Hospital Leaders Attempt to Blunt Financial Crisis at the Windemere Facility

Gazette Senior Writer

Leaders at the Martha's Vineyard Hospital stepped in this week to try to contain an escalating financial crisis at the Windemere Nursing Home and Rehabilitation Center. Hospital senior managers said the crisis at the Island's only nursing home could pose a threat to the Island's only hospital.

At a special meeting on Wednesday, hospital trustees voted without dissent to terminate the Windemere board of trustees and replace it with the hospital board. Windemere executive director Philip Hickey will now report directly to hospital chief executive officer Tim Walsh.

A press release issued by the hospital described the change as a governance move, but Mr. Walsh did not hesitate to use the word crisis yesterday when talking about Windemere.

"What was happening in a nutshell was the hospital had all the responsibility but didn't have the direct authority. When you get in a crisis mode and try to do things in a hurry, it needs to work more effectively," Mr. Walsh said.

Hospital board chairman John Ferguson was even more blunt.

"The nursing home is bleeding us. No matter how you want to look at it, we own it [the nursing home] and we just couldn't do this anymore. We didn't have the control over it that we needed," said Mr. Ferguson from his office in New Jersey. A longtime seasonal resident of the Vineyard, Mr. Ferguson is the chief executive officer of the Hackensack Medical Center in Hackensack, N.J.

Windemere shares a campus with the Martha's Vineyard Hospital, and although the nursing home is set up as a separate corporation named WNR Inc., the home is a business affiliate with the hospital.

Early this year Windemere board members announced that the nursing home had ended its fiscal year on Dec. 31 with a staggering $500,000 operating loss. The loss was some $300,000 higher than projected for the year. Board members said about half the loss could be traced to retroactive cuts in Medicaid reimbursements.

The financial picture at Windemere grew even more bleak after newly elected Gov. Mitt Romney announced a drastic new package of Medicaid cuts as he launched a plan to overhaul the state budget.

Yesterday, Mr. Walsh said the Windemere operating budget for the coming year projects a loss of about $400,000, a number the hospital CEO called unacceptable.

"That is not a very good budget and not a budget we can live with," he said. Mr. Walsh said Windemere owes the hospital about $700,000 for dietary services. Mr. Ferguson said the hospital cannot continue to extend that kind of credit to the nursing home.

"That comes out of our bottom line; that's our money. It's like the hospital is giving a blank check to the nursing home and we can't do that anymore," Mr. Ferguson said.

He said it will now be up to Mr. Walsh to take a hard look at Windemere and come up with a plan to cut expenses and also seek more rate relief from the state.

"Tim thinks he can see some places to cut expenses without sacrificing quality and he has some ability to work with the state government. It is a very unique situation, and if the state is looking out for the Vineyard, then we could get some more money," Mr. Ferguson said.

"The point is that we need to do with Windemere what we have done with the hospital, which is to make it successful. That's the way it is and we are going to take the responsibility," he added.

Mr. Walsh said the hospital ended its fiscal year slightly in the black for the first time in several years. The fiscal year ended on March 31.

Mr. Ferguson said the nursing home will now be treated like a department of the hospital: "It's a big department, but a department, just like obstetrics or any other department."

The decision to replace the Windemere board with the hospital board came after a recent study by the hospital governance committee.

"[The Martha's Vineyard Hospital] . . . holds ultimate responsibility for all financial decisions of WNR and. . . . It has an obligation to insure that no WNR decision puts [the hospital] in financial jeopardy," a memorandum written by the governance committee said. The committee recommended the change. Members of the WNR board will be invited to join a newly formed oversight committee, and a letter of appreciation was sent to all the board members.

Windemere has been plagued by financial problems since the day it opened in 1994. The nursing home has seen an array of board and structure changes over the years, and it was in bankruptcy for two years in the late 1990s. But throughout the ups and downs, one thing has remained constant - huge annual operating deficits.

"It's a pretty steep loss they are incurring. We definitely need to address it, and it has to be brought down so that Windemere can survive," Mr. Walsh said.

He said under the old system Mr. Hickey reported to both him and the WNR board of trustees. "It was not working. Now I will have more direct access to work with Phil, and we'll see if we can come up with some efficiencies on the expense side and some better rates on the reimbursement side," the CEO said. "I guess you could say that I am cautiously optimistic."

Mr. Ferguson offered this message in conclusion: "We didn't think we could take any more time to get things to go the way they are going. It's almost out of time. We're going to take our best shot at it, and I am hoping that a year from now you are going to see both the hospital and Windemere being successful. I think the Island needs both of them."