Cape's new hospital chief will confront revenue woes

Dr. Richard F. Salluzzo

Cape Cod Healthcare Inc. yesterday chose a graduate of the University of Massachusetts and the Tufts School of Medicine to become its chief executive as the organization faces a shortfall of revenue in addition to layoffs and cutbacks.

Dr. Richard F. Salluzzo will replace Stephen L. Abbott, who has been chief executive of Cape Cod Healthcare, the parent of Cape Cod Hospital in Hyannis, since the late 1990s.

Salluzzo is president and chief executive of Wellmont Health System, a group of 12 hospitals in Tennessee, Virginia, and Kentucky. He is credited with moving the system from a loss to a profit and for efforts to eliminate medical errors.

"We are fortunate to have attracted an executive of Dr. Salluzzo's caliber and experi ence," said Bob Birmingham, chairman of Cape Cod Healthcare's board of trustees, in a statement. "He epitomizes the blend of proven operating experience and executive vision we set as the benchmarks for this search."

Salluzzo joins the Cape's largest employer at a crucial time. In a recent letter to employees, Abbott, who is retiring as chief executive, said the small hospital chain faced "very heavy financial losses."

"After the first seven months [of the fiscal year], we have lost $17.6 million," wrote Abbott. "Last year at this time, we had lost $4.8 million. Typically, we make up ground in the summer months, but we don't expect to be able to make up for the losses of this magnitude."

Abbott said Cape Cod Healthcare, which also includes Falmouth Hospital and a visiting nurses association, had already undertaken a number of steps to control costs. Cape Cod Hospital has 238 beds and Falmouth has 95. Cape Cod Healthcare has about 4,000 employees. Combined, the hospitals' emergency rooms treat about 130,000 patients a year, said Birmingham.

To save money, both hospitals have reduced staffing through attrition, early-retirement programs, and layoffs and instituted tight controls on overtime. In addition, senior management took a 10 percent pay cut.

The biggest problem, according to Abbott's letter, is a drop in the volume of high-profit diagnostic services, including MRI and CT scan imaging. To control costs, doctors have been referring patients to outside imaging facilities with lower prices. Abbott asked hospital employees to curtail such outside referrals.

"We are asking for our medical staff to return some of the volume they have recently referred to other providers. Please encourage your own physician to utilize Cape Cod Healthcare's services for your own care and your family's care, as well as for your neighbors and friends," he wrote.

Birmingham said the healthcare system is investigating forming a physician hospital organization, in which doctors and the hospitals would jointly negotiate with insurers. It hopes such a setup would provide doctors with the financial incentives to send patients to Cape Cod and Falmouth hospitals for imaging and other diagnostic services.

"We have to align the interests of the physicians and the hospital," he said.

Salluzzo declined to discuss his appointment yesterday, but in a statement, he said, "I know Cape Cod Healthcare faces some challenges going forward and I look forward to working closely with the board, our physicians, and staff in addressing and solving these challenges."

Prior to joining Wellmont in 2004, Salluzzo was chief executive of Conemaugh Health System, a four-hospital system in western Pennsylvania. In addition to his medical training, he has a master's degree in business administration from the University of Pittsburgh.

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