Randolph
“We are a resource in this community that ought to make it more attractive to live here, to work here (and) for businesses to come here,” Daniel Bennett, the new CEO, said in an interview at the Randolph hospital this month.
Besides the hospital and nearby clinic, Gifford operates clinics in Berlin, Bethel, Chelsea, Rochester, Sharon and White River Junction; a physical therapy practice; a home care agency; and is building a new assisted-living facility for seniors in Randolph Center.
And Gifford doesn’t intend to follow the example of other area hospitals that in recent years have shut birthing centers and nursing homes, according to Bennett.
Providing that breadth of services is an important part of Gifford’s mission, according to Gus Meyer, chairman of the hospital board of trustees that chose Bennett to replace long-time CEO Joe Woodin.
“Comprehensive health care at a local level is certainly part of our view,” Meyer said.
But that can present financial challenges, as will be evident when Gifford posts its financial results for the fiscal year that ended Sept. 30. Gifford will record its first operating deficit in 17 years, Meyer said.
Financial pressures have driven other small Twin State hospitals into affiliation deals with Dartmouth-Hitchcock or the University of Vermont Medical Center.
“The number of hospitals throughout the state that are truly independent is dwindling,” Meyer said.
But Bennett, who as a hospital administrator in Maine was involved in a small hospital’s affiliation with a bigger neighbor, doesn’t expect to lead Gifford down the road that leaves a bigger hospital in control of its strategy, governance or finances.
“Gifford is staying as it is, and very happily so,” he said.
Still, Gifford’s leaders acknowledge that to succeed as a small hospital, it needs to work well with others.
Topping Gifford’s get-along list are the bigger hospitals in the region.
Gifford and other small hospitals often depend on the region’s academic medical centers and other big hospitals to employ physicians trained in such specialties as oncology, cardiology and orthopedics.
By sharing, or employing part-time, some of those same specialists, a small hospital that can’t afford to employ that specialist full-time can offer care needed and expected by the community. Not incidentally, care in some of those specialties can be quite profitable. That can help offset areas of care that only break even or lose money.
Gifford has a cardiologist from D-H and an employee trained in biomedical science from the University of Vermont, according to Bennett. The committee that oversees cancer care at Gifford includes six doctors from D-H and UVM and an affiliate, according to its 2015 annual report.
In general, autonomy requires collaboration, not only with the big hospitals, but also with providers with other focuses, according to Bennett, who earned a bachelor’s degree in accounting from Saint Michael’s College in 1991.
“You have to have strong partnerships,” he said. “There have to be clear pathways for transitions of care from one level of care to another, from medical care to mental health care to substance abuse care.”
Working out those divisions of labor and relationships is “always a dynamic in process,” Meyer said. But that dynamic doesn’t require that Gifford, which sits about equidistant from D-H’s main campus and the nearest UVM affiliate, be melded into a bigger organization, he noted.
Still, in a time of looming changes in how health care gets paid for, advances in medical science and technologies and consolidation efforts by large academic medical centers seeking to expand their population bases and manage costs, staying independent can be a challenge.
And Gifford, with nearly 700 employees and net assets — a basic measure of financial strength — of about $50 million, is much smaller than D-H. The Lebanon-based medical system has more than 9,000 employees and net assets of about $600 million.
Affiliation deals in recent years have given D-H control of Cheshire Medical Center in Keene, N.H., New London Hospital, Windsor-based Mt. Ascutney Hospital and Health Centers and D-H’s Lebanon neighbor, Alice Peck Day Memorial Hospital. UVM Medical Center, which formerly operated under the Fletcher Allen banner, has done its own deals.
Meanwhile, an even bigger system is moving north. Massachusetts-based Partners Healthcare, which is the new employer of Woodin, the former Gifford chief, hooked up with three New Hampshire hospitals, most recently in a deal with Wentworth-Douglass Hospital in Dover. That deal still needs approval from Granite State antitrust regulators.
Gifford is not alone in its commitment to independence. Cottage Hospital in Woodsville and Springfield Hospital in southern Windsor County have charted similar courses, so far successfully.
Affiliations between academic medical centers and smaller community hospitals almost always result from financial pressures, Meyer said.
Small hospitals handed over control to D-H, knowing that becoming part of the Lebanon-based system could generate some cost savings, and that “just having that Dartmouth name can help recruit physicians,” said Maria Ryan, Cottage’s chief executive.
“A lot of those hospitals went to Dartmouth,” she said of the recent merger wave. “It wasn’t Dartmouth trying to gobble them up.”
Meanwhile, Gifford has been growing and upgrading its facilities. Bennett, who previously worked at Gifford as an accountant, was struck by “the amount of building and improvements” that he found upon his return.
After acquiring a parcel in Randolph Center, Gifford used it to build a new home for its 30-bed Menig Nursing Home, which opened a year ago. The previous Menig facility was remodeled to create 25 private rooms at the hospital.
