Boston Medical Center, the safety net hospital that sued Massachusetts in July over state-subsidized care, has seen its operating losses grow and cash reserves shrink, prompting one rating agency to lower the hospital’s credit rating last week.
Amid losses, Boston Medical Center's rating drops
Analysts also labeled the teaching hospital’s outlook negative—an unfavorable shift from the prior stable outlook—based on limited prospects to raise cash or trim expenses and not enough in savings to “support operations through the intermediate term,” according to a report released by Moody’s Investors Service. It made the assessment as Boston Medical Center closed its books for fiscal 2009 on Sept. 30.
The hospital’s rating fell to Baa1, or midinvestment grade, from A3. Moody’s noted its strategic capital projects have been put on hold and one measure of financial strength, the number of days Boston Medical Center could operate on its cash reserves, slid by 10 days to 83 days.
The hospital said its operating revenue totaled $943 million in 2009, down 8.4% from $1.03 billion in 2008, and is projected to be $876.5 million in 2010. State aid for the hospital dropped 47% to $115 million for fiscal 2009 from $217 million the prior year, and is projected to drop to $52 million for the year that began Oct. 1.
Those declining subsidies from Massachusetts, where a 2006 law launched an effort to significantly expand insurance coverage, have left the 520-bed hospital with a projected $28.9 million operating loss for the year, said Tom Traylor, Boston Medical Center’s vice president of federal and state programs. That’s after continued cost-cutting shaved another $29.1 million in expenses, he said.
Half the hospital’s patients are uninsured or enrolled in safety net insurance plans, Traylor said, and revenue from its privately insured patients, which account for roughly 20% of its revenue, cannot offset the losses.
Amid the losses, departing President and CEO Elaine Ullian’s 2008 compensation has drawn criticism. Ullian, who announced in July she would retire in January 2010, earned $1.35 million in compensation and benefits for the year that ended Sept. 30, 2008. She also received another $3.47 million in benefits and deferred compensation earned over 15 years.
The hospital’s lawsuit against the state’s Executive Office of Health and Human Services alleges Massachusetts violated state laws when it altered reimbursement for state-subsidized plans, including MassHealth, which accounts for roughly 40% of the hospital’s discharges and seeks $127.6 million.
Kristina Barry, a state Health and Human Services spokeswoman, in a written statement said that the administration is confident its actions complied with the law and called Boston Medical Center’s lawsuit disappointing.
Traylor said the hospital has reached out to the state to settle its lawsuit.
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