Doria's actions appeared to have been prompted by his concern over the loss of services and rising anger among local residents and hospital employees that the cut backs in Bayonne may be tied to BMC's efforts to purchase St. Vincent's Hospital in Staten Island.
In an Aug. 30 letter issued to hospital staff, the administration of BMC tried to explain the reasons for the changes, saying that part of the reason for seeking St. Vincent's Hospital is to offset the economic pressures mounting on all stand alone hospitals throughout the country.
"Unfortunately, a single acute care facility just can't go it alone as the recent closings in Passaic County and around the state indicate," said Robert Evans, president and CEO of BMC, claiming that the purchase of St. Vincent's Hospital could help secure BMC's future.
"We recently had a visit by NJ Commissioner of Health Jacobs and his chief of staff," Evans said. "Dr. Jacobs was very informed about our facility, and we had a wide-ranging discussion regarding the healthcare industry in New Jersey, economic issues facing Bayonne Medical Center, our strategic planning process and our clinical data."
Evans said that the Commissioner had very positive comments about BMC's benchmark quality scores, processes for reporting data and board and management oversights on these issues."
Dr. Jacobs apparently also met with physician members of the Coalition to Save Bayonne Hospital, which has raised numerous concerns about the hospital's finances, it's property acquisitions, the lay offs, department closings and salaries for upper management at BMC.
A tough road since the late 1990s In presenting the BMC argument to Dr. Jacobs in mid August, Evans went through the history of the hospital's financial woes, showing what has been done to save the hospital to date and what the hospital plans to do in order to keep BMC solvent in the future.
In the late 1990s, Bayonne Hospital was in trouble because admissions had dropped by 40 percent; physicians were leaving and cash flow was critical. In order to respond to this, the hospital reduced staff and created a seven year strategic plan. This plan focused on improving the hospital's core services such as radiology, labs and such, improving services such as waiting times in the emergency room.
Once the hospital stabilized its cash flow and generated new income, BMC began to reinvest in new technology and facility improvements. New clinical procedures were introduced in an effort to increase those coming to the hospital. Beds were increased to meet new demand.
Then in 2003-2004, cost increased and revenues fell causing a revenue shortfall of $28 million on a $140 annual budget.
This was due to sharp increases in insurance, pharmaceuticals, technology and core supplies while Medicare, Medicaid and Charity Care payments to the hospital were reduced along with managed care payments.
For a long time, the hospital had maintained unprofitable services by using revenues from the profitable ones. But with reduced revenues and increased costs, the hospital could no longer afford this so it closed the sleep lab studies, reduced the Psychiatric department and closed the Senior Day Care Center - sending people to other local venues.
A crisis was averted by increasing revenues using new technology and stiff negotiating with managed care firms for better payment deals The hospital also leveraged its investment portfolio to generate more cash and started seeking out other hospitals or a merger that would allow for better deals in purchasing supplies and increase the revenues even more.
While revenues increased and BMC tightened its belt enough to survive, the administration failed to find a suitable local hospital or a larger system to connect with, Evans said.
To maintain the hospital's finances, cut backs were still necessary, and so the administration began to look at additional areas that seemed to drain resources. One of these areas was OB services since births in BMC had dropped significantly so that hospital was maintaining a department to handle less than 100 a year.
So forging an agreement with St. Vincent's Hospital, BMC arranged to send people there and cut the cost in the Bayonne facility.
Hospital officials, however, said this could be a temporary situation and one that will be reviewed again early next year to see if it is viable for the hospital to reopen the department.
Some of the proposed solutions to the current fiscal situation include opening a new skilled nursing home facility that would recapture many of the patients currently lost to other nursing homes, restructuring of bonds in order to cut out high-cost, short-term debt, increase the capacity of the operating room to handle highly profitable cardiovascular procedures.
The purchase of St. Vincent's might save BMC
Evans said the purchase of St. Vincent's Hospital makes sense because it fills the need to increase purchasing power to reduce costs. St. Vincent's has a potential client base of about 225,000 people. BMC currently has a base of about 62,000. Despite reports that St. Vincent's is broke, the facility actually generates about $240 million a year, and BMC officials claim most of this is drawn off by other institutions connected to St. Vincent's, and still manages to break even each year.
"The ability to lower our average fixed costs and take advantage of the many market opportunities associated with such an endeavor is significant," Evans said. "Our challenge was to find a hospital near our catchement are that offered these opportunities and demonstrated promise for long-term growth and stability."
In purchasing St. Vincent's, BMC would receive the Staten Island hospital without debt, and the net patient service revenue - money a hospital generates after all of the contractual obligations are met - St. Vincent's will cover all the capital and strategic improvements necessary.
"Together, our hospitals generate revenues of roughly $400 million, giving us the cash flow, market power and flexibility to solidify our mission here in Bayonne for year to some," Evans said. "In addition, the entire facility is conveyed to us virtually debt free inclusive of significant real estate and even millions of dollars in account receivable."
Evans agreed that change is painful. But in planning strategically to fill economic and service gaps at BMC, the administration is attempting to balance the annual budget to remain fiscally viable.
Community concern is natural
He said many people are concerned about the changes.
"I believe this is natural," Evans said. "But the dialogue from some parties seems to be more about winning than listening and working together with the resources available for the good of the organization."
Despite this, Evans believes BMC is doing the right thing.
"While we understand we are operating in challenging economic times and have been for a number of years, the board and leadership of Bayonne Medical Center has worked tirelessly to develop new services and meet community needs while protecting the underlying economics of this organization," Evans said.
No report has yet been issued from the commissioner about his findings at BMC, but hospital officials said they felt confident of a positive outcome.