Hospital came close to closure

Massena Memorial Hospital Chief Executive Officer David Bender talks about the hospital’s past and future. Bob Beckstead/Johnson Newspapers

MASSENA — Massena Memorial Hospital was on the verge of closing its doors because it wouldn’t have been able to meet payroll without financial assistance from the state.

“We were getting notices from key providers of our services. We absolutely couldn’t survive in August,” Chief Executive Officer David Bender said. “We made that very clear to the state. I don’t think people realize that we were absolutely not going to make payroll in August. There was absolutely no way. We could either meet payroll or pay off these folks that we need to keep the ER open and the OR open. It was one or the other and you can’t have that, so the closed sign would have gone on the doors.”

Mr. Bender was the speaker for the Monday Luncheon Club’s weekly gathering in Massena. He outlined the problems Massena Memorial Hospital has faced and what it still faces as it moves forward.

“In 2011 we had a terrific balance sheet,” he said. “We had cash in the bank of about 100 days. Right now we’re down to well less than 10. Our accounts payable has ballooned. A month ago we were sitting at $8 million in accounts payable, which is about 120 days in payables. Those of you who are in business, you know how impossible it is to run an operation like that.”

That’s why becoming part of St. Lawrence Health System in a timely manner was imperative, Mr. Bender said.

Massena Memorial Hospital’s Board of Managers and the Massena Town Council met on July 30 to approve three resolutions. One was to accept $20 million in grant funding from the state, which was contingent on the hospital becoming part of St. Lawrence Health System.

Mr. Bender said there have been questions about why the move was made so quickly.

“A lot’s happened in terms of the asset purchase agreement,” he said. “I think there’s real good reasons why it had to happen that way, why it was as mysterious as it probably seems to be right now.”

He said, as reported in the news media, the hospital lost $4.5 million in the first six months, with the worst loss of $1 million coming in June. July was another $1 million loss, he said, “and August won’t be any better, I can tell you right now. It’s a slow-moving ship that takes time to make changes.”

Because of the mounting losses, Mr. Bender said they met with state officials for several months.

“We made it clear to them just how dire the situation has become. They said, ‘What’s the bare minimum you needed to keep open a little while longer?’ and we went back and forth, back and forth on all of that. They finally said, ‘Well, we can find money for you. We can find $2.8 million for you, but it has to be in the form of a loan. We can’t give it to you; it has to be a loan,’” he said.

The problem was that the loan couldn’t be made to a municipality like the town of Massena, which owns the hospital.

The money could have gone to St. Lawrence Health System, who would provide it to Massena Memorial Hospital. But that wasn’t legal because of anti-kickback laws, with two unrelated organizations pushing money from one organization to the other, Mr. Bender said.

“The only way to make it legal was to quickly sign an asset purchase agreement so that we were no longer unrelated parties. This lifesaving $2.8 million can only be accomplished by a long weekend of work that would normally take about six months to a year to get it all done. We were able to achieve all of the details of the asset purchase agreement over about a five-day period. It was all agreed to and we got the funds. We were able to make payroll, and the immediate crisis was averted,” he said.

The Dormitory Authority of the State of New York is lending the $2.8 million to St. Lawrence Health System, and that money will be used as a line of credit for Massena Memorial.

At the same time, the state agreed to provide the hospital with $20 million in grant funding “on one major condition — that Massena Memorial Hospital become part of St. Lawrence Health System. That was the state basically saying, ‘We know you’ve been in negotiations, discussions with other parties for a number of years. You’ve got the right party here,’” Mr. Bender said.

“We were thrilled to get that money. It gives us a chance to buy the time we need to stop these million-dollar monthly losses. It gives us a chance to start making the corrective actions that need to be taken to pay off the long-term liabilities,” he said.

In addition to the $20 million, as part of the asset purchase agreement, St. Lawrence Health System has committed to putting $8 million into Massena Memorial Hospital.

“That’s $28 million today that we didn’t have a month ago. I think it’s an extremely strong, necessary step forward. This $28 million doesn’t solve the problem. We’re still losing $1 million a month. That would disappear fast if we did nothing, but it gives us a chance to solve the problem. It gives us an absolute mandate to solve the problem. That’s all part of what we’re going to be doing over the next year, two years, three years,” Mr. Bender said.

Among the hospital’s liabilities is a debt of about $7 million to $8 million to the state pension system over an approximate three-year period. There were also critical capital needs that needed to be addressed at the hospital, but couldn’t be taken care of because of lack of cash. Mr. Bender said they’re still working to find out their total amount of liabilities.

“I know, when we were asked very fair, direct questions from the press, I gave a lot of ‘I don’t know’s’ because that is the actual answer. I don’t know how much our liability is out there right now,” he said.

Johnson Newspapers 7.1

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