, Gloucester, MA

March 28, 2013

Lahey eyes 'distressed' funds for AGH

By Richard Gaines
Staff Writer

---- — Lahey Health, the $1.5 billion nonprofit regional health system created last year through the merger of the Lahey Clinic and Northeast Health System, has agreed to seek “distressed hospital funding” for Gloucester’s Addison Gilbert Hospital, which became non-self supporting as a long term stand-alone community hospital roughly 20 years ago.

The state last year created a Health Policy Commission as part of a major initiative in health care cost containment. The purpose of the commission was to begin to level hospital costs between the world-renowned teaching hospitals in Boston and the regional and community hospitals, and slow the overall growth of hospital costs. As part of the legislation, the commission was assigned to create a “distressed hospital fund” of a reported $135 million, obtained via a one-time assessment of the insurers and the major health care systems.

The method of assessment and competitive grant selection among applications for the distressed hospital funding has not yet been determined, but Alan Sager, a professor at Boston University’s School of Public Health, said the number of acute care hospitals has been reduced by one half to about 65 since 1993.

”This is the latest and most formalized program to help hospitals that are thought to be needed but are needy,” said Sager, who has studied and commented on the generation-long effort of Cape Ann to keep Addison Gilbert, which was founded on Washington Street late in the 19th century, and quickly became a beloved Cape Ann institution.

At the time the state approved the Lahey-Northeast merger last March, the Department of Public Health required that Lahey Health maintain AGH with all its services including the Emergency Department, Intensive Care Unit and existing ward of inpatient beds for three years.

Lahey Health has repeatedly asserted that AGH has an essential place in its long-term business plan.

“There have been no discussions on either part of Lahey or Northeast Health Systems related to reducing services in Addison Gilbert Hospital,” Lahey President Howard Grant said at the time of the approval of the merger. “We would be thrilled if over time we would be able to add services in the community.”

An additional obligation to Lahey, however, is holding twice-a-year public forums, and with the next one coming on April 11, the new grant-seeking initiative is certain to be a topic of discussion.

The idea of attempting to supplement AGH revenues from the future Distressed Hospital Fund came from state Rep. Ann-Margaret Ferrante, according to a Feb. 26 letter to Ferrante from Scott V. Hartman, Lahey Health’s vice president for government relations.

In his letter, a copy of which was obtained by the Times Wednesday, Hartman wrote that Cindy Donaldson, chief operating officer at AGH, “called me about your offer to help AGH secure funding from the distressed hospital fund. Thank you for being proactive.”

“Would you be interested in meeting to discuss a plan and other legislative proposals that are of interest to you? ... I will call your office to arrange a convenient time,” Hartman wrote.

Ferrante did not return phone calls for comment Wednesday. But Donaldson released a statement thanking her for “reaching out to us regarding the proposed distressed hospital fund which was part of last year’s state health care cost containment legislation.

“Rep. Ferrante continues to be a strong advocate and supporter of Addison Gilbert Hospital, and this is another example of her commitment to our community hospital. Additional specifics – including eligibility and the processes to apply for funding – have yet to be determined,” Donaldson said.

“We look forward to working closely with Rep. Ferrante as we continue to learn more about the fund and whether Addison Gilbert Hospital might benefit from it,” she added.

Sager identified problems facing the Health Policy Commission as it begins structuring the distressed hospital fund.

“At some point, someone needs to draw up a list of the hospitals and ERs that are essential to protecting the health of the public,” he said. “It should be publicly discussed. Only one state (not us) has such a list. After identifying needed hospitals, we could make sure that each had sufficient revenue to cover the cost of efficient provision of needed care.”

A professor of health policy and management, Sager also said, “I think that state help to AGH would indeed signal a state recognition that AGH is needed.

“But how would the state measure the amount of money needed? How would Lahey calculate that, and how could the state verify Lahey’s claim?” Sager wrote in an email. “And how would the state ensure that its help to AGH didn’t just allow Lahey or Beverly to withdraw equivalent dollars? That is, how to ensure maintenance of effort?”

”In reviewing grant applications the HPC (Health Policy Commission) must consider the financial health of the applicant, the anticipated return on investment, the coordination with other policy goals of the HPC, and geographic and population need,” the commission said on its website.”Teaching hospitals, hospitals with relatively high prices, and for-profit hospitals are not eligible to receive funds”

The Massachusetts Hospital Association has favored a systemic solution to fiscally distressed hospitals based on increased Medicaid reimbursement rates.

”Absent a systemic cure, MHA supports the creation of a distressed hospital fund that can serve as a limited bridge to advance reform,” the hospital association said last year during debate on the massive cost control act including the Distressed Hospital Fund. “However, MHA is strongly opposed to any surcharge on hospitals.”

Richard Gaines can be reached at 978-283-7000, x3464, or at