Quincy Medical Center chief has a blueprint for revival
Steve Adams, Patriot Ledger, June 5, 2010
Quincy - John Kastanis believes it’s not too late to pull Quincy Medical Center out of its lingering fiscal difficulties. “I’ve walked into worse situations that did turn around successfully,” said Kastanis, the hospital’s interim CEO. The hospital’s trustees hired Kastanis as a short-term, turnaround specialist to help erase a $4.5-million deficit in its $110-million budget by the end of the fiscal year September 30.
At stake are the jobs of 1,100 employees and convenient access to hospital treatment in the local community, particularly for low-income residents and senior citizens.
Kastanis said his blueprint includes increasing patient volume, strengthening existing partnerships and forming more partnerships with local physicians’ networks, and cutting costs through employee concessions and operational efficiencies. The hospital is also working on an affiliation with Tufts Medical Center, hoping to get more prestige and expertise by bringing in specialists from a Boston teaching hospital.
Still, the path to financial success will be difficult. Like many smaller hospitals in Massachusetts, Quincy Medical faces many challenges.
“Community hospitals are in the middle of a perfect storm,” said Phil Johnston of Marshfield, a political adviser and former health care administrator on the state and federal levels.
The new health care overhaul calls for $500 billion in Medicare cuts over the next decade, which will shrink reimbursements to hospitals for senior citizens’ health care. That hits hard at facilities like Quincy Medical Center, where up to 70 percent of the patients who stay overnight are on Medicare, spokeswoman Janice Sullivan said.
Medicaid, a public health care program for low-income people, is another budget-buster. Quincy Medical is one of six hospitals suing Governor Deval Patrick’s administration for $70 million, claiming they were underpaid on Medicaid reimbursements over three years.
Community hospitals in urban areas are disproportionately harmed by Medicaid cuts since they treat a larger percentage of low-income patients, said Ellen Murphy Meehan, executive director of the Massachusetts Alliance of Safety Net Hospitals. The group lobbies for eight of the 18 Massachusetts hospitals – including Quincy Medical Center – designated as safety-net hospitals because at least 63 percent of their revenues come from public insurance plans.
“Hospitals that rely on public payments need to be treated differently,” Meehan said. “(Safety net hospitals) take the largest share of the cuts, and you have to make those up in the form of layoffs, reduced services and cutbacks in staffing.”
For now, such hospitals are cutting back: Quincy Medical Center eliminated 14 administrative positions this spring and this week laid off the equivalent of 14 full-time employees.
Still, for all the talk of Medicaid and Medicare, private insurance payments are also a concern. A recent report by Attorney General Martha Coakley put Quincy Medical Center near the bottom of Massachusetts’ 60 hospitals in the rate it gets from the three largest insurers: Blue Cross Blue Shield of Massachsuetts, Harvard Pilgrim Health Care and Tufts Health Plan.
Community hospitals lack the bargaining clout to compete against larger hospital networks when negotiating with insurers, the report concluded.
That’s because community hospitals are disadvantaged, relative to bigger hospitals, in negotiating payment rates with insurers. The disparity might grow as insurance companies’ own fiscal problems will force them to negotiate even harder with hospitals on rates, said Johnston, a former regional director of the US Department of Health and Human Services. The region’s biggest health insurer, Blue Cross Blue Shield of Massachusetts, posted a $150 million loss last year. And insurers took another financial hit this spring when Governor Patrick’s administration capped health insurance premiums for small-business plans.
“This is going to be a trickle-down situation, where the negotiations ... are going to be very difficult,” Johnston said.
As if that’s not enough, interim CEO Kastanis also faces a labor dispute. The hospital has asked employees to accept an across-the-board 3-percent wage cut and a raise in health insurance premiums. The Massachusetts Nurses Association filed an unfair labor practice charge with the National Labor Relations Board in April after Quincy Medical administrators declared an impasse in negotiations.
“We’re just looking for good direction, some vision, some good ideas to make the hospital more viable,” said Paula Ryan, chairwoman of the Quincy Medical Center nurses’ union.
The Canton-based nurses union said the cuts are unreasonable because staffing levels are already too low to provide adequate patient care. The nurses met with Dr. JudyAnn Bigby, the state’s Secretary of Health and Human Services, on Wednesday to lobby for emergency funding for the hospital. The Patrick administration has $20 million to give to Massachusetts hospitals this year from its infrastructure and capacity-building trust fund, spokeswoman Paulette Song said.
