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BMC’s finances take turn for worse

Hospital faces first loss in five years

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By Liz Kowalczyk
Globe Staff / July 12, 2009
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Boston Medical Center, the state’s largest provider of medical treatment to the poor, is bracing for dramatic financial losses, which some fear will force it to slash programs and jeopardize care for thousands of poverty-stricken families.

The hospital projects that it will lose $175 million in the fiscal year starting Oct. 1, an 18 percent operating loss that is unusually large even in Massachusetts’ up-and-down hospital industry. The hospital estimates that it will close this year $38 million in the red, its first loss in five years.

Ironically, hospital officials blame the downturn partly on changes ushered in with the state’s groundbreaking mandatory health insurance law, which Boston Medical Center supported and that benefited many of its patients. As part of the law, the state phased out special subsidies for hospitals that treat large numbers of poor patients, a significant shock for Boston Medical Center.

About half the hospital’s 400,000 pa tients live below or near the poverty line, and English is not the first language of 30 percent of the patients. Its emergency room is the city’s busiest, with doctors and nurses renowned for their skill at treating victims of mayhem.

“They’re an invaluable provider, they really uphold the safety net,’’ said Brian Rosman of the Boston-based patient advocacy group Health Care For All.

In addition to medical care, the hospital’s services for the poor include a food pantry for patients with special diets, legal aid, and an extensive roster of translators to assist non-English speaking patients.

The Patrick administration has been negotiating with Boston Medical Center for nearly two years over whether to increase state funding for the hospital, but the state is grappling with a financial crisis of its own.

State officials acknowledge that the hospital will receive significantly less next year for treating Medicaid, uninsured, and newly insured patients. But they point out that BMC has sizable reserves - about $190 million in unrestricted cash, according to the hospital. And, state officials believe, the hospital’s costs are much higher than those at other hospitals, raising questions about whether it can provide care more efficiently.

Sympathy for the hospital, which estimates that it treats 15 percent of all poor residents in Massachusetts, has waned among some legislators whose blue-collar districts include struggling community hospitals that have no cash savings and little philanthropic support to fall back on. Meanwhile, Boston Medical Center, which is located in the South End, recently built a $119-million cancer center, restored two historic brick buildings for office space, and has started building a $189-million outpatient center.

“There’s no reserves in the hospitals that I represent. These hospitals are broke with a capital B,’’ Senator Michael Knapik, Republican of Westfield, told his colleagues during a budget debate last month. “You’ve got to understand that all healthcare doesn’t begin and end in Boston.’’

Hospital chief executive Elaine Ullian said in an interview last week that the shortfall doesn’t pose an immediate threat to the hospital’s survival, especially given that admissions have grown 7 percent and outpatient visits have soared 11 percent since 2006, when the state passed the law requiring almost all Massachusetts residents to have health coverage.

But, she said, the state is now paying the hospital 64 cents for every dollar it costs to care for poor patients, which is “an untenable business model.’’ She said the board of trustees will decide on program cutbacks “if it gets to that point’’ and that “there are no sacred cows.’’

Ullian said she is hopeful that the state will figure out a way to increase the hospital’s funding.

Earlier this year, Boston Medical Center laid off about 250 people and took other measures to save $40 million. Hospital officials disputed the state’s contention that its costs are out of line, saying they are average compared with costs at other large Boston teaching hospitals.

Boston Medical Center is facing its most severe financial crisis since its creation in 1996 through a merger between Boston City Hospital, a public hospital that treated the urban poor, and the academic Boston University Medical Center, which cared mostly for suburban patients. Healthcare specialists were skeptical about the marriage of hospitals that shared a neighborhood but had vastly different cultures, and hundreds of patients left at first. But Ullian guided the new larger institution to financial success - and some say helped transform a neighborhood - without losing site of the public health mission.

Ullian said the state is paying for the health insurance program, now considered a possible national model by President Obama’s administration, “on the backs of the poor.’’

“It wasn’t supposed to be this way,’’ she said of the initiative to cover most of the uninsured. “There was never enough money put in to achieve this wonderful goal. Our hope and belief was that more money would come through. A principle of reform was that Medicaid rates would be higher, when in fact Medicaid rates went down rather than up.’’

Before the insurance law passed, the state paid Boston Medical Center, as well as Cambridge Health Alliance, large grants to care for the uninsured, which accounted for about 20 percent of Boston Medical Center’s patients. The administration also gave the hospital special payments to supplement regular Medicaid fees. As a result, the hospital made about a 7 percent profit on low-income patients, which it pumped back into its services. But both these programs have been phased out over the past three years, as the number of uninsured adults statewide has fallen.

Now, the state pays Medicare-like rates for the remaining uninsured patients, which make up about 10 percent of the hospital’s patients, and the state’s new subsidized health insurance plan, Commonwealth Care, pays rates similar to Medicaid for the newly insured. At the same time, after an initial increase in Medicaid rates, the state has cut them for many hospitals, including BMC.

The state paid the hospital $446 million in 2006 for caring for the poor and plans to pay it $317 million next year, at the same time that expenses and patient volume are growing.

The hospital, said vice president Tom Traylor, could survive for one to two years by dipping into cash reserves to cover losses.

Meanwhile, patient advocates and union leaders are worried about the implications of an 18 percent shortfall come October, given the hospital’s unique programs. The Service Employees International Union, which represents more than 2,500 workers at Boston Medical Center, has organized an aggressive campaign to win more funding, including 10,000 calls and letters to the governor’s office and legislators. “There has to be a solution,’’ said spokesman Jeff Hall.

At the hospital food pantry last week, believed to be the only one at a hospital in the country, patients handed staff “prescriptions’’ that their doctors had given them. Doctors refer patients for specific problems, such as needing a low-salt diet for high blood pressure, but also if they discover a family simply doesn’t have enough to eat. The shelves were piled high with canned tuna, kidney beans and black beans, unsweetened applesauce, whole grain and regular pasta, peanut butter, boxed cranberry bread, and chocolate muffin mix.

Staff loaded a cart with some of these items, as well as orange juice with calcium and chicken breasts, for a single mother of four children, including a nine-year-old son with sickle cell anemia. His pediatrician wrote the prescription so “he would have healthy food,’’ said the woman, who didn’t want her name used. “I’m very glad the hospital has this kind of resource.’’

Liz Kowalczyk can be reached at kowalczyk@globe.com.

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