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The Case for Restoring a Full Service Hospital for Northern Berkshire County
Following the sudden closure of the 121-bed North Adams Regional Hospital (NARH), which left
thousands of residents without access to local healthcare, Berkshire Health Systems
(BHS)/Berkshire Medical Center (BMC) purchased NARH now BMC North and has been
operating a satellite emergency room out of the facility, while providing inpatient care only at its
Pittsfield campus. BMC has linked its willingness to provide inpatient care to receiving Critical
Access Hospital (CAH) designation, which grants rural hospitals higher Medicare reimbursement
for services. The following report clearly shows that restoration of inpatient beds is not only
necessary, but is financially viable. Receiving CAH status would be desirable, but not necessary,
for the ongoing viability of inpatient services in Northern Berkshire County. This conclusion is
based on:
1) An analysis of the cause of NARHs financial problems and ultimate bankruptcy;
2) An examination of the issues at stake in BMCs attempted purchase of NARH before the
closure;
3) The inpatient needs in North County and loss of patients to Vermont hospitals;
4) Financial security of BHS and the availability and promise of resources on the part of
BHS and the Commonwealth
The report concludes with the finding that Berkshire Medical Center should restore inpatient
services at its North County campus as soon as possible and that all stakeholders, including BHS
and local and state policymakers should take whatever steps are necessary to ensure that the
health care needs of this community are provided for within this community.
History of Financial Problems
For more than a decade, North Adams Regional Hospital (NARH) turned a profit on patient care,
from the ER and outpatient centers to inpatient services. 1 But when NARH closed abruptly in
March, the hospital simply pointed to its finances and the challenges facing rural hospitals as
the culprits, leading many to believe that a hospital could not be sustained in North County. The
truth, however, is that NARHs parent company, Northern Berkshire Healthcare (NBH) made a
series of non-hospital real estate investments, assuming nearly $65 million in debt through
revenue bonds between 1996 and 2004, which, in the end, cost this community its hospital.
Following the assumption of $12.8 million in revenue bonds in 1996 to refinance old debt, NARH
took on another $25 million in 1999 to purchase Sweet Brook Transitional Care & Living Centers
and Sweetwood Continuing Care Retirement Community. This was an alarmingly large
assumption of debt which bore no connection to the provision of hospital services. The real
estate investment scheme immediately unraveled and the Sweets began costing NBH money.
NBH then took aggressive steps cutting staff and reducing operating costs in order to lend
money to the Sweets.2 Ultimately, NBH sold the Sweets in 2010 for $7 million under pressure
from bondholders. In the meantime, NBH took on another $27 million in revenue bonds in 2004,
in part to pay off a portion of the 1996 debt. The 2004 revenue bonds immediately went into
default, as the organization could not meet some of the financial covenants required by
bondholders.
1 Publicly-available information from 2000 to 2012; later data not yet available
2 In re Northern Berkshire Healthcare, Inc., et al. (Chapter 11 Case No. 11 31114 (HJB)). United State
Bankruptcy Court District of Massachusetts, Western Division. January 5, 2012
By the time NBH filed for bankruptcy in 2012, its debt burden still hovered around $44 million. In
its court filings, NBH attributed its financial problems almost entirely to becoming highly
leveraged through the series of bond issuances listed above. The final impetus for NBHs 2012
Chapter 11 filing was bondholders refusal to make a voluntary deal to restructure the debt,
again affirming the catastrophic impacts this debt took on North Adams Regional Hospital. And
while NARH publicly wanted to lay blame for the closure on the healthcare environment or rural
location, the data demonstrate that, despite constant competition with the larger and more
prosperous Berkshire Medical Center, NARH turned a profit on patient care every year, a fact
supported by BMCs interest in purchasing it.
The Deal that Wasnt & Ultimate Closure
Prior to the decision to shut NARH down, executives were in talks with Berkshire Health Systems
(BHS; parent company of BMC) to purchase the North Adams hospital. BHS was reportedly willing
to purchase the full-service hospital, but would not take on more than $4 million of its
outstanding debt. During negotiations, the State offered to enhance Medicaid reimbursement to
the struggling hospital in order to offset some of the acquisition costs facing the prospective
owner. Debt-holders would not agree to the deal, and at the last minute, BHS walked away,
leaving NARH to file for bankruptcy and close its doors. 3 But just two months after the closure,
BMC had crafted a deal to open a satellite emergency department in North Adams and ultimately
purchase the hospital for $4 million (a fraction of its value) without committing to provide
inpatient care.
A report released last fall by the Maine-based Stroudwater Associates, a firm contracted by the
Department of Public Health to evaluate the healthcare market in the Northern Berkshires, found
that there is a need for inpatient services at BMC North yet indicated that Critical Access Hospital
designation should be a precondition for providing inpatient services in North Adams. While BHS
did not identify CAH status as necessary during its negotiations to purchase NARH prior to its
closure, it has since claimed that it is a requirement for providing inpatient care. 4 In the months
since acquiring the North Adams hospital, BHS has committed capital to expanding outpatient
services, continues to assess the needs and possibilities for services in North Adams, and has
repeatedly pledged to apply for Critical Access Hospital designation. Yet, Berkshire Health
System has yet to file an application with the Centers for Medicare & Medicaid Services, the
federal body that certifies Critical Access facilities. Why?
