By Patrick Donges
http://stream.publicbroadcasting.net/production/mp3/wamc/local-wamc-973506.mp3
North Adams, MA – Northern Berkshire Healthcare, or NBH, is the largest employer in the city of North Adams, operating North Adams Regional Hospital, the Visiting Nurses Association and Hospice of Northern Berkshire and the REACH Community Health Foundation.
In a release Monday, NBH officials announced the Chapter 11 bankruptcy protection filing in U.S. Federal Bankruptcy Court. Dr. Arthur Turton is chair of NBH's board of trustees.
"This is the culmination of a process that was first discussed almost three years ago and really started in earnest nine or 10 months ago. Our hospital cannot go forward and be financially solvent and carry the amount of debt that we currently have on the books."
That debt equals about $43 million, funds bonded for the expansion of the hospital and the purchase of the Sweet Brook Care Centers and Sweetwood retirement community in Williamstown.
NBH sold Sweet Brook and Sweetwood last year because operational deficits at the facilities coupled with their bonded debt had been a drain on overall finances. Here's Turton.
"Sweetwood and Sweet Brook were purchased at a time when the financial models showed that they could be quite profitable. At that time of course hospital utilization was much higher than it is now so the hospital was also making more money."
"There was a substantial change in the real estate market. That made the model not sustainable, and it started losing money instead of making money."
He said that while lenders are willing to accept lower payments, or no payments, over the next five years, negotiations have been hinged at maintaining the current debt level, which he said would not be possible given the current direction of healthcare policy.
"Health care reform is to help reduce costs. They're talking about lowering payments to hospitals. There's a lot of talk about setting up systems where people can get more and more care at home. Everything points to a reduced utilization of hospitals and reduced payments to hospitals."
"To have any expectation that the health care reform is going to be some boon to hospital finances and allow us in the future to afford this debt is quite unrealistic."
NBH CEO Rick Palmisano, who is also the organization's chief restructuring officer, described the management model that eventually made operation of the two facilities unsustainable.
"People who bought units at Sweetwood; they paid an entrance fee somewhere between 150,000 and 500,000, and when they left the facility they would get 90 percent of that back."
"If you find yourself in a housing market where no houses are selling, and that's exactly what we found ourselves in 2009 and even to this day, we then went from occupancy in the high 90 percent as low as low 50's. Simultaneously although the hospital was doing well, the hospital was needing to take cash that it was producing to refund those dollars to residents. At some point the equation became untenable."
Palmisano said he only way to have prevented the bankruptcy filing would have been to avoid the sub-prime mortgage crisis and credit market crash following the collapse of the investment giant Lehman Brothers in 2007.
The filing is part of a reorganization process NBH is working through to repair their finances that includes affiliation talks with larger organizations.
Palmisano said that while talks have been had with the likes of Massachusetts General Hospital, Baystate Health and Berkshire Health Systems, those plans have been put on hold because of the debt issue.
Both Turton and Palmisano said that treatment and services at North Adams Regional Hospital would not be interrupted during the filing process.