The monopoly merger that formed Optima Healthcare not only angered the residents of Manchester, N.H., but also turned out to be unprofitable.
The system comprises three hospitals, which are losing money on operations. And the likely dissolution of Optima, forged for economic efficiency, will only deepen the facilities' financial troubles, the Standard & Poor's credit-rating agency said earlier this month.
Optima consists of 242-bed Catholic Medical Center and 238-bed Elliot Hospital, Manchester's only hospitals, and 150-bed St. Joseph Hospital in Nashua, N.H. CMC and Elliot merged in 1994 to form Optima, and St. Joseph joined the system in 1997.
The joint operating company overseeing all three hospitals racked up millions of dollars in losses during the first four months of this fiscal year.
Consolidation of acute-care services at Elliot and the conversion of CMC into an outpatient facility angered the community, sparked a state investigation and recently caused two special boards to recommend the breakup of the system (Feb. 8, p. 17). The system's governing boards may decide about dissolution as early as this week.
Although the consolidation was halted midstream, the shift of services had already begun to boost Elliot at CMC's expense. For the fiscal year ended June 30, 1998, CMC posted an operating loss of $12.6 million on $125.4 million in patient revenues. The hospital posted a net loss of $5.6 million, partly because of one-time retirement expenses of $4.6 million.
Investment income brightened the financial picture at Elliot, which lost $4 million on operations but had $4 million in net income for fiscal 1998. Unlike CMC, whose admissions for 1998 fell by 8.5% to 8,500 compared with 1997 figures, Elliot's admissions stood firm at about 10,000.
St. Joseph posted a fiscal 1998 operating loss of $3 million and a net loss of $1.5 million on patient revenues of $82.8 million and total revenues of $87.5 million.
For the four months ended Oct. 31, Optima lost $2 million on operations and $2.2 million on its bottom line, according to Standard & Poor's. Total revenues and breakdowns by hospital were not immediately available.
Standard & Poor's had issued ratings of A- to CMC, Elliott and St. Joseph. But citing a likely Optima breakup, the rating agency put the three hospitals on CreditWatch with negative implications, signaling a probable downgrade.
The Catholic hospital faces the toughest outlook. "CMC will have more of an uphill struggle," said Cynthia Keller, a Standard & Poor's analyst.
Optima President and Chief Executive Officer Douglas Dean said managed care had outpaced the system's ability to cope with it but that a system model offers the best chance of financial success.