The Stroudwater Report: Service Needs
Although Stroudwaters focus on the necessity of Critical Access designation was off the mark,
what Stroudwater confirmed is that Northern Berkshire residents have asthma, heart disease,
and most cancers at higher rates than other communities, and face public health issues including
obesity and alcohol and tobacco addiction. 5 The fastest-growing segment of the population is the
elderly, many of whom are disabled. And compounding health problems are barriers to access,
like the lack of financial resources and transportation. The combination of these factors makes
North County a medically vulnerable population. 6 The Stroudwater report affirmed the
communitys need for inpatient services, saying that market demand showed an existing need
for 18-21 beds for acute inpatient medical services and 11-12 beds for inpatient behavioral
health and substance abuse services. 7
3 Robert Weisman. North Adams Regional Hospital to close: Financial woes, patient drop force a
Friday closing; Unions says theyll fight move that will idle 530, Boston Globe. March 25, 2014
4 The nurses at NARH have consistently supported CAH designation, but the federal government
repeatedly denied status petitions
5 Stroudwater Associates. Healthcare Market Assessment: Northern Berkshire County,
Massachusetts. September 17, 2014. Hereafter, Stroudwater
6 Stroudwater, p.18
7 Stroudwater, p.50
2
Mental health disorders are the seventh leading cause of death for [North County];
Mental health disorders and alcohol abuse are the second and eight leading causes related to
hospital discharges;
Both mental health and alcohol abuse exceed the states percentage rate for hospital discharges 10
The DPH data show that demand for inpatient psychiatric care in North County is substantial and
the Stroudwater report concurs. But absent CAH status, Stroudwater advises that the Brien
Center, an outpatient human service agency, build its capacity and expand outreach services
despite the fact that, in 2013, the average wait time for outpatient services in the region was
between seven and ten weeks.11 The underfunded human service industry, already struggling to
provide supports for individuals whose care can be managed on an outpatient basis, cannot be
expected to adequately serve those who need inpatient care. And while outpatient psychiatric
care can be an important, complementary service to inpatient treatment, it is no replacement for
inpatient, around-the-clock nursing and medical care.
3. Inpatient Obstetrics Services
The Stroudwater report states that obstetrics (OB) services were the most often-cited needs for
inpatient care in North County, and the nearly 1,100 babies born in North Adams in the most
recently-reviewed years support that claim. The firm recommends refocusing on prenatal care
and forcing women in North County to deliver their babies at BMCs Pittsfield campus. Citing
physician recruitment as a roadblock to service provision, Stroudwater again forgets that BMC
North is no longer NARH, but a campus of Berkshire Medical Center with access to the largest
Mother Baby Unit in the Berkshires and its many physicians who can easily provide healthcare
to women and their babies in North Adams. 12 Providing OB care at BMC North would eliminate
real dangers of a lengthy drive from North County to Pittsfield, especially in emergency situations
or for women with high-risk pregnancies, but Stroudwater recommends against inpatient OB care
at BMC North.
8 Stroudwater, p.35
9 Stroudwater, p.38
10This data comes from the Department of Public Healths Community Health Information
Profile, and was included in NARHs Community Needs Assessment, p.65
11 Stroudwater, p.54
12 BMC website
3
Stroudwater, p.52
Birth Data
Stroudwater, p. 50
Center for Health Information and Analysis. Hospital Profiles. March, 2014
Ibid.
4
18 Center for Health Information and Analysis. Appendix, Massachusetts Hospital Profiles: Data
Through Fiscal Year 2012. March, 2014
19 Operating Budget Summary Fiscal Year 2015. SVMC. Delivered to the Green Mountain Care
Board on June 25, 2014
20 Stephen D. Majetich, CFO of SVMC. Responses to Questions. Letter to Michael Davis, Green Mountain
Care Board. August 11, 2014
21 Jim Kinney. Nurses union complains of staffing at Berkshire Medical Center in Pittsfield,
patient volume up 10 percent since closing of hospital in North Adams, Masslive. December 03,
2014
22 Center for Health Information and Analysis. Appendix, Massachusetts Hospital Profiles: Data
Through Fiscal Year 2012. March, 2014
5
on that offer, given community demand and the Stroudwater report, which supports that
demand.
Conclusion
The primary obligation of a hospital is to meet the healthcare needs of the communities it
serves. The next consideration is whether or not all of those needs can be met based on the
finances available to the hospital. Berkshire Medical Centers early moves to continue operating
an emergency facility in North Adams and securing the grant to implement expanded outpatient
services are clear indicators that BMC understands the healthcare needs of North County are
many. All evidence points to a sustainable community hospital, and the Stroudwater report and
community input are indisputable: inpatient services are needed in North County. BMC has the
financial resources and market dominance to restore and deliver a full spectrum of services to
the Northern Berkshires in a fiscally responsible manner. This should be done now without further
delay.