September 17, 2019
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Despite bankruptcy, Lincoln hospital isn’t making many changes to how it runs

Nick Sambides Jr. | BDN
Nick Sambides Jr. | BDN
The Penobscot Valley Hospital in Lincoln is seen in this Nov. 28, 2014, file photo.

When Penobscot Valley Hospital entered bankruptcy in January amid a drop in patients in recent years, it planned to cut the number of doctors that staff the 25-bed facility, the Lincoln hospital said in a court filing this month.

But the hospital has changed that plan after seeing a surprising uptick in patient visits this year. Now, it intends to maintain its existing services and staffing levels, according to CEO Crystal Landry. It now employs around 116 people.

“We have no plans to make any changes to our service lines,” she said in an interview last week.

However, at least two of the hospital’s creditors are unhappy with that position and said the facility will have to make some operational changes if it hopes to pay back its debts and stay in business.

In January, Penobscot Valley Hospital sought Chapter 11 bankruptcy protection after accruing up to $10 million in debt to creditors, including the U.S. Department of Agriculture, the Maine Department of Health and Human Services, Machias Savings Bank and the federal Centers for Medicare and Medicaid Services.

It filed for bankruptcy this year because it has struggled to pay back those debts and hopes to renegotiate them.

[Lincoln hospital owes up to $10M to nearly 900 creditors]

It also has struggled with a $2.7 million drop in patient revenue following the 2015 closure of the Lincoln Paper and Tissue LLC mill, but managed to reduce its operating losses by shrinking its staff from 162 in 2016 to 116 last year.

Hospital officials now say that they can handle the debt without cutting into the facility’s remaining services.

Landry said the hospital has seen “a little bit of an increase” in patient admissions this year, but she wasn’t immediately able to provide data showing or explaining the increase.

She also couldn’t say whether new visits have led to a corresponding increase in patient revenue, saying that the hospital’s bottom line will depend on what insurance coverage patients have, what services they receive and the portion of their medical bills they are able to pay.

In its bankruptcy filings, Penobscot Valley Hospital projected that Maine’s expansion of Medicaid would help it collect $750,000 to $1 million in additional revenue this year, but Landry said she probably won’t know until the end of this year how much of an impact the expansion has had.

Maine’s Medicaid expansion has enrolled fewer low-income adults than many expected since enrollment began in earnest at the start of the year. In Penobscot County, 4,600 adults had gained coverage under the expansion as of Aug. 23, according to the latest state data.

So far this year, Penobscot Valley Hospital is on track to post a smaller operating loss than in recent years. It lost about $2 million in 2016, $1.6 million in 2017 and $837,000 last year, according to court filings. Its operating loss was $278,298 from late January, when it filed for bankruptcy, through July of this year.

Penobscot Valley Hospital has said that it hopes to come out of Chapter 11 bankruptcy within a year of its original filing, a timeline that Landry reiterated Wednesday.

In one of its latest court filings on Aug. 7, the hospital said that it has worked to resolve one of the issues that contributed to its current debts: $2.3 million in overpayments the hospital received from Medicaid, Medicare and the health insurance company Anthem that it had trouble detecting so it could pay them back.

[Why Maine hospitals are teaming up instead of competing]

Now, Penobscot Valley Hospital has worked with an accounting firm to develop tools that will flag future overpayments, so it can repay them and avoid using the money for everyday expenses. It’s also setting aside money specifically to repay past overpayments and others that may come this year.

The hospital said in the Aug. 7 court filing that it “has been diligently pursuing its restructuring plans” and working “cooperatively” with some of its creditors, but that it still needs “additional time” to craft its Chapter 11 restructuring plan.

But two creditors both recently expressed their concerns that the hospital has made little progress toward developing a plan to emerge from bankruptcy while paying more than $170,000 in administrative fees for the bankruptcy proceeding.

In a joint court filing on Aug. 12, Machias Savings Bank and the Maine Health and Higher Education Facilities Authority said that the hospital’s “lack of progress toward a plan of reorganization or other exit from bankruptcy is not only troublesome, but also very expensive.”

The hospital “has made no material operational changes and has, indeed, concluded that none are feasible,” they continued. “It is readily apparent that the Debtor can only survive if it achieves a significant restructuring of its balance sheet.”

Penobscot Valley Hospital is among the first hospitals in Maine to file for Chapter 11 protection. Parkview Adventist Medical Center in Brunswick filed for Chapter 11 in 2015, and Mid Coast Hospital in Brunswick later bought it.

Landry said that Penobscot Valley Hospital is not considering closing its doors or affiliating with a hospital network.

“I can’t stress enough that we continue to take care of our community, and that’s what we plan to do for many years to come,” she said. “You hear about other places that have not made payroll for a couple months. That was not the case here with Penobscot Valley Hospital. We entered into Chapter 11 with the goal specifically to restructure our debt, and that remains the goal at this time.”

 



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