NARH Financial Turnaround Expected At Hands of Cambio Firm

By Susan Bush
12:00AM / Wednesday, August 31, 2005

Northern Berkshire Healthcare CEO John C.J. Cronin announced change ahead for the North Adams Regional Hospital during an Aug. 30 media conference.

North Adams – Facing a fifth consecutive fiscal year doused in red ink, the North Adams Regional Hospital is being financially overhauled in hopes of ending the downward spiral.

Interim Administrators In Place

Two members of the Cambio Health Solutions LLC firm, which dubs itself as a “performance accelerant” specializing in hospital “turnarounds” are in place in temporary, contracted leadership roles at the North Adams Regional Hospital and the Cambio company has been hired to assess the hospital’s overall structure and make recommendations for change.

“This really is an approach to turn an organization’s [financial] performance around,” said John C.J. Cronin, the CEO of the hospital’s parent company Northern Berkshire Healthcare. “These are folks we’ve hired deliberately to come in and it shouldn’t be confused as something else.”

During an Aug. 30 afternoon media conference, Cronin announced that John Schibler is serving as the hospital’s interim chief financial officer and chief implementation officer, while Joseph Nolan is serving as the NARH chief operating officer. Nolan and Schibler are expected to be contracted hospital administrators for about nine months, Cronin said.

According to Cronin, Nolan and Schibler report to him. Neither Nolan nor Schibler attended the media conference.

The appointments are part of a Cambio analysis of the hospital’s financial and operation performance. Cambio recommendations are expected to result in significant changes affecting hospital operation and financial strategies.

"Anything is Possible"

While predicting that hospital patients would notice no significant changes, Cronin also ruled nothing out.

“Anything is possible as we do this work,” he said. “The pathway to viability doesn’t presuppose closing any program or adding any program.”

Cronin also stressed that the Cambio teams make recommendations, but the NBH will make final decisions. Financial performance is the catalyst for the Cambio involvement but community need “is a factor” in the process, Cronin said.

Over $2 Million Loss Projected for Fiscal Year 2005

Predictions about an improved financial picture for NARH made earlier this year have been proven dismally inaccurate, and a loss of over $2 million is now a certainty for fiscal year 2005, Cronin said. The loss will be pinpointed by the end of September, Cronin said. The hospital’s fiscal year stretches from Oct. 1 to Sept. 30.

The previous, more optimistic financial forecasting was the result of working with “experts” and “doing homework,” Cronin said.

“And we were way off,” he acknowledged.

The way the hospital does business must change to remain viable, and Cambio personnel are assessing most aspects of the hospital, Cronin said.

Financial Improvements by FY 2007 Expected

“We made the decision that we would retain Cambio to help us with those changes,” Cronin said. “I think we have an approach that will change the financial aspect [of the hospital] and strengthen us.”

Over the next 12 to 14 months, Cambio recommendations will be implemented through a series of work plans. Cronin said that he expects that by fiscal year 2007, “[NARH] will be back to solvency.”

Recent changes that resulted in the departure of top-tier administrators such as Suzanne Stinson and Win Brown mean that fiscal year 2006 management costs will be reduced by over $1 million from fiscal year 2005 costs, Cronin said.

The upcoming 14 months will be a cycle of “change, transition, and improvement,” Cronin said.

No Merger with BMC, Says Cronin

Hospital employee overtime will be cut as a result of the changes, Cronin said, and also said that whether any lay-offs would occur, who would be affected and in what numbers are not yet known. He vehemently denied any potential merger with the Pittsfield-based Berkshire Medical Center.

Cronin termed Schibler a “special employee” whose goals include coordinating communications between Cambio teams and hospital managers, Cronin said.

Nolan has “a deep background in operations,” according to Cronin.
“He is doing most of what Bruce Nash did,” Cronin said. “He’s really picked up where Bruce left off.”

Dr. Bruce Nash resigned as NARH president in early August, and hospital officials have said that the job of hospital president would be replaced with a chief operating officer.

Cronin declined to answer questions about the cost of hiring the Cambio firm, and said that Nolan and Schibler are being paid through the company. Cambio’s Internet web site www.cambiohealth.com offers interim management as part of its services: “If needed, we can provide interim management to fill key vacant positions or provide a chief implementation officer [for a defined period] to support your team in tackling a special challenge,” according to Cambio’s information.

