LEWISTON — It has been a rough decade for Lewiston’s two hospitals, their employees and their patients.

In addition to dealing with the extreme challenges of the COVID-19 pandemic, the hospitals have cut services, seen multiple layoffs, sold property, reported millions of dollars in operating deficits, and left residents wondering about the future of their health care.

Among the more public signs of stress and changes at the two hospitals in just the last few years:

• In 2019, Covenant Health, which owns St. Mary’s Health System, partnered with an outside company to manage its coding, billing and payment processing. The move affected hundreds of employees, with some assigned jobs with the new company and others given the option to apply for new jobs with Covenant Health or the new company, or take a severance package and leave.

•  In 2021, St. Mary’s sold a former convent on the health system’s campus to Bates College for $1.95 million.

• On what one St. Mary’s Health System official called a “very difficult day,” the hospital’s maternity ward and women’s health services were shut down in July 2022. Most of the staff affected were hired by Central Maine Medical Center for its maternity ward, expanding its program, but the closure surprised many. St. Mary’s officials said the move was due to declining birth rates in Androscoggin County.

• Last fall, Central Maine Healthcare partnered with New England Cancer Specialists to manage its new cancer center, including the health system’s medical oncology practice and chemotherapy treatments.

• Last December, St. Mary’s laid off at least 31 while other staff were transferred to other positions or had their hours reduced, and a community HIV support program was terminated. At that same time, the hospital reported a $48 million loss in 2022.

• In January, Central Maine Healthcare announced the closure of its Sabattus Street Urgent Care services, which is now being used for X-ray and lab services.

• At Central Maine Healthcare, recent staff reductions have included eliminating 45 positions as it reorganized its management and administrative positions in January. Affected staff were offered other positions or given severance package options.

• Central Maine Healthcare recently listed two of its Lewiston buildings for sale.

As area residents in recent years have faced shortages of primary care providers, specialty doctors and other medical, mental health and long-term care services, the moves by the two hospitals have provided hints at the deep financial challenges they are dealing with. Not only have the moves been unsettling to residents and employees alike, many of whom have taken to social media to express their concerns, but they’ve raised fears about what’s next.

In multiple recent interviews with the Sun Journal, top officials at both hospitals acknowledged that tremendous financial pressure is forcing the hospitals to make cuts in services and staff, reduce debt, sell off assets, increase efficiencies, take on cost-effective partnerships and consider a wide range of actions to continue to provide services.

UNPRECEDENTED LABOR COSTS

From 2012 to 2022, CMMC reported revenue shortfalls — what are called “negative operating margins” — in all but two of those years, while St. Mary’s reported revenue shortfalls in all but four of those years, according to the hospitals’ tax filings.

More recently in 2022 CMMC spent more on its operations than it earned through its operations by $25.3 million, according to the hospital’s 990 tax document. St. Mary’s spent more on its operations than it earned through its operations by $48.5 million, according to its tax filings.

While many financial factors are responsible for the shortfalls, officials say two play overwhelming roles:

• Federal and state reimbursements that lag millions of dollars behind inflation every month and pay only part of the actual cost of care.

• A labor shortage that is forcing hospitals to spend additional millions of dollars every month for “traveling” doctors and nurses willing to work temporarily for higher pay.

Hospital officials are more familiar with lagging government reimbursements, though high inflation during and immediately after the pandemic was unexpected. But the skyrocketing costs posed by the labor shortage, partially fueled by the COVID-19 epidemic, blindsided officials.

To fill vacant positions, hospitals have become reliant on contracted or traveling health care staff — health care workers employed through a staffing agency who only work in a hospital for a fixed period of time for higher rates.

Maine Hospital Association President Steven Michaud said that, since the pandemic, the medical field has seen “tremendous” staff turnover because of retirements or leaving the medical field due to COVID-19 burnout. Hospitals have used staffing agencies to fill many vacant positions, he said, which comes at a higher price.

In any labor market, when there is a shortage of workers, companies will boost salaries and benefits to attract talent, he said. This alone has increased expenses.

“That’s going to increase our expenses a great deal. And then you throw on top of that, because of those same shortages, we’re using a tremendous amount of what we call ‘travelers,’ but they are temporary staff just to fill in, just to keep your beds open and your services running, and they come at a premium,” he said.

Central Maine Healthcare sometimes pays up to $120 per hour for a traveling nurse, an amount that includes fees paid to staffing agencies, Central Maine Healthcare President and CEO Steven Littleson said. It costs far less, he said, to hire a permanent nurse who is not temporary.

