Alliance benefits Brattleboro Retreat employees, patients
BRATTLEBORO — Every dollar the Brattleboro Retreat can shave off its operating expenses is a dollar more it can use to fulfill its mission of providing mental health services to some of the most vulnerable members of our community.
"Our biggest supply line item is patient medication," said Art Nichols, CFO.
Nichols, who came on board at the Retreat in 2017 after 11 years as president and CEO at Cheshire Medical Center in Keene, N.H., said the Retreat has an annual operating budget "in the neighborhood of $74 million."
While close to 70% of that operating budget is for wages for its 750 employees, close to 6%, or more than $1 million, of the budget is designated for the purchase of medications for the Retreat's patients.
"Last May, the Retreat joined the New England Alliance for Health," he said. "By joining the Alliance, we gained access to the Northeast Purchasing Coalition. By joining the coalition, we estimate we've been saving $50,000, or 5 to 6% of the money we spend on medications. That was well worth it. But it wasn't the purchasing aspect that proved to be the main benefit of joining the Alliance. The main area is in employee benefits."
The Retreat expends $5 to $6 million a year on providing health insurance coverage to its employees, said Nichols, with another $2 million going out for other benefits.
"We felt like our health insurance here at the Retreat was pretty expensive," said Nichols.
By joining the Alliance, the Retreat was able to lower its annual administrative costs between $50,000 and $100,000 a year and negotiate a new insurance contract with Harvard Pilgrim Health Care.
"That's a lot of money for an organization like the Retreat," said Nichols.
According to its website, the New England Alliance for Health, which was formed as a limited liability corporation by Dartmouth Hitchcock Medical Center in Lebanon, N.H., "is a group of community hospitals, behavioral health centers, and home healthcare agencies that came together in a shared commitment to improve the quality, efficiency, and availability of health care in New Hampshire, Vermont, and western Massachusetts. As a group, we share knowledge, resources, and solutions to challenging healthcare issues."
While the new contract with Harvard Pilgrim didn't lower insurance costs for the Retreat or its employees, it didn't increase costs either, said Nichols.
About 500 employees and 300 of their dependents get their health insurance through the Retreat, he said. As is typical with businesses that provide health insurance to their employees, the Retreat pays about 70% of the total cost.
"If we had stayed with the previous plan, there would have been increases," said Konstantin von Krusenstiern, Vice President of Strategy and Development.
The Retreat was also able to add another plan option for employees who wanted to pay less but had higher deductibles.
"We went to great pains to test overlap of networks to make sure people weren't going to be disenfranchised or lose their doctors," added Nichols.
Finding places to save money is very important to maintain the Retreat's presence in Brattleboro, he said.
"We have had financial difficulties the last three or four years," noted Nichols. "We just closed out our year and we are going to record a relatively modest operating loss."
Nichols said the Retreat is able to continue to operate as well as it does because of its staff, which is dedicated to providing the best care to its clients, and the fact they can keep occupancy at a high level.
"We have to run at 90% occupancy," said von Krusenstiern.
In 2018, the Retreat had a daily census of 105 patients a day with 119 available beds.
"That's humming for any business to operate at that high of a level," said Nichols. "That is really a reflection of a wise use of our assets. We did darn well, but it's still a struggle."
The Retreat is licensed for up to 149 beds, but it doesn't have the staffing or the actual infrastructure to offer that much care, said Nichols. The Retreat would have to take on more debt to renovate another of its buildings and then recruit people to staff the added beds.
In a typical setting, a hospital doesn't need to fill its beds to near-complete occupancy because it gets much of its revenues from outpatient treatment such as primary care and procedural care.
"We don't have that," said Nichols. "The whole mental health sector is constrained because it gets one payment for one patient, generally all inclusive. This is a payment model we are stuck with, which makes it more difficult of psychiatric facilities."
One of the reasons the Retreat has been able to maintain its viability is because it's the only child and adolescent care facility in Vermont, said Nichols, and because of its relationship with the state.
After Tropical Storm Irene, the Retreat added 14 beds on Tyler Four to treat some of the state's most acute patients and is adding another 12 beds to expand that capacity.
"Any business like ours that depends on volume can benefit when you add another 12 beds and spread the costs across a broader base," said Nichols.
In 2012, the Brattleboro Retreat established an endowment fund with an investment of $100,000. Before then, the Retreat did not have an endowment. The fund is now closing in on $1 million said von Krusenstiern.
Up until it started the endowment, the Retreat used what is called retained earnings, or its surplus, to even out the ups and downs of the revenue stream, he said.
"You could have a net surplus from operations but still have a cash loss because you didn't collect your accounts receivable," said Nichols.
If there is a true surplus, noted von Krusenstiern, it's up to the board of trustees to decide whether to invest it in the capital plan, put some in the endowment, or plow it back into the operating budget.
Another recent investment made by the Retreat was via a contract signed in late 2018 with the United Nurses and Allied Professionals local 5086, which covers more than 550 Retreat employees including nurses and other direct care staff.
"We did feel like we needed to increase salaries just to be competitive," said Nichols. "We didn't see that as a capitulation. Like every hospital in Vermont and New Hampshire, we are struggling to get employees."
Another area where the Retreat struggles to rein in increasing costs is in workers compensation insurance, said Nichols. "It's just very expensive, especially for an organization of our size, and there aren't a lot of choices."
Currently, the Retreat gets its workers comp from Liberty Mutual. The Retreat also purchases what is called stop loss insurance, to limit its losses for major claims.
"We pay an insurance company to make sure our losses won't exceed a certain level," he said. "It's very expensive, but the Alliance has put together a stop loss agreement that involves a group of hospitals. That alone is going to save us another $100,000 or so."
There is a fee to be a member of NEAH, said Nichols, "But we expect to make that back many times over due to the benefits of the membership."
Bob Audette can be contacted at 802-254-2311, ext. 151, or firstname.lastname@example.org.
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