Hospital Ends Year in Solid Black Ink

Total Revenues Are Up for Fiscal 2005; Expenses Rise, Including Fund-Raising as New Building Campaign Begins

By James Kinsella
Gazette Senior Writer

Revenue and net income increased at the Martha's Vineyard Hospital during its recently completed fiscal year.

The hospital reported total revenue of $37,932,089 for the 12 months ended March 31, up $3.05 million or 8.7 percent from the prior year. The bulk of the increase came through charges to patients.

Income from operations rose from $286,862 in the prior fiscal year to $714,986.

Given contributions and other gains, the hospital's net assets rose $5,464,853 to $24,268,504.

Expenses at the hospital also increased, by $2.62 million or 7.6 per cent, to $34,598,689. Increases in the cost of salaries, benefits, supplies and general expenses led to the overall increase.

The financial results cover not only those of the hospital, but of the Windemere Nursing Home and Rehabilitation Facility, which operates an 81-bed skilled nursing home on the hospital campus in Oak Bluffs.

Tim Walsh, chief executive officer at the hospital, said he was heartened that the nursing home, after years of losses, showed operating income of about $62,000 this year. Operating income at the hospital came in around $652,000.

"Generally, we're pleased with the results," Mr. Walsh said of the financial report. "Both institutions are in the black."

Speaking of the nursing home, he said, "I think we've turned the corner on it."

Martha's Vineyard Hospital Inc., the corporation licensed to operate the Vineyard hospital, owns WNR Inc., which operates Windemere.

The nursing home has posed a continuing financial question mark for the hospital, which took on debt to acquire the facility.

As of March 31, the hospital faced scheduled principal payments of $2.4 million on the debt, owed to Compass Bank (which has been succeeded by Sovereign Bank).

"As collateral for the Compass Bank note, [Martha's Vineyard Hospital] has mortgaged substantially all of its property, plant and equipment with Compass and granted Compass a first lien on all gross receipts," hospital accountants wrote in a draft audit for the end of the year.

"At March 31, 2005, [the hospital] was in technical default on the note due to the uncertainty regarding the ability of its affiliate, WNR, to continue as a going concern," accountants wrote. "However, the bank has granted [the hospital] a waiver of this covenant."

Also, the nursing home owes the hospital about $900,000 for past dietary services. The hospital owes the nursing home $100,000 for rental of space.

But since, as Mr. Walsh put it, "you can't owe yourself money," each consideration has been eliminated from the consolidated financial statement.

Mr. Walsh said he hopes that the nursing home will build a track record of operating income rather than loss, which he said will eliminate the technical default.

In comparing the two fiscal years, the hospital financial report also shows that:

* Charity care charges rose $367,000, or 21 per cent, to $2.1 million. The percentage of charity care patients to all patients served rose from 3.39 per cent to 3.57 per cent. Mr. Walsh said those figures reflect a higher volume of patients at the hospital.

* In terms of operating expenses, administrative and general expenses stayed virtually flat at $6,569,486. The increases came in patient services, which rose 8.8 per cent to $30.2 million, and in fund-raising, which increased 64.9 per cent to $431,571. Mr. Walsh said the hospital is starting to spend more on fund-raising in light of a pending $42 million capital campaign at the hospital.

As for their respective share of overall expenses, patient services increased one per cent to 81 per cent, administrative and general expenses slipped one per cent to 18 per cent, and fund-raising stayed flat at one per cent.

* Donations to the hospital more than doubled, from $1.4 million to $4.6 million. Contributions during the most recent fiscal year included $1,266,830 in unrestricted gifts, $2,946,323 in temporarily restricted gifts, and $398,780 in permanently restricted gifts. Mr. Walsh said the temporarily restricted gifts were given toward the capital campaign, scheduled to last about five years.

* Unpaid bills as of March 31 totaled $5,300,560 from patients, commercial insurance plans and health maintenance organizations; $752,389 from Medicare, which helps fund coverage of older patients; $579,897 from Medicaid, which helps provide coverage for low-income patients; and $455,275 from Blue Cross Blue Shield.

* Outpatient services accounted for the bulk of gross patient service revenue at the hospital: $45.7 million. Also contributing to gross revenues were inpatient routine services, $4.4 million; inpatient ancillary services, $8.9 million and long-term care services, $5.7 million.