Portland’s Mercy Hospital is moving forward with plans to build and relocate to a new facility on Fore River Parkway despite suffering financial losses in recent years.
Mercy President Charlie Therrien said Wednesday that the hospital submitted a letter of intent last week to the Maine Department of Health and Human Services to obtain a Certificate of Need for its Fore River hospital project. A Certificate of Need is a state requirement to make sure that hospital expansion projects are necessary and would not duplicate services or increase health care costs.
Following two consecutive years of eight-figure losses, Therrien said Mercy has rebounded by focusing on efficiency and quality of patient care. The hospital reduced its net operating loss for the 2017 fiscal year, which ended Sept. 30, to $3.9 million from a loss of $17.4 million the previous year.
Each hospital maintains a fund containing donations, grants and previous years’ operating surpluses that it can draw from to cover operating losses. At the end of the 2016 fiscal year, Mercy’s fund balance was $29.1 million, down from $45.4 million a year earlier.
Mercy’s parent organization, Eastern Maine Healthcare Systems, also struggled financially in fiscal year 2016. It reported a net operating loss of $34.3 million and subsequently had its credit rating downgraded to junk bond status by ratings firm Moody’s Investors Service.
But Therrien said Mercy has turned things around and has been operating in the black since October.
Meanwhile, the hospital has been recognized for high quality with a five-star rating from the federal Centers for Medicare and Medicaid and an “A” grade for safety from a patient advocate organization, The Leapfrog Group, Therrien said.
“We had a really good year, in a lot of different ways,” he said. “We weren’t able to get to break-even, but we did see a significant improvement.”
The hospital has reduced its staff significantly since the 2015 fiscal year, when it reported a net operating loss of $22.2 million. That year, it reported having 2,150 paid employees, about one-third more than the 1,550 employees it has currently.
In the past fiscal year alone, Mercy reduced its staff by about 12 percent through layoffs, early retirement offers and not filling some vacant positions, Therrien said. It has shifted to a system of more flexible staffing based on patient volume to maintain quality of care with fewer workers, he said.
A DIFFERENT HOSPITAL PLAN
Meanwhile, Mercy continues to work on plans to relocate from its current main campus at 144 State St. to an expansion site at 175 Fore River Pkwy., also in Portland. The hospital already has facilities at the Fore River site including an urgent care center, and it plans to build a full-service hospital there before relocating and selling the State Street campus.
Therrien said construction on the Fore River hospital, which has an estimated cost of $75 million, would not begin until Mercy experiences at least one full year of solvency following its recent losses. He noted that there are certain unknowns that could impact Mercy’s bottom line, such as continued Republican efforts to weaken or repeal the Affordable Care Act, and the Legislature’s ongoing effort to fund the voter-approved MaineCare expansion in the state.
“A lot of generous contributions already have been made (toward the Fore River project),” Therrien said. “We have to make sure that we continue to demonstrate financial stability.”
The Fore River hospital would be smaller than originally planned. Therrien said the current plan calls for a 108,000-square-foot facility in addition to the existing 150,000 square feet of hospital space, not including medical offices, built on the Fore River site in 2008. Originally, Mercy planned to build about 420,000 square feet of hospital space and offices at the expansion site. The existing Mercy Hospital on State Street is about 250,000 square feet.
Therrien said the reduced footprint at Fore River reflects an evolving health care trend toward shorter and fewer inpatient hospital stays. For example, patients undergoing joint-replacement surgery in the past had to stay at the hospital for three days, he said, whereas now they can go home on the same day as the surgery.
“We now can do things in more of an ambulatory environment,” he said. “We’re caring for the same patients, but we’re caring for them in a different way.”
Therrien said he is expecting to wait one more year to show that the hospital’s finances are in order, and then two additional years for construction, which would put the Fore River hospital on track to open in 2021. At that point, the hospital on State Street would close and the property would be sold for redevelopment.
The eventual relocation to Fore River would prompt additional staff reductions to eliminate overlapping job functions at the two Mercy sites, Therrien said. However, he said no specific downsizing plan is in place as of yet.
The coming year is a significant one for Mercy, as it will mark the community hospital’s 100th anniversary. Mercy was founded in 1918 by the Roman Catholic Diocese of Portland and the Sisters of Mercy to provide quality health care, especially to the poor and disadvantaged. Each year, Mercy provides millions of dollars worth of free care to patients who can’t afford to pay.