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Department of Health says MMH moving in right direction with privatization study

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MASSENA - State Department of Health officials say Massena Memorial Hospital is moving in the right direction with its study on possible privatization, according to MMH Chief Executive Officer Charles F. Fahd II.

Mr. Fahd said he, along with their Board of Managers chair and vice chair and representative legal counse,l recently visited with Department of Health officials in Albany. Among their discussions with Dr. Nirav R. Shah, the commissioner of health, was the hospital’s on-going study to determine the feasibility of switching from a municipal facility to a non-profit.

“We talked to them about the current status of the hospital, which they are very well-informed about. They gave us some encouragment. They thought we were going in to the right direction, and they urged us to continue,” he said.

“They really can’t get terribly involved in the process until such time as a decision is made by the hospital board and the town board to move forward with the process. No decision has been made to do that,” Mr. Fahd said.

One of the concerns from the Department of Health, he said, was financial viability of area hospitals.

“There are 17 hospitals in the north country area. I believe they’re concerned about their financial viability. They do have some concerns about the number of days’ cash on hand,” Mr. Fahd said.

Massena Memorial Hospital began studying possible privatization this year because of cost concerns, as well as their inability to share services with other hospitals because of their municipal status.

They agreed in July to hire the law firm of Hancock Estabrook. LLP, Syracuse, at a cost not to exceed $100,000 for the study. Board members moved ahead with retaining the firm in August to explore transitioning from a municipal hospital to a private, not-for-profit facility. They had received a formal engagement and retainer letter from Hancock Estabrook at the beginning of August.

“The attorneys are just ramping up,” Mr. Fahd said.

That study consist of three phases. Phase one includes the study of all contracts, such as vendors and employees, to see if anything would prohibit them from changing their status.

Phase two is the implementation phase. Following approval from the Massena Town Council, they could start filing the paperwork such as the Certificate of Need to begin the conversion process.

The third and final phase would be going through the Internal Revenue Service to acquire their tax-exempt status.

More recently, board members agreed to enter into a contract with FreedMaxick Healthcare, financial analysis consultants, at a cost of up to $32,000 to do a financial study for the hospital.

“It was determined that not only did we need some legal advice about the information-gathering process for becoming a 501(c)(3), we also needed somebody who had the expertise of the financial aspects. They’re going to be charged with doing a financial analysis,” Mr. Fahd said.

The consultants will look at the hospital’s audited financial statements as well as the employee benefit plans currently in place, according to the hospital CEO.

“We’re going to be looking to them to provide us some recommendations. The reason that we’re dong this with both the consultants, legal and financial, is that this type of project doesn’t come along every day. We don’t have the experience or expertise that they have,” he said.

FreedMaxick Healthcare representatives have suggested their study would take six to eight weeks.

“I think realistically it’s going to take significantly longer than that,” Mr. Fahd said.

FreedMaxick Healthcare was selected because of their proposal on the services they could offer, he said.

“We had one organization here a couple of months ago. They came in and provided us with a presentation on that. We made a decision not to accept their proposal because of cost restrictions and went back out again. This is another organization that we took a look at and liked what they had to say,” he said.

“It’s not to say that it’s been done a lot. We’ve been basically stating there are not a lot of municipal hospitals left in the state. There were never really a lot of municipal hospitals in New York state, so the number of people with expertise is limited,” Mr. Fahd said.

MMH officials have said that, facing projected financial hurdles in the future, they need to investigate the transition from a town-owned hospital to a private, not-for-profit facility.

Mr. Fahd had said that what was a $124,200 contribution to the state’s pension program in 2002 has jumped to $4.4 million in December 2013, with a projected $4.8 million contribution in December 2014.

He has also said that among the losses they’re projecting is a reduction of $10.5 million in Medicare reimbursement over the next 10 years because of the federal Affordable Care Act; a $1.9 million reduction in Medicaid reimbursement over the next 10 years because of sequestration; and a $2.7 million reduction in Medicaid reimbursement over the next 10 years because of inpatient coding adjustments.

In addition to the loss of Medicaid and Medicare reimbursements and the increased pension costs, Mr. Fahd has also noted that the state Department of Health also wants north country hospitals to seek formal affiliations, collaboration, merger or other sharing agreements to reduce duplicated services such as capital equipment acquisition and overall health care expenses in the region. But, as a municipal hospital, Massena Memorial is unable to do that because of the taxpayer money involved.

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