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Carney may be sold or shuttered

Caritas funding buoys Dorchester hospital

Caritas Christi Health System Inc., the troubled hospital chain owned by the Archdiocese of Boston, is considering closing or selling 144-year-old Caritas Carney Hospital in Dorchester because its performance is predicted to fall about $7 million short of expectations this year, according to an internal document obtained by the Globe.

Despite receiving $4 million in state subsidies, Carney expects to lose about $2.3 million in the fiscal year that ended Sept. 30, the hospital said in the report, which was written before the fiscal year closed and is part of its 2008 budget plan.

Only money from sister hospitals in the Caritas Christi chain is keeping Carney afloat, the report said. "Carney would be insolvent were it not for the infusion of an advance of $6.7 million from the other Caritas hospitals," it said.

Caritas Christi would prefer to continue operating Carney as a community hospital, providing care for all but the most complex medical cases. But the report says management is also weighing other options, including closing the hospital, selling it separately from the chain's other five hospitals, and a complete restructuring of the 197-bed facility and its services.

A decision on a course of action is expected by the end of the year.

Bob Guyon, chief financial officer of Caritas Christi, acknowledged Carney's financial problems, but said the hospital serves many uninsured people, and has weathered similar crises in the past.

"By virtue of the community Carney serves, it's always going to be in financial distress," he said.

Carney's basic problem, Guyon said, is a 10 percent decline in inpatient volume. He said strong financial results at Caritas Norwood, St. Anne's Hospital in Fall River, and Good Samaritan Medical Center in Brockton show Caritas Christi can turn around troubled hospitals.

Carney's position as a community healthcare provider also makes its survival a priority for many city and state politicians.

"Dorchester and Carney are synonymous," said Boston City Council president Maureen Feeney. "I am personally committed to doing anything and everything to preserve Carney Hospital."

Feeney's husband, Larry Feeney, is president of the Caritas Carney Foundation, the charitable arm of the institution.

Carney has looked to some former elected officials for help. In June, the hospital said it had hired former Senate president William M. Bulger as an adviser to its fund-raising efforts. Former House speaker Thomas M. Finneran, now a talk radio host, was master of ceremonies for its annual fund-raising dinner two weeks ago.

"It hardly had the air of the last gathering on the deck of the Titanic," Finneran said, adding he was "confident" about Carney's future.

The archdiocese earlier this year said it would get out of the healthcare business and sought to transfer Caritas Christi - and its estimated $275 million in debt - to another Catholic hospital chain. After months of talks, Ascension Health of St. Louis abandoned efforts to take over the six-hospital Caritas Christi chain in June. In September, talks with a second Catholic healthcare chain, Catholic Health Initiatives of Denver, also ended without a deal.

According to financial statements filed annually with the state, Carney's net worth - the value of its assets minus its liabilities - has been negative for years. Recently, its net worth has further declined, from negative $8.1 million in September 2003 to negative $15.6 million in March of this year.

In addition, Carney has stretched out payments to vendors. As of the end of March, it was taking the hospital an average of 91 days to pay vendors, compared to 66 days a year earlier. The industry average in Massachusetts is 48 days, according to the Division of Health Care Finance and Policy.

"They're losing money in fiscal '07, and, not surprisingly, they're hurting for cash and they're stretching out their payables," said Dr. Michael Sniffen, a consultant to hospitals in New Jersey, who reviewed the state financial statements on Carney for the Globe.

Carney Hospital opened in South Boston in 1863, and was a pioneer in Catholic-sponsored healthcare. It moved to its current location near the Lower Mills section of Dorchester in 1953. For many years, the hospital was operated by the Daughters of Charity, a Catholic group with a mission of providing healthcare for poor people that dates to the 1600s. Carney became part of Caritas Christi, the second-largest healthcare chain in New England, in 1997. The chain also includes St. Elizabeth's Medical Center in Brighton, Good Samaritan Medical Center in Brockton, Holy Family Hospital in Methuen, Caritas Norwood Hospital, and St. Anne's Hospital in Fall River.

Carney, like other hospitals that care for large numbers of patients without health insurance, has been hard hit by the state's healthcare reform efforts. Previously, the state reimbursed hospitals for providing free care, but under healthcare reform, all residents are required to have insurance. Because some patients have not yet signed up for coverage, the hospital said, it will lose $2 million in free care reimbursement, and collect only $700,000 in new revenue from newly insured patients during the current fiscal year.

The $4 million annual state subsidy Carney receives comes from a fund for distressed hospitals.

Since the talks with Catholic Health Initiatives broke off last month, Caritas Christi has concentrated on turning around the system without a change in ownership. It has reactivated a search for a new chief executive being led by Russell Reynolds Associates, an executive search firm. The chain hasn't had a permanent chief executive since Dr. Robert M. Haddad was forced to resign in May 2006 over allegations he sexually harassed several female employees.

Brokering a financial turnaround for Carney will be a challenge, in part because numerous changes intended to improve services and boost performance have already failed to have a major financial impact. The hospital has reopened its cardiac catheterization lab, started an oncology chemotherapy clinic with New England Sinai Hospital, opened a satellite unit of New England Sinai to focus on patients with complex lung issues, and installed advanced imaging equipment.

Carney's financial picture is not entirely grim, according to the management document. Inpatient psychiatric volume was up 2.9 percent in the just-ended fiscal year, overall outpatient volume increased, and emergency room visits and radiology and laboratory results all exceeded expectations. Also, operating expenses were $90,000 under budget, and salaries and wages were under budget by about $1 million.

Nonetheless, for fiscal year 2008, Carney is predicting a loss from its healthcare operations of $4.2 million. Officials hope it will break even after receiving its state subsidies, more than $4 million in Medicare adjustments, and a settlement from another payment dispute.

Guyon said many hospitals, not just Carney, depend on such one-time payments to help balance the books.

"There are some one-time things in Carney's budget for 2008, and we're going to rely on those to get Carney to a break-even," he said. "I guess we're going to have to rely on those sorts of things, including support from the state, after 2008."

Jeffrey Krasner can be reached at krasner@globe.com.

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