TOWNSHEND -- Grace Cottage Hospital administrators say they are working to address deficiencies identified by state officials, and they do not expect that the facility's Medicare payments will be interrupted.

The Townshend hospital has submitted -- and the state has approved -- a plan designed to fix deficiencies found in care, privacy, documentation and night-shift staffing.

The deficiencies, identified during a February inspection that had been spurred by a patient complaint, were the basis of an announcement on Monday warning that Grace Cottage could lose its Medicare funding before the end of this month.

But hospital Chief Executive Officer Roger Allbee said he believes a follow-up visit this month from state inspectors will show that Grace Cottage has addressed any problems.

"We're not the first hospital to go through this, and we won't be the last," Allbee said. "We have been working cooperatively and thoroughly with the state, and we expect that they will agree that we are now in full compliance."

He added that "this is a welcome process that helps keep us at the top of safety and quality rankings, and we are confident that there will be no interruption in reimbursements or patient services."

With just 19 beds, Grace Cottage is Vermont's smallest hospital. Administrators tout the hospital's focus on patients' individual needs, with Allbee noting that "Grace Cottage Hospital is nationally known for its high level of patient satisfaction and quality of care, and we always encourage input and feedback from our patients and the community that we serve."

That feedback also can prompt visits from inspectors -- a process that is not uncommon based on the number of hospital-inspection reports available at the Vermont Division of Licensing and Protection's website, www.dlp.vermont.gov.

The state is contracted by the federal government to "conduct on-site investigations, regarding certain complaints, we also do surveys," said Fran Keeler, the division's assistant director.

When the state's inspections find problems, those can jeopardize a hospital's Medicare funding through the federal Centers for Medicare & Medicaid Services (CMS).

That's what has happened at Grace Cottage, where a patient complaint led to a February visit by state regulators. As a result of that visit, "we did have some fairly significant findings that the hospital was notified about," Keeler said.

Those findings were summarized in a March e-mail from Jeanne Fortier, Grace Cottage's chief nursing officer and interim chief operating officer. Fortier's e-mail was among documents related to the investigation that were released by the state:

According to Fortier's note to other hospital staff members, the deficiencies were:

-- Failure to implement fall-risk protocols (no bed alarms were placed on admission for two high-risk patients who then had falls).

-- Failure to implement pressure-ulcer-prevention measures for a high-risk patient who then developed a pressure ulcer.

-- Failure to obtain a physician-ordered wound culture.

-- Failure to initiate an alteration in skin integrity care plan "for a patient that clearly had it."

-- Lack of a standardized process for documenting care.

-- Failure to protect patient privacy by using non-hospital personnel to provide care (Rescue Inc.) and taking a photo of a patient's wound with a personal cell phone.

-- Failure to follow hospital policies for fall precautions, skin breakdown and uses of physical and chemical restraints.

-- Lack of policies for use of non-hospital personnel, photographing wounds and use of sitters for patients at high risk for falls or hurting themselves. Also, there was no policy "to clearly define who should accompany patients that leave the facility for outside appointments," Fortier wrote.

-- Lack of adequate staff on night shift.

The same state documents also feature Grace Cottage's detailed plans to address those issues.

Included is a new policy on "photographing, video recording or recording devices," which says "Grace Cottage Hospital must take reasonable steps to protect patients, visitors and staff members from unauthorized photography, video or audio recordings."

Other examples of administrative responses include new policies on use of non-hospital personnel; a new plan "to prevent ulcers and improve wound care" and related education of the nursing staff; and "re-education" of staff on fall policies.

Grace Cottage also formed a team to "review the current policy on involuntary procedures and restraints ... and to understand our failure to follow the policy and how the situation could have been handled differently."

And, in response to staffing concerns, the hospital pledged in its plan submitted to the state that "adjustments are being made to bring the night-shift nursing staff back up to four."

Keeler said the state has accepted Grace Cottage's plan and will conduct an unannounced visit to determine whether the hospital has implemented corrective measures.

That visit must happen sometime before May 28, the date that the CMS notice sets for cutting off Medicare reimbursement to Grace Cottage. Allbee believes that date will bring no such action.

"They'll retract that once the state has verified that the deficiencies ... have been corrected," Allbee said.

The same process has happened several times in recent years at the Brattleboro Retreat. Each time, the Retreat has corrected deficiencies and has not lost its Medicare funding.

Mike Faher can be reached at mfaher@reformer.com or 802-254-2311, ext. 275.