From TCExtra.com
Lakeville Journal
Sharon Hospital opens its books
By TERRY COWGILL
05/29
SHARON — It’s been six years since the first hospital conversion in Connecticut from nonprofit to for-profit.
When Sharon Hospital was under nonprofit ownership, its operations were essentially an open book. Its tax-exempt status required it to reveal much of its finances to the Internal Revenue Service and to state officials.
Essent Healthcare, the privately held company that acquired the nearly 100-year-old hospital in 2002, is required to report less to those authorities. Now Essent executives such as new Chief Executive Officer Michael Browder have decided to disclose unusual amounts of data regarding the hospital’s operations, finances, patient care and comparisons with competitor facilities.
“We want to be more connected to the general public,” said Ben Heller, a member of the hospital’s governing board. “For so long it’s been this mysterious entity.”
Aggressive investing
Heller, Browder and Sharon Hospital CEO Charlie Therrien spoke with this reporter and Lakeville Journal Company publisher Janet Manko last week in the hospital’s board room.
In a four-page insert purchased for insertion into this week’s Journal, hospital officials also revealed that Essent is carrying a significant debt load, which has funded the company’s aggressive expansion. When Essent was founded in 1999 by venture capital firm Thoma-Cressey, Essent’s board of directors and then-CEO Hudson W. Connery saw the firm invest $120 million right away. Since then, Essent has taken on $115 million in debt — borrowed mostly from GE Capital. Essent hopes to retire that debt, or refinance to lower its obligations, by 2013.
“Sharon Hospital today is strong and so is Essent,” said Browder, who replaced Connery last year after the founding CEO was reportedly forced out. “We are comfortable with the debt load. By pure market standards, we are underleveraged.”
From a high of $3.6 million three years after Essent acquired it, the 78-bed hospital’s net income declined to $1.734 million last year. During that time, interest expenses have risen more than 18 percent to $1.729 million, eating into the hospital’s operating profits. However, under nonprofit ownership, the hospital had lost about $16 million in the six years before Essent bought it. Essent owns four other hospitals: two in nearby Massachusetts and one each in Texas and Pennsylvania.
Decline in patient volume
The three men said that Sharon Hospital’s challenges are quite simple. Increasing patient volume remains a priority. From 2004 to 2006, for example, Sharon’s discharges went down 5.3 percent and emergency room visits declined by 5.4 percent. Browder and Therrien said patient volume is down at Sharon’s principal competitors (New Milford, and Torrington’s Charlotte Hungerford) by a similar percentage.
Many hospitals across the nation are experiencing similar declines since mid-2006, owing perhaps to the alternatives including walk-in clinics, outpatient surgical centers, hospices, home therapy and visiting nurses. Browder said he believes that recent improvements in pharmaceuticals and a declining economy have also kept would-be patients away from hospitals. In acquiring new facilities, Essent has always looked for hospitals that do not have a proximity to outpatient surgical centers, Browder said.
The physicians associated with Sharon Hospital, most of whom work as outside contractors to the hospital, are also vying for patients’ attention.
“Doctors are trying to plug the hole and do more in their offices, so they are also our competitors,” Browder explained.
Births at the hospital, however, have been a bright spot. They’ve increased about 10 percent since Essent acquired Sharon. A new 11,000-square-foot women’s services center finished last year could have something to do with that.
Financial advances, stability
In the six years it has owned Sharon, Essent says it has retired the hospital’s previous debt, financed an $8-million renovation project, helped fund a locally controlled community health foundation worth between $16 million and $20 million, and restored the hospital’s long-term fiscal health — all without a reduction in patient services.
And there was last year’s $17 million capital improvement project, which included not only the birthing center, but a new emergency department, an addition to the radiology department and a new 1,200-square-foot facility to house the magnetic resonance imaging equipment.
Through its first five-and-a-half years of ownership, Essent says it has spent more than $34 million in additions and improvements to Sharon Hospital’s physical plant and equipment. That amount is greater than the hospital’s net annual revenue when it was purchased.
Response to community concerns
Still, in the statements put out by its governing board in this week’s Journal, Essent officials concede that patient “volume has not yet sufficiently increased Essent’s significant investments [and] the debt created to increase business is large.”
In a letter to the editor in The Lakeville Journal earlier this year, Victor Germack, a financial analyst and member of the Community Association To Save Sharon Hospital (CASSH), a group that opposed the sale to Essent, raised what he called “several troubling issues.” Therrien acknowledged that today’s insert in The Journal is, in part, a response to Germack’s letter.
Germack went to Hartford to the headquarters of the state Office of Health Care Access, whose approval was critical to the Essent sale. He reported that of Essent’s five hospitals, “only Sharon Hospital was marginally profitable. The four others showed net losses for fiscal 2006.” Germack raised questions about Essent’s debt load, its overall financial condition and was particularly concerned about staffing levels and the degree of charitable care given at Sharon.
Indeed, The Lakeville Journal received a letter last April complaining that “as a result of the spending on the physical appearance of the hospital, the nursing staff has had considerable changes to their working conditions.”
The letter, which was signed only as “a group of concerned employees at Sharon Hospital wanting quality healthcare,” said nurses are “being forced to work” under a lower staff-to-patient ratio and that often “nursing personnel are being canceled and told to stay home.” Complaints to the administration fall on deaf ears, the letter claimed, so there have been some discussions about “joining a healthcare union.” Therrien said those employees’ concerns have been addressed.
“We follow national standards and our own determinations. I feel confident that our staffing levels are appropriate,” Therrien said. “There will always be people who disagree, but we have worked with nursing leadership to make sure they have the right support and resources.”
Finding quality doctors
Another significant challenge for Sharon Hospital is recruiting doctors. Shortages exist in adult and pediatric primary care, where Therrien said he would like to have four more physicians; and in endocrinology/diabetes, where the hospital could use one more.
The ranks of medical school graduates have been declining nationwide, Therrien noted, in part because of increased demands on physicians’ time and resources in order to comply with regulatory burdens and insurance. Combined with the cost of living in the Northwest Corner and an ailing national economy, the climate for finding qualified physicians leaves a lot to be desired.
“Recruiting doctors is hard,” said Heller. “Stop to think what it costs to buy a house here.”
Therrien has had less trouble recruiting qualified nurses, but was quick to “knock on wood.” He also insisted that Sharon Hospital fulfills its legal obligation to care for those who cannot afford care.
“We do not screen for financial ability,” Therrien explained. “We do go through a process to see what people can pay. Whether you have insurance or not is not necessarily the determining factor.” He added that Sharon Hospital has financial counselors who work with patients and direct them to local services that can help them further, if needed.
But all three men emphasized the importance of the concluding sentence of this week’s insert: “Finally, we are faced with the largest problem of all: How can the nation’s 2,000 small community hospitals survive in today’s atmosphere of intense governmental, economic and medical pressures?”
© Copyright 2008 by TCExtra.com
Just remember: Sharon Hospital is profitable. One of two in the Essent chain. They are talking about retiring Sharon's debt in that time frame, not Essent's.
