The Block Island Times

We need to focus on Med. Ctr. finances — now

Dec 11, 2012

The Block Island Medical Center is in financial distress. Although I am no accountant, that is my conclusion after studying the financial statements and talking with center personnel and the treasurer of the board of directors.

It caught my attention when a recent issue of the Block Island Times reported on the November 19 meeting of the Block Island Health Services board. The story by Gloria Redlich said that the center would need to dip into the endowment to the tune of $125,000 in order to meet its financial obligations for 2012. This is more than twice the anticipated and budgeted amount.

The budget being prepared for 2013 indicates that the problem will get worse and not better, according to center representatives.

The article cited both revenue shortfalls and cost overruns as being the culprits in causing the financial situation for the current year. At my request center representatives sat down with me to share more of the specifics. I met with interim director Peter Baute, bookkeeper Bruce Eagleson and board treasurer Pete Tweedy. They offered insight and concern.

The revenue problem is primarily focused in two areas: patient fees and fundraising.

Patient fees are down by some $10,000 on a projected total of $355,000. Percentage wise that is a relatively modest problem. In response to my question, Tweedy reported that the budget had anticipated that the services of the nurse practitioner would be reimbursed at a rate about 15 percent lower than the physician, so that is not the issue. He says the shortfall reflects collection problems and paperwork filings. Both Baute and Tweedy expressed concern that the revenue for patient visits is an ongoing issue and highlights the continuing concern that island residents do not use the center as their primary care provider. It is difficult to address the patient fee revenue problem without reversing this trend.

Much larger in scale is the drop off in contributions. Though precise figures are not available, the numbers are a result of declining membership fees and contributions to the scale of some $40,000 to $50,000. Failure to run the annual art fundraiser normally held at the Atlantic Inn contributed to the deficit.

On the spending side there were four primary areas that comprised the overage:

1. Professional fees, primarily for attorneys, that were well above budget;

2. $20,000 in investment in computers and software to replace aging systems;

3. $13,000 in incentive bonuses that had been promised but not budgeted;

4. Substantial maintenance on the physical plant that had not been anticipated.

The result is the need to increase the draw on endowment from a budgeted $54,00 to $125,000. That’s not good. The first number represents the standard (and sustainable) 5 percent draw on endowment. A continuing need to go higher than this amount will rapidly reduce and eventually eliminate the endowment, throwing the center into a financial crisis.

The problem is that it is difficult to see how to correct the problem.

Obviously increasing business is a sound strategy, but the question is: How? Staff turnover at the center must create anxiety in the minds of patients considering a long-term relationship with the center. One fact that occurred to me is that as recently as the 2004/05 school year, student enrollment was 143. It is now 110. That’s a 23 percent decline. It means fewer families living on island and visiting the center for flu shots and physicals.

There’s another syndrome at play. When I take the ferry on a winter Monday or Thursday, I greet scores of older islanders traveling to medical appointments. It has occurred to me that many are driven more by a social desire to get off the island than by the quality of the care they will receive. In short, there are myriad and thorny challenges to increasing business.

There’s another conclusion it’s hard to avoid drawing: Surely charitable giving and membership fees have been negatively affected by the adverse publicity the center has received over the past year. Are Block Island residents trying to send the board a message? If so, then firing former director Monty Stover instead of hiring another person to help in the areas where the board thought his performance was weak looks, in hindsight, like a penny-wise, pound-foolish decision. (Please take our online poll this week to help us all get a sense of what’s going on in this area.)

Certainly, Stover is said to have performed well as a fundraiser, and past donation totals of over $140,000 a year are impressive. I have to wonder: Who is carrying that burden now? It may well be some time before those levels are restored — and how realistic is it to expect that the number can grow?

On the spending side, we can certainly hope that legal fees will decline if the board moves up the pace to settle issues with the Town Council. Maintenance is an ongoing concern unlikely to disappear. The need for systems upgrades is ongoing, and what is the cost to install new patient records software required by federal law? Perhaps incentive bonuses should be discontinued until there is something to incentivize.

Frankly, I am relieved that I do not sit on the BIHS board. We should be grateful that others are willing to take this on.

I appreciate that the center responded to my request for information. It is far better to get the news out there, whether good or bad, than to conceal it. It contributes to building trust.

The BIHS board needs to focus on issues other than open meetings and turn to much more urgent concerns. No one is asking to see patient records, and it is difficult to see why there’s any call for secrecy. Next week the BIHS board meets with the Town Council on the management agreement. Let’s get this behind us.

There’s no question in my mind that the center is now in financial distress. It is difficult to comprehend how a consultant could deem the center to be financially sound as recently as  September 2011, and yet we now find ourselves at this juncture. At this point, who caused this problem is almost irrelevant. We need to fix it soon, or we won’t have to worry about the quality of health services on island. They will not exist.

—Fraser Lang

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