WARWICK – Hospital systems in Rhode Island appear to be on the road toward financial recovery after both Lifespan Corp. and Care New England Health System, the state’s two main hospital networks, kicked off 2023 with improved numbers from the previous year.
But while overall trends seem to be pointing upward for the systems, individual hospitals are seeing vastly different performances.
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Care New England Health System’s latest financial report for the first quarter ending on Dec. 31 showed signs of recovery. Operating loss for the quarter of was $13.8 million, compared with the $20.9 million during the first quarter of fiscal 2022.
Care New England also reported a net income of $1.34 million during the the first quarter of 2023, thanks to net non-operating gain of $15 million.
However some shortfalls linger. In Care New England’s report, Warwick-based Kent Hospital struggled when compared with other hospitals in the system such as Women & Infants Hospital and Butler Hospital.
In the last quarter, Kent, the state’s second largest hospital, saw low medical and surgical volumes, inconsistent outpatient volumes, high lengths of stay and crippling staffing shortages – all factors that contributed to its negative performance and affected CNE’s overall bottom line.
“Kent is sandwiched between a couple of different challenges: they’re seeing more patients, they’re not making much money and doing less surgeries,” said Robert Hackey, a professor of health policy and management at Providence College.
A lot of these challenges are not new or surprising, said Dr. Paari Gopalakrishnan, president and chief operating officer of Kent.
“Acute care hospitals are struggling across the region,” Gopalakrishnan said. “What we’re seeing is a lot of struggles with labor expenses, traffic, nonlabor expenses and decrease in medical discharges.”
Kent reported 6% fewer medical/surgical discharges than previously forecasted, while medical/surgical patient days 3% were percent higher than predicted. The average length of stay for medical/surgical was also higher than previously forecasted. The report found this, paired with low patient volume, led to shortfalls in the patient service revenue.
Growing the surgery programs – by investing in new technology and hiring surgeons, for example – is a priority, said Gopalakrishnan.
“These are some of the economic engines,” he said. “All those things are instrumental for long term success.”
Hackey said about one third of hospitals in Rhode Island are operating at a negative margin. In particular, many of Kent’s challenges echo those of other acute care hospitals.
Women & Infants Hospital and Butler Hospital, Care New England’s other large facilities, are both specialty hospitals, focusing on women and infants’ health and behavioral health. Common challenges plaguing Kent – such as staffing shortages and declining patient volumes – are not present at the other two hospitals, where both patients and workers are drawn more steadily.
But Gopalakrishnan said the administration is optimistic about Kent’s trajectory going forward. Recruitment has been looking up: the hospital recruited 42 nurses in the past four months and is continuing to invest in recruitment efforts.
“If we continue our current strategies, through the next year we’ll be in good shape,” Gopalakrishnan said.
Staffing shortages are also the main concern for Lifespan, which operates five hospitals, including the state’s largest, Rhode Island Hospital. John Fernandez, Lifespan’s new president and chief executive officer, recently said the hospital system has more than 1,000 open positions, including 400-500 for nurses.
And despite faring better than Kent, Women & Infants and Butler have seen their share of labor unrest. A few months ago, unionized workers gathered at both hospitals to urge the administration to address staffing shortages they say are at risky levels.
“I don’t think Kent is necessarily an outlier in terms of being a poor performer, they’re really reflecting larger trend nationally,” Hackey said. “But the big challenge is going to be to see that [patient] volume go up. It doesn’t seem they’ve found an effective way to do that.”
Conversations about Kent Hospital’ s – and Care New England’s – financial sustainability are not new. During the COVID-19 pandemic, financial relief has given temporary reprieve to hospitals across the state.
House Speaker K. Joseph Shekarchi, whose home city of Warwick is home to Kent, was one of the lawmakers that worked with Gov. Daniel J. McKee to ensure the 2023 state budget included relief for hospitals across the state last year.
In the budget, a total of $77.5 million in funds from the American Rescue Plan Act were set aside to support health care facilities, including $45 million to be allocated to hospitals.
Also, more than $10 million in federal funds and general revenue were invested to increase Medicaid rates to hospitals by 5% relative to its 2021 rates. The budget also increases Medicaid reimbursement rates for labor and delivery services by 20%, significant financial support Women & Infants Hospital.
“It doesn’t mean they’re out of the woods,” Shekarchi said. “They need to find a solution, whether it’s another merger partner or an alliance. That’s for them to figure out.”
This year, McKee’s 2024 state budget proposal includes revisions to how the state structures its financing for community hospitals, Shekarchi said. These include “a new hospital license fee structure and state-directed payment program through the managed care plans to promote quality improvements at the community hospitals,” as described by the House Fiscal Staff. This would increase payments for hospitals, including Kent.
But these fixes are only temporary, Shekarchi said.
“I’m very concerned about Kent,” said Shekarchi. “I worry about it. Kent needs to figure out a longer solution to viability.”
A potential long-term solution was merging with Lifespan Corp. and create a new health system in partnership with Brown University.
However, Attorney General Peter F. Neronha shut down that proposal, arguing that the merger would affect competition in the market and “negatively impact healthcare costs, quality and access to care.”
“In the wake of the failed merger, I am not sure where they’re going to find a way to turn this around,” Hackey said. “I see them in a steady state.”
Despite the continued financial struggles, Kent Hospital is deeply embedded with its community. Recently, it was one of the hospitals picked by East Greenwich restaurant Circe Restaurant & Bar to donate hundreds of meals. The program, first launched by co-owners Carlo Carlozzi and Kyle Poland in 2020 thanks to the help of an anonymous donor and brought back in March 2023, donates about 400 meals a week for four weeks to frontline workers and first responders.
So far, it has donated 210 meals to frontline workers at Kent and plans to donate an additional 150 during the last week of March.
“Kent is one of primary targets because they’re local and deal with a significant amount of people sick with COVID or infrastructure problems,” Poland said. “I don’t think people realize how stressful it is … What they’re doing is really awesome.”
Care New England also recently experienced a wave of leadership changes over the past year. Its former CEO and President Dr. James Fanale retired on Dec. 1, and was replaced by Dr. Michael Wagner, former CEO and president of Tufts Medical Center.
Care New England also recently hired Todd A. Conklin as its new chief financial officer and executive vice president.
“We have to give them time and see what kind of strategies they have,” Hackey said about the new leaders.
To Gopalakrishnan, the future recovery of Kent lies in the effectiveness of their action plan, which prioritizes recruitment and retention efforts, improving quality of care, investing in innovative programs and growing surgical platforms.
“I feel really confident in the plan we put together,” Gopalakrishnan said. “The things we’re putting and investing in now won’t have short term financial benefit, but we should see steady improvement. We fully expect next year to have a financially stable portfolio.”
To Hackey, it might lie in a new partnership with an out-of-state system which could turn CNE’s situation around, upgrade their facilities and resources.
But for now, CNE has voted to remain independent, at least in the foreseeable future.
“They’re keeping an independent tone … that works only if you can find a way to make money,” Hackey said. “I don’t know what their long-term plans are in term of partnership, but the current system model does not seem to suggest their performance is improving.”
Shekarchi said he supported the Lifespan merger because it was “in the best interest” of everybody, and he would be open to potentially supporting another collaboration, depending on the partner. What’s important, he said, is that CNE finds a way to be sustainable in the long term.
“They have to figure that out,” Shekarchi said. “The healthcare model is ever changing. The challenges that Kent is facing are system wide, statewide. Other hospital systems have figured it out and Kent will have to figure it out. I am here to support it.”
Claudia Chiappa is a PBN staff writer. You may contact her at Chiappa@PBN.com.