Kastanis, who most recently ran three hospitals in New York and has been on the job in Quincy for three weeks, said the chances of getting a government bailout are slim. Instead, his focus is more on reducing costs and boosting revenues through increased patient volume.
Patient volume in May was up over the previous year, Kastanis said. He declined to release specific figures. Referrals from local doctors’ networks are increasing, he said, a key fact given that bolstering relations with doctors is seen as vital to the hospital’s survival. Harvard Vanguard Medical Associates is now the one physician group that designates the hospital as its preferred community hospital for its Quincy practice, Kastanis said.
“We’re seeing the major physician groups trying to make sure we get our share of referrals here,” Kastanis said. “They do want to see us succeed.”
Richard Barry, a Quincy lawyer and member of the hospital’s board of trustees, acknowledged that many of Kastanis’ strategies to save the hospital have been tried before.
“The difference between now and the previous efforts is execution,” Barry said. “John is the man to bring the execution to the plan.”
A Trying Decade, Year for Quincy Medical Center:
A private granite company created Quincy Hospital in 1890 to treat workers suffering from dust inhalation. The years since have been full of major expansions and upgrades as well as significant challenges – especially during the past decade.
2000: Christine Schuster replaces Jeffrey Doran as CEO. “Total business” increases, but the hospital is still not meeting financial projections.
2001: Quincy mayor’s budget includes a $4.5 million payment for Quincy Medical Center, part of a deal struck with Boston Medical Center in 1999 to keep the hospital open and make it so the city was not involved in its management.
2002: Amid stepped-up recruitment of Asian patients and doctors, the hospital reports a $5.9 million loss. A bill signed by Gov. Jane Swift gives the city more time to pay off $15 million as part of its hospital deal.
2005: Dr. Gary Gibbons succeeds Christine Schuster as Quincy Medical Center’s CEO.
2006: The state forgives the city’s $12 million debt for the center. The hospital loses another $2.3 million in first nine months of the 2006 fiscal year.
2007: An auditor’s report finds finances have improved, but the inflow of money is still insufficient to cover day-to-day expenses.
2009: Quincy Medical Center’s contract with Boston Medical Center ends, and the hospital starts talks about an affiliation with South Shore Hospital.
The road’s become even rockier in the past six months. The Quincy hospital is scrambling to close a $4.5 million budget deficit and had a “technical default” due its financial woes.
February: Twin Rivers Technologies founder Paul Angelico comes in as “chief transfor-mation officer.” Some 14 management jobs are cut, and hospital staff is asked to take a 3 percent pay cut and pay more of their health insurance premiums.
Robert Curry resigns as chairman of the hospital’s board of trustees. To date, he had been the first and only such chairman.
The hospital announces it will launch its new Center for Healthy Aging this summer and promote it as a health care hub for local seniors.
March 1: Gary Gibbons tells the city council that Quincy Medical Center must close a $4.5 million budget deficit by Sept. 30 to survive.
March 31: Partnership talks with South Shore Hospital are called off. The same day, Gibbons says he will resign as CEO, effective April 30.
April 1: A day after their contract expires, Quincy Medical Center’s registered nurses file an unfair labor practice charge against the hospital and threaten to picket if the hospital board does not resume negotiations over pay and benefit concessions.
May 17: Consultant and veteran hospital administrator John Kastanis is brought in – for a 6-month period – to serve as interim CEO.
May 27: Angelico leaves his post with Quincy Medical Center.
May 29: Kastanis says Quincy Medical Center has a tentative agreement to form a clinical affiliation with Tufts Medical Center in Boston.
June 2: Planned layoffs of 23 employees are announced, with two new positions added.
Facing $4.5 million deficit, which it aims to cut by the end of this fiscal year, Sept. 30
Has about 43 days of “free cash” (liquid assets) available to spend, less than the 60 days “cash-on-hand” cited in its bond agreement
Carrying $58 million in debt
Departures recently of CEO Gary Gibbons and longtime board chairman Robert Curry
Has laid off 37 full- and part-time employees – out of 1,100 total
Decreasing Medicare reimbursement rates hurt the bottom line since 70 percent of patients who stay overnight are on Medicare
Quincy Medical Facts:
Location: 114 Whitwell Street, Quincy
Founded: 1890, privatized in 1999
Medicaid/Medicare share: +80% of patients
Licensed Beds: 196
Staff Physicians: 350
Total employees: 1,100
Outpatient visits: 70,718
ER visits: 38,594
Source: Quincy Medical Center data from fiscal year 2009 (October 1, 2008 to September 30, 2009)
Copyright 2010 The Patriot Ledger. Some rights reserved