Lebanon
Dartmouth-Hitchcock ended its fiscal year on June 30 with an $18.7 million surplus — a figure that accounts for $17.7 million in restructuring costs — according to an unaudited report to bondholders that was filed Aug. 11 and signed by D-H Chief Financial Officer Dan Jantzen.
The results track with the goal of ending the year in the black that D-H officials set out in a financial performance improvement plan in July 2016, following a $12.2 million loss in the fiscal year ending June 30, 2016.
D-H spokesman Rick Adams pointed to D-H’s $26.2 million surplus for the fourth quarter as a sign of significant improvement in the organization’s performance compared with the $9.8 million surplus in the third quarter of 2017 and the $22.6 million loss the organization suffered in the fourth quarter in 2016.
“It is important to emphasize that these results reflect a sustained, long-term strategy to strengthen the organization’s financial position during a time of industry uncertainty,” Adams wrote in an email.
A note in the filing attributed D-H’s financial improvement to “continued growth in patient services as compared to the prior year, including surgical cases, inpatient discharges, case mix index, patient appointments and cost management initiatives.”
D-H has seen continued demand for services because it is the state’s only academic health system and tertiary referral center, Adams said. The aging population also contributes to demand for services, he said.
D-H officials achieved cost savings by laying off 84 employees last fall and eliminating high-cost contract employees in areas such as information technology, where the organization has struggled to recruit permanent staff, Adams wrote.
D-H officials also anticipate future savings, Adams said, from transitioning from a defined-benefit pension plan — in which employees’ pension payments were based on the length of their service and the salary they earned at the time of retirement — to a defined-contribution plan, in which the employee and D-H both make contributions on a regular basis and future benefits depend on investment earnings.
Additional savings came from cutbacks in non-essential hiring, large capital investments, business-related travel expenses and supply purchases, Adams said.
The recent filing held no surprises for Margaret Johnson, a New York-based analyst for Fitch Ratings, which assesses the financial health of borrowers.
“It seems pretty much in line with what we had been expecting,” she said.
She indicated that the financial report supports Fitch Ratings’ decision to remove the Dartmouth-Hitchcock Obligated Group from a negative watch last November.
That left the group, which in addition to D-H includes Cheshire Medical Center, New London Hospital and Mt. Ascutney Hospital and Health Center, with an A rating for bonds issued through the New Hampshire Health & Education Facilities Authority.
Though Alice Peck Day Memorial Hospital also is a D-H affiliate, it is not a participant in the bond repayment group.
Fitch had lowered the group’s rating from an ‘A+’ in August 2016 as a result of a $39 million loss the members of the group posted in fiscal year 2016.
D-H and its affiliates began pooling bond repayment obligations on July 1, 2016.
As a whole, the group ended fiscal year 2017 with a $13.9 million surplus.
There were some negative numbers in this filing. Both Cheshire Medical Center and New London Hospital showed losses in 2017. Cheshire had a deficit of $4.2 million and New London lost $2.1 million.
The losses of Cheshire Medical Center, located in Keene, are due to new clinical programs aimed to make the hospital a regional referral center, Adams said.
In particular, Cheshire officials opened a new progressive care unit and expanded intensive care unit capacity, he said.
To staff these units, Cheshire hired additional anesthesiologists, hospitalists and registered nurses.
These investments haven’t yielded the increase in patient acuity and volume that hospital officials had anticipated, and a shift in the payer mix from commercial insurance to Medicare has meant lower-than-anticipated reimbursements, Adams said.
New London Hospital’s loss in 2017 is due to a drop in patient demand in radiology, the laboratory, the emergency room and in physician practices, Adams said.
The losses in physician practices and radiology were due to the difficulty in filling three open primary care physician positions and a post in radiology, Adams said.
The primary care jobs have recently been filled, he said.
Other costs contributing to New London’s deficit include a $700,000 disparity in the amount the hospital paid in Medicaid enhancement tax payments and the amount it received from the state in so-called “disproportionate share hospital” payments, as well as the hiring of non-revenue-generating employees necessary to comply with reporting requirements, Adams said.
In addition, New London Hospital closed its unprofitable nursing home, the William P. Clough Extended Care Center, resulting in a closing cost of about $424,000, Adams said.
D-H anticipates New London Hospital will show a modest surplus for fiscal year 2018, as a result of adding clinical staff, curbing losses from the Clough Center and reducing unprofitable services, Adams said.
Nora Doyle-Burr can be reached at ndoyleburr@vnews.com or 603-727-3213.