Local figures were not available from the two hospitals, but the national average weekly wage for traveling nurses in March 2023 was $2,588.68, compared to $1,375.06 for permanent staff nurses, according to information from the Center for Economic and Policy Research.

St. Mary’s spent nearly $27 million more last year to bring in temporary staff to fill positions, according to President Cindy Segar-Miller.

Similar figures were not available from CMMC, but Littleson said the combination of using a staffing agency to find traveling nurses and hiring them at the current market rate more than doubles the cost compared to the hospital directly hiring permanent nurses.

As of mid-January, the health system was using 123 traveling nurses and 300 other contracted workers to fill vacancies, Littleson said. It employs 3,200 people across its entire health system.

“We are not producing professionals in those jobs at the rate that we need them to take care of patients in the state of Maine and so we have to import them and that’s expensive, and we’ve increased our hourly rates just to remain competitive, as everybody has,” Littleson said. “… And the fact of the matter is reimbursement for patient care has not gone up at the same rate.”

‘ST. MARY’S IS AT A TIPPING POINT’

That lagging reimbursement often comes from federal Medicare and the state’s Medicaid program, called MaineCare. Michaud, with the Maine Hospital Association, calls them “poor payers” because they do not compensate for the full cost of the care provided. On average, Medicare pays about 85 cents on the dollar and Medicaid pays about 70 cents on the dollar, he said, with those rates shifting depending on the procedure or service.

That reduced amount puts stress on all hospitals, CMMC and St. Mary’s included. Adding to that burden is the inflation that followed the pandemic, pushing the cost of goods and services up without a quick and corresponding rise in reimbursement for the hospitals.

Particularly hard hit has been St. Mary’s, with an almost $10 million financial shortfall in its behavioral health services last year. That was due in part, according to Segar-Miller, to Medicare and MaineCare’s practice of not covering the entire cost of services, even after factoring in a MaineCare rate increase last summer.

The hospital is seeking a one-time $8.9 million payment from the state through legislation presented by state Sen. Peggy Rotundo, D-Lewiston, to keep its behavioral health services afloat and develop a new day program, according to Segar-Miller’s testimony to the Legislature’s Health and Human Services Committee.

“In fact, continuation of our current program offerings is also at risk,” she said. “Quite frankly, St. Mary’s is at a tipping point. In recent years, St. Mary’s Health System has experienced severe operating losses and one key component of those losses has been the negative operating margin in its behavioral health programs.”

Many hospitals use profits made through private insurances to cover some of its losses from Medicare and Medicaid reimbursements, called “cost shifting,” according to Michaud.

Private insurances are usually paying above the cost of service, which allows hospitals to use that excess amount to cover costs that are not being covered by Medicare or Medicaid, he said. However, those profits usually do not cover all of the Medicare and Medicaid losses.

While acknowledging that federal and state governments are dealing with their own spending pressures, “It’s probably one of the very biggest problems in the whole health care field,” he said. “The whole health care payment system is cost shifting. So, when Medicare and Medicaid pay at very significantly below your costs, well, a chunk of that is cost-shifted to commercial payers.”

HELP ON THE WAY?

The Maine Department of Health and Human Services and Maine Hospital Association recently announced a proposed reform of MaineCare hospital reimbursement rates. Among the reforms:

• The state would raise the tax rate on hospitals that are not designated as rural critical access hospitals with the intention of using the increase to leverage more federal Medicare money that would then be returned to the hospitals.

• The state’s 16 rural critical access hospitals would not have to pay the hospital tax at all, however their reimbursement rate would decrease.

• Invest $90.3 million in federal and state money starting state fiscal year 2025 for hospital inpatient and outpatient services.

• MaineCare reimbursement rates would be changed to better align with Medicare to reduce errors and confusion.

The agreement is subject to approval by the federal Centers for Medicare and Medicaid Services.

Michaud is supportive of the agreement and pleased at the outcome, though not all Maine hospitals may benefit and some could be hurt, he said. But because it is a substantial net benefit to hospitals as a whole, the Maine Hospital Association supports it.

The agreement will help Maine’s hospitals, but no one believes it is a panacea. Even if the federal government and state government funded health services at full cost it would not solve all of the funding issues most hospitals face, Michaud said, though it would make a “tremendous difference.”

“I mean, if all of a sudden they paid their cost . . . we probably wouldn’t be having this conversation right now,” he said. “. . . Yeah, that would be a game changer, but I’m not holding my breath on that one.”

ROBBING PETER TO PAY PAUL

Fortunately, the state has not seen a lot of hospital closures because of the pressures they currently face. Hospital administrators have been creative in how they have addressed funding issues, Michaud said. However, some hospitals have had to make cuts to staff and services to reduce or eliminate revenue shortfalls.

