joseph Hospital. The 5-year-old wing contains several outpatient services: surgery, cardiovascular, oncology, endoscopy and blood drawing.

Last decade, SNHMC doubled the size of its emergency department and added a cardiology center and three ambulance bays in an $18 million project that highlighted several major growth initiatives.

At the time, executives at both hospitals had no idea lawmakers would eventually end a tax and Medicaid reimbursement arrangement between hospitals and the state that started in 1991.

This year, hospitals across New Hampshire finally have to pay the so-called “bed tax” while getting no matching Medicaid funds in return, collectively giving the state more than $200 million.

As a result, the hospitals are eliminating positions and reconfiguring services.

But even in hindsight, hospital executives stand by their many construction projects and purchases of new equipment, saying the Medicaid tax would still require deep cuts even if they hadn’t spent money growing.

The hospitals haven’t overextended themselves, but instead have kept pace with the community’s health needs and mandated standards, executives at St. Joseph and SNHMC said.

“I firmly believe we’re always approving big projects in a very cost-conscious way, and planning around patients and meeting standard codes and regulations,” said Tom Wilhelmsen, SNHMC’s president and CEO.

For instance, Wilhelmsen said, almost every SNHMC hospital room has been converted to accommodate only one patient – instead of the long-held practice of having two beds per room – to meet Americans with Disabilities Act requirements, as well as federal privacy standards.

“We converted the old areas of the hospital to meet current hospital standards,” he said.

Wilhelmsen added later: “We have very nice facilities, but it’s not the Taj Mahal.”

Similarly, a St. Joseph Hospital executive pointed to colonoscopy screenings as just one example of how hospital expansion has benefitted the Nashua region.

Prior to the opening of the new wing at St. Joseph, patients had to wait six to eight months for a colonoscopy, but now wait no more than eight weeks, said Melissa Sears, the hospital’s vice president of strategy and business development.

“When we choose to build or expand, it’s determined on the needs of the community and demand,” Sears said.

Of course, before this year, hospital executives had no idea legislators would end the Medicaid reimbursement agreement. But the expansion projects still would have proceeded, Sears and Wilhelmsen said.

“Hindsight is always 20/20,” said Sears, who added that hospital growth and the cuts required bythe bed tax are separate issues.

St. Joseph faces $19 million in losses over the next two years because of the tax, and must eliminate jobs and services, said David Ross, the hospital’s chief executive officer.

The hospital will close two subsidiary companies, Rockingham Regional Ambulance and Granite State Mediquip.

The companies employ 174 workers, most of whom won’t be reassigned within the hospital, Sears said. More hospital employees will be laid off this month, Ross said.

Southern New Hampshire Medical Center needs to cut about $10 million from its budget this year to pay the 5.5 percent bed tax, Wilhelmsen said. SNHMC will lay off up to 6 percent of its workforce and close a unit that has 60 percent of the city’s beds for inpatient psychiatric cases.

About two-thirds of those employees have already been laid off, and the remaining 100 employees are to be pink-slipped by September.

Nashua’s two hospitals have joined eight other hospitals in suing the state over the loss of Medicaid revenue.

The two hospitals’ most recent tax filings do not reflect the new fiscal environment caused by the end of the reimbursements.

In 2009, St. Joseph had $171.5 million in revenue before expenses. The hospital’s 2010 form wasn’t yet available through Guidestar, a service that provides tax forms and reports of nonprofit organizations.

Southern New Hampshire Medical Center gained $220.1 million in revenue before expenses from October 2009 to September 2010, according to its most recent tax form.

Earlier this year, before the Legislature halted the Medicaid arrangement, Gov. John Lynch said many of the state’s hospitals hadn’t addressed the high cost of health care because they instead spend profits on CEO pay, advertising campaigns and multimillion-dollar building projects.

Lynch asked the state Health Services Planning and Review Board, the regulatory board that approves health care system investments, to institute a moratorium on the construction of new hospital facilities.

The board heard the governor’s moratorium request but can’t implement one because it would violate the law, board member Nick Vailas said.

“We don’t have the wherewithal to stop a project if they meet the regulatory requirements,” Vailas said of hospitals that seek permission to construct or modify buildings, buy new medical equipment or offer new services and inpatient beds.

Hospitals seek a certificate of need from the board whenever embarking on such projects. When the hospitals meet the criteria, as laid out by the law, the board can’t deny certificates, Vailas said.

The Medicaid tax “is a huge reduction in revenue,” but hospitals will have to adjust, Vailas said.

Hospitals will have to consider stopping the “arms race” of hiring large numbers of doctors and buying new equipment, he said.

Hospitals haven’t tackled the high cost of health care, and the process of acquiring certificates of need should focus on lower costs, Vailas said.

That change will have to come from the Legislature, but lawmakers have protected the certificate of need process and thus protect the current hospital franchise system, he said.

Fellow board member Jim Tollner wouldn’t comment on whether hospitals had overextended themselves with construction projects and expensive equipment.

But Tollner – a Nashua resident and former city alderman – added, “It’s easy to look back in hindsight” and wonder whether hospitals should have planned differently.

“The hospitals are providing services that New Hampshire residents used to have to go to Massachusetts for,” Tollner said.

But now, as the economy has slowed, the board should take a more cautious approach, within its legal framework, when reviewing construction proposals, Tollner said.

The hospitals in Nashua and Manchester and on the Seacoast “are well-positioned in the next few years to handle any capacity issues,” whereas it may be time to review whether hospitals in other areas of the state are in need of improvement, he said.

Albert McKeon can be reached at 594-5832 or