After a June announcement that Springfield Medical Care Systems (SMCS) and Springfield Hospital have filed for Chapter 11 bankruptcy protection, the big question is what will happen next for these regional health-care providers.
“Well, we can't keep doing the same thing that we've done, because that's the definition of insanity,” said Mike Halstead, interim chief executive officer of Springfield Hospital.
That's why Halstead says that, in order to stay financially viable, SMCS and the hospital plan to join another health-care organization.
Right now, the Dartmouth-Hitchcock health system in New Hampshire is the likely candidate, and the parties are in early stages of exploring options for their shared future.
Halstead made those remarks at a July 18 meeting at the Charlestown Senior Center, the fifth such meeting that he and Joshua Dufresne, acting chief executive officer of SMCS, have held in the two entities' coverage area, including Bellows Falls and South Londonderry.
Springfield Medical Care Systems operates nine federally qualified health centers, including two dental clinics and a vision center. It also owns Springfield Hospital. SMCS serves southeastern Vermont and southwestern New Hampshire, including approximately 5,000 Windham County residents in Bellows Falls and Londonderry.
Three of the SMCS facilities are in Bellows Falls: the Rockingham Health Center, Squeaky Sneakers Daycare, and the Windham Center for Psychiatric Care, a 10-bed inpatient psychiatric facility. A fourth is the Mountain Valley Health Center in Londonderry.
On June 26, the two entities filed for bankruptcy protection under Chapter 11 of the federal Bankruptcy Code. This move will allow the organizations to remain open and provide care during the reorganization process.
Dufresne and Halstead said that the process will likely last a year depending on how the process unfolds. They told the small audience that patients should experience few changes to their care - or their access to care - during the reorganization.
“We are working every day with our vendors and mainly keeping the health care as it always was and offering the very best care,” Dufresne said in his opening comments. “People are excited to see a direction, and people are excited to see the opportunity for a reorganization.”
Halstead added that he views the Chapter 11 process as phase two of a three-phase plan.
The first phase started in February, according to Halstead, with reducing expenses to balance out with the two organizations' revenue.
For the previous several years, both the hospital as well as the clinic - two separate legal entities - were spending more money than we were bringing in, he said.
That phase took a few months to complete, but the two organizations feel like they have a better handle on their bottom lines.
Filing a petition for Chapter 11 with the U.S. bankruptcy court represents phase two: addressing what Halstead calls “legacy debt,” bills that had accrued over the previous two years or so.
The two organizations bring in revenues of $60 million each year, said Halstead.
Public bankruptcy court filings show that the hospital owes $6 million and the clinics owe about $2.3 million to their respective 20 largest lenders, vendors, and government entities. SMCS has outstanding debt to more than 1,500 creditors, according to a July 6 court filing.
A meeting of creditors is scheduled for noon on Friday, Aug. 16 at the U.S. Bankruptcy Court, 151 West St., Room 202, in Rutland.
A merger with another entity is part of the third phase of the reorganization, with a goal of exiting Chapter 11.
Creating new relationships
According to Halstead, both organizations will redefine how they operate and what kind of services they will provide.
He made it clear that joining another network of hospitals appears to be Springfield's only option. It just doesn't have the revenues to remain a standalone rural community hospital.
At this early phase, SMCS and the hospital have discussed the situation with several networks in Vermont and the surrounding area. At this time, Dartmouth-Hitchcock's network is the contender.
One possibility is to create relationships with two neighboring hospitals also in D-H's network and share services. D-H is already involved with Valley Regional Hospital in Claremont, N.H., and Mt. Ascutney Hospital in Windsor, according to Halstead.
D-H also has relationships with Cheshire Medical Center in Keene, N.H., and Brattleboro Memorial Hospital.
Dufresne said that a partnership among the three neighbors - while under the umbrella of D-H - could mean that each hospital would provide a portion of services rather than all three offering all services.
“Orthopedics is a great example,” said Halstead. “Does it make sense to have orthopedics in all three locations, or does it make sense to have it in one of the facilities?”
Dufresne and Halstead agreed that this arrangement might lead to residents traveling farther for their care.
It's one of the challenges of rural medicine, they said.
A shift in strategy
Dufresne said that in the past, Springfield has tried unsuccessfully to operate under a growth strategy and to expand services.
“There has been a lot of advice reported over the years to stop being a small hospital that does everything for everyone,” Dufresne said. “And I think Springfield was a hospital that did that in a sense.”
“And so you're asking, what's the solution?” said Halstead. “The solution is: the system has to change.”
Going it alone will ultimately not work for Springfield, he said - and he and Dufresne are not alone.
“I just don't know whether some of the hospitals in Vermont have the time to stay alive long enough for the system to change,” Halstead said.
According to numbers from the National Rural Health Association, nationwide, 673 rural hospitals are financially stressed enough that they could close - and 106 rural hospitals have since 2010.
Dufresne and Halstead outlined several of the stressors to SMCS and the hospital.
The two entities serve a community with high financial need and with fewer patients with commercial insurance than other locations, leaving patients covered by Medicare and Medicaid. The two federal health insurance programs reimburse hospitals at rates that don't cover the cost of doing business.
Both SMCS and the hospital filed bankruptcy documents with the U.S. Bankruptcy Court for the District of Vermont on June 26.
How unique is Springfield's situation?
“There's a little bit of a feeling of Springfield being a canary in the coal mine,” Dufresne said. “And there are other hospitals in the state of Vermont that are in trouble.”
“Some of those hospitals have larger investments or endowments that can help with subsidizing those losses,” he said. “We did not.”