Hospitals can generally keep their doors open after several years of higher expenses than revenues through a number of measures, including postponing investments in equipment and buildings, but eventually those measures will catch up to them, Michaud said.

“You can rob Peter to pay Paul, you can drain your investments, you might have some capital reserve that you (were going to use to upgrade) your physical plant, but you just don’t do it,” he said. “Well, eventually the chickens are going to come home. You can’t have the place falling apart around you and you can’t have a 30-year-old CT scanner. In tight times like we’re in, those are the kinds of hard decisions you make.”

Central Maine Medical Center is owned by Central Maine Healthcare and is tied into its finances, providing the hospital with funding to help cover its financial shortfalls, Littleson said.

“We operate as a system and the money we make in other areas goes to offset some of those losses experienced,” he explained.

The health care system has several other ways it gains revenue outside of its operations, including returns from the system’s large investment portfolio, Littleson said. Money made from investments adds to the health system’s bottom line.

The health system’s operating expenses exceeded operating revenues by $13.5 million for fiscal year 2022, according to the health system’s audit statement. In fiscal year 2023, its operating expenses exceeded operating revenue by $5.2 million. This means that it did not make enough money from services it provided to cover the amount of money it spent providing those services.

However, contributions from the health system’s investments helped cover the shortfall and then some in fiscal year 2023, ending the year with a profit of $9.3 million, according to the health system’s audit report. The stock market can swing that bottom line either way, depending on losses or gains.

Massachusetts-based Covenant Health, which owns St. Mary’s Health System, has had to cover St. Mary’s financial shortfalls in the amount of $88 million collectively over the past three years, according to spokesman Benjamin Sullivan. It is not sustainable for Covenant Health to continue to do this.

“Absent of relief and significant financial improvement, Covenant Health will be forced to work with the St. Mary’s Health System to further curtail service offerings, which will likely impact jobs and ultimately put some of the most vulnerable residents in this community at risk,” he said.

St. Mary’s officials have identified five areas that will help it recover financially while continuing services, which include stabilizing its workforce by hiring highly skilled employees, according to Segar-Miller. That will reduce the dependency on high-cost staffing agencies. Officials hope that by enhancing benefits packages they will attract and keep staff, along with offering professional development opportunities and providing an inclusive work environment.

The other areas include:

• Stabilize and expand behavioral health services, using the MaineCare rate increase to fund those services and make them more financially viable.

• Use telemedicine and remote patient monitoring to expand primary care access.

• Focus on efficiencies and cost containments.

• Continue to analyze the size of its staff according to volume and demand.

Central Maine Healthcare officials are working to generate a positive financial bottom line through efficiency, Littleson said. By lowering the hospital’s costs associated with patients, such as labor and supplies, and reducing the length of patient stay, hospital officials hope to reduce those costs.

Littleson acknowledged that given the pressures on the hospital, officials there are open to considering any measure that would help maintain the organization’s financial health as long as the measure has a positive impact on staff, patients and the community.

OPTIMISM AMID THE CHALLENGES

For Michaud, the outlook for hospitals is not bright now, but he’s convinced there is too much at stake for Maine’s hospitals to fail.

“I can’t think of anything more valuable to a society,” he said. “So, I don’t think public policy makers and the public are going to put up with significant closures or catastrophic loss of services when the citizenry depends on it. And these regions and towns and cities depend on them. … They’re going to have to step in and say, ‘How do we solve this problem together?’”

St. Mary’s officials are always assessing the system’s services and will continue to invest in and support the community’s greatest needs, Segar-Miller said. She said recently she does not anticipate any more program closures or staff layoffs at this time. Despite the current financial struggles, she said she sees a positive future for the hospital.

Earlier this month, the Legislature’s Health and Human Services Committee voted in favor of St. Mary’s request for almost $9 million of state funding to cover last year’s financial losses in its behavioral health services. The legislation now goes to the full Legislature for consideration and, if approved, to the Appropriations Committee for funding.

Despite financial constraints, Littleson sees a positive future for Central Maine Healthcare as well. He said seeing the way Central Maine Healthcare staff and affiliates stepped up after the Oct. 25 mass shooting in Lewiston made him proud. Hospitals are full, doctors are busy and they still face challenges, but there is a renewed sense of confidence and optimism in the health care system, he said.

“We know people want to get their health care locally and as long as we can provide the care that people need locally, we can do great things,” he said. “It’s not easy in this business and it’s not going to get any easier, but there’s no reason to be anything but optimistic.”

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