Gifford has kept Menig open despite financial losses, Meyer said. In fiscal 2015, Gifford’s tax return showed $1.5 million in expenses at its Gifford Retirement Community unit, which includes Menig, exceeding by about $400,000 the $1.1 million in revenue from that same unit.
Now, Gifford is adding a 49-unit independent living facility at its new “senior living campus” in Randolph Center, which it has dubbed Morgan Orchards. The new facility is expected to open in July or August, according to Ashley Lincoln, Gifford’s director of development.
Gifford also plans to continue offering birthing services, Bennett said. That bucks a trend in which some other Upper Valley community hospitals, citing financial pressures, have shut their facilities so that local families had to travel to D-H or elsewhere for births.
Gifford’s birthing center “is an incredibly valuable service to the community,” Bennett said.
While such facilities are not generally money makers, that doesn’t tell the whole story, he added: “If you are looking at it strictly from a business standpoint, if you are open to young families and they have a good experience when they have a birth, they are probably going to continue to use your services down the road.”
“It’s all part of being a resource for the community,” Bennett added. “It’s a commitment we’ve made to our community and in the grand scheme of things, the financial scheme of things, it works.”
And Gifford isn’t in dire straits, according to Meyer.
Last year’s financial setback was minor. An audit has not yet been completed, and the exact amount of the deficit hasn’t been reported to him, he added.
“It’s not seriously in the red,” he said. “We’re still in excellent financial shape.”
Like most small hospitals, Gifford relies on some high-margin services to offset the losses or low margins in such areas as birthing services, Bennett said.
In fiscal 2015, Gifford posted $67.9 million in net patient service and other operating revenue, and an operating profit of $1.9 million, according to its audited financial statement. Even after absorbing an $845,000 loss in the value of an interest rate swap agreement, Gifford’s total revenue exceeded expenses by $1 million.
In 2014, Woodin as chief executive had total compensation of $489,000, according to the Gifford tax return. The return disclosing Bennett’s compensation has not yet been filed.
As a provider in a rural area, Gifford — which in fiscal 2015 collected about half of its net patient service revenue from Medicare and Medicaid — got a financial hand from some federal programs that boost payments to providers.
For one thing, it is a critical access hospital. That designation by the Medicare program boosts the rate at which Gifford is reimbursed for some services by the federal government.
Since 1997, hospitals with critical access designation have been reimbursed by Medicare at “101 percent of their reasonable inpatient and outpatient cost,” according to a 2013 report by the Inspector General of the U.S. Health and Human Services Department.
In 2011, the program’s 1,700 designated hospitals posted $8.5 billion in revenue by providing health care to 2.3 million patients, the report said.
Gifford is also one of a handful of hospitals in the country controlled by an entity with Federal Qualified Health Center status. Such centers are required to have a sliding fee scale in order to provide care regardless of ability to pay and are obliged to prioritize primary care and make dental and behavioral health care available.
In return, FQHCs receive enhanced funding. In fiscal 2015, Gifford got a $962,000 consolidated health center grant from the U.S. Department of Health and Human Services.
Gifford still has some work to do as a FQHC, Bennett said: “We need to continue to build our primary care capacity and access to primary care.”
But that emphasis on primary care is in line with Gifford’s general orientation and “didn’t change our direction or perspective one iota,” Meyer said.
Springfield Hospital in Springfield, Vt., is also a unit of an FQHC.
In fiscal 2015, Gifford also received $1.5 million in so-called meaningful use payments through the Medicare and Medicaid programs after it met federal targets for transitioning to electronic systems for health records. Gifford finished that year owing just over $20 million in long-term debt.
The hospital he now runs faces a range of challenges, according to Bennett.
Recruiting and retaining nurses is difficult in a rural area and “primary care physicians are tough, no matter where you are,” he said. The hospital has started a training program to prepare local residents to work as certified medical assistants.
Wage scales are elevated, he said, because academic medical centers in the region “sometimes … set the market maybe a little higher than you would (otherwise) see in a rural area.”
Vermont’s health care reform efforts, which have resulted in an agreement between the state and federal officials to change how care is paid for, remain “covered with uncertainty,” Meyer said.
The so-called all-payer deal would initially apply to patients covered by Medicare but is intended to eventually cover patients with Medicaid or private insurance. Its general goal is to link compensation to the health of the covered population and the quality of the care provided, and to end the so-called fee-for-service arrangements that are seen as providing perverse incentives that result in waste and unnecessary spending.
So far, many details of how hospitals and doctors would be compensated under all-payer remain unclear, and that has Gifford and other hospital operators hanging back, Meyer said: “We don’t want to dive into something and then find out what we dove into later.”
Vermont’s lack of capacity for treatment of people with severe mental illness in crisis also takes a toll at Gifford, Bennett said. “It stretches the resources available in the emergency department,” he said. “We have five beds in our emergency department. So if you have a couple of people who are there with mental health-related issues and we can’t find a placement for them, and they are there for several days … your bed capacity is less.”
Rick Jurgens can be reached at rjurgens@vnews.com or 603-727-3229.