The main entrance of Eastern Maine Medical Center in Bangor.

Saving ailing hospitals created fiscal strain for Eastern Maine Healthcare

If a major credit rating agency follows through on a downgrade to EMHS, the hit would reverberate throughout the extensive financial ties that bind the hospital network.

Published April 08, 2017, at 7:56 a.m.     |    

Saving ailing hospitals created fiscal strain for Eastern Maine Healthcare

Posted April 08, 2017, at 7:56 a.m.

If a major credit rating agency follows through on a downgrade to Eastern Maine Healthcare Systems, the hit would reverberate throughout the extensive financial ties that bind the hospital network.

Perhaps best known for its flagship hospital, Eastern Maine Medical Center in Bangor, the system stretches from Presque Isle to Portland. It includes not only nine hospitals, but also dozens of medical practices and eight nursing homes, as well as pharmacies and ambulance services.

The $1.5 billion not-for-profit organization employs nearly 12,000 people, second in the state only to MaineHealth, which became a competitor in 2013 with EMHS’ acquisition of Mercy Health System of Maine.

EMHS went on to add an Ellsworth hospital to its fold in 2015, and is now in talks to acquire another in Dover-Foxcroft.

The system’s myriad components are fused more today than ever, with the home office providing a range of services to its members, such as human resources and management of health quality improvement programs. The members, in turn, fund the expenses of the home office’s oversight.

EMHS says this model has reduced administrative costs and decreased variation across the system. The financially struggling hospitals it has acquired in recent years faced uncertain futures without the purchasing power and scale of a big network.

But it also means EMHS’ members are more focused on the wellbeing of the system than their own financial performance. That’s reflected in the fact that EMHS now reports its balance sheet as a single entity, with little distinction between which profits and losses belong to which members. Individual hospitals no longer publish annual reports detailing their own finances.

As Moody’s Investor Services weighs whether to downgrade EMHS to “junk bond” status, it will view the system as one corporate entity. Meanwhile, the patients who visit its many facilities across Maine for surgeries, doctor’s appointments and lab tests, still typically think of their local hospital as a community institution.

 

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