What, When, How, and Why

According to Cronin, Cambio employees have been on site at the hospital for several weeks and are reviewing processes and procedures described during the conference as “outdated.”

“As we go forward in time, the processes and practices that we need to do our work needs to change,” Cronin said. “We are in a time warp. In the most simplistic terms, the world moves on and we haven’t moved on with that.”

For example, managers of various departments, such as patient care units and radiology, currently have no monthly data to evaluate the dollars made within their arenas as opposed to the department expenditures, Cronin said. Additionally, the managers cannot determine how many resources their operations consume as opposed to the available revenues.

“That’s a kind of ‘70s mentality,” Cronin said.

Financial services, medical records and billing, examining payer relationships [such as insurance company reimbursements] and negotiating improved payer rates, and “knowledge transfer” are all on the Cambio front burner, Cronin said.

Cronin said that negotiations with the hospital’s largest private commercial payer, Blue Cross and Blue Shield, are poised to begin.

“We are approaching that with far more rigors than in the past,” Cronin said.

In answer to a direct question about dealing with health insurance companies that are reputed to be difficult, Cronin said that all companies “will have to come to the table.”

But he immediately added a softer note.

“I don’t want to blame the insurance companies,” he said. “The [overall health care services] system is dysfunctional.”

Health insurance companies most often pass on any added costs to employers, who in turn raise employee contributions and co-payments, Cronin said. The result is a nation that outspends other industrialized nations’ healthcare systems but generates a poorer outcome and hosts a greater number of uninsured citizens.

As he has frequently done over past years, Cronin pointed to low state Medicaid and federal Medicare reimbursements as a prime source of the hospital’s financial woes.

In a prepared statement distributed during the conference, Cronin said that the NARH “contends with unique demographic factors that make it difficult to achieve a break-even budget.”

According to the information, 19 percent of the Northern Berkshire population is over age 65 and “tends to be poorer, meaning more residents depend on Medicaid for health coverage, and tends to be uninsured when compared to other populations.”

Federally-Funded Clinic Would Be "Financial Suicide"

When asked if the expected changes include turning uninsured or under-insured persons away from the hospital’s Emergency Department, Cronin responded, “We will continue to take everyone who presents and we will continue to provide free care.”

When asked to comment on a statement made recently by U.S. Congressman John W. Olver that the Northern Berkshires likely qualifies for a federally-funded public health clinic, Cronin termed the idea “financial suicide” and said that a clinic would worsen the region’s health care situation by pulling people away from existing systems and services.

Cronin also cited the shift away from inpatient care to outpatient care as another source of NARH financial challenge, and he noted that employee wages and salaries, new medical technologies, drugs, and other costs continue to rise and pose financial impacts.

Cambio: Different Hospitals, Different Strategies

The Cambio firm was founded in 1989 and their work has offered different strategies for different hospitals. Strategies for the Lowell General Hospital included “ to increase revenues, Cambio renegotiated the hospital’s managed care contracts and trained a hospital team to aggressively work denials” and “Cambio’s exhaustive service line analysis found that the inpatient psychiatric unit had consistently generated heavy losses. LGH’s management team made the decision to stop offering the service, knowing it was available at other community providers,” according to a “case study” posted at the Cambio web site.

Newspaper articles that followed the psychiatric unit closing at LGH reported that the closing resulted in increased patient loads, and increased revenue difficulties, for surrounding facilities that did offer inpatient psychiatric services.

However, according to Cambio information, “Financial improvements included a $4 million revenue increase from renegotiated managed care contracts and a $4.5 million reduction in non-salary expenses.”

A review of Cambio’s posted case studies shows that the firm has guided several successful mergers, however, the studies also indicate actions that did not include unit closings, mergers, or employee lay-offs.

When involved with Midwestern Hospital, Cambio claims that their efforts led to “Midwestern’s management team, guided by Cambio, implemented revenue cycle, inventory, and productivity initiatives, achieving the high end of Cambio’s projections in one year’s time, with no reduction in the workforce.”

The North Adams Regional Hospital is a community resource that meets community needs, and will continue as such, Cronin said.

“That is a factor in each and every dialogue,” he said.

Susan Bush may be reached via e-mail at suebush123@adelphia.net or at 802-823-9367.