By John Byrne, Post-Tribune staff writer
Methodist Hospitals' Northlake Campus will shut its doors permanently within two years unless the facility undergoes radical changes to save money, hospital officials said Tuesday.
Administrators are preparing to slash the number of beds at the Gary facility in half and eliminate all elective surgery in a bid to stop the financial hemorrhaging, which is approaching $2 million per month.
And those cuts come under one of the more conservative austerity programs the hospital is considering.
Unless wholesale changes are made the hospital will be forced to close, a situation that would force other area hospitals to absorb hundreds of thousands of hospital visits annually by Gary residents.
Hundreds of employees at the Northlake Campus could lose their jobs as administrators try to save money, though officials said Tuesday they hope other cost-saving plans make staff cuts unnecessary.
Hospital officials said they are also considering petitioning large hospital networks about becoming an affiliate facility. Methodist has had discussions with two hospital networks, Tom Kruse, vice president of Methodist and Chief Strategist said, but declined to name them.
While membership would cut costs and provide a ready-made population of patients from member facilities, hospital vice president Tom Kruse acknowledged local officials might be forced to give up a large measure of control.
Given the proprietary feelings many Gary residents have toward the Northlake Campus, and a 1979 federal consent decree that mandates spending parity between the Northlake and Merrillville’s Southlake campuses, Kruse acknowledged it may be difficult to convince people they must shrink the hospital in order to save it.
“We need to get everybody, from a legislative standpoint, on the same page going forward on this,” Kruse said.
Toward that end, Kruse and other administrators will appear before the Gary City Council at 5:30 p.m. today to present the hospital’s case.
If Methodist doesn’t find sound financial footing, state welfare agencies have threatened to continue withholding tens of millions of dollars in Medicaid payments owed the hospital.
Methodist has been losing money for several years, a problem exacerbated by Gary’s shrinking population, and the hospital’s recent difficulties in meeting state and federal patient care standards.
“Fifty-eight percent of Gary residents now leave the city for their medical care,” Kruse said. “The brand loyalty isn’t there.”
Methodist, a single non-profit entity comprising the Gary facility and the Southlake Campus, lost $25 million in 2005, according to Kruse.
That number eclipses $40 million if money still owed the hospital by various state agencies is added to the bottom line.
Because of the red ink, Methodist is in violation of agreements governing its $75 million in outstanding bonds, Kruse said.
“If we don’t stay in compliance with our bond agreements, the bond holders have the authority to name a financial adviser,” Kruse said.
The adviser would have the authority to order that Northlake, which sustained all the losses, be closed.
“A financial adviser’s only goal is to get the money back,” Kruse said. “He is going to say, 'Close Northlake. It’s not my problem.’ ”
Methodist estimates the Indiana Family and Social Services Administration owes the hospital roughly $53.6 million in Disproportionate Share Hospitals reimbursements for Medicaid care provided during the past three years, and another $14 million in Hospital Care for the Indigent money from fiscal year 2005.
According to Kruse, the hospital can remain solvent if the state produces at least $20 million of the outstanding payments for Methodist.
But state officials, looking at Methodist’s bottom line, have refused to pay until the hospital begins operating on a “sustainable business model,” Kruse said.
That’s where the fundamental changes come in.
In April, Kruse will present to the hospital’s Board of Directors a detailed proposal to cut the number of beds at Northlake from 357 to 150.
“That’s not as big a change as it seems,” Kruse insisted. “Our average daily census is only 159.”
The plan also will eliminate elective surgeries such as open heart surgeries and brain surgeries, which Kruse argued are performed too infrequently at the Gary campus to meet patient safety standards, anyway.
“When you’re talking about cardiovascular surgery, I’ll go on record and say that program should close,” he said. “No patient deserves to go to those programs where we are performing fewer than 20 in a year.”
By moving away from the expensive, seldom-performed surgeries at the Gary facility, Kruse said, officials hope the Northlake Campus can focus on trauma cases, high-risk obstetrics and other areas where doctors can do the most good.
Methodist’s pediatric care would be consolidated solely in Gary under the “preferred scenario” being pursued by hospital administrators.
Medical “centers of excellence” focusing on renal disease, stroke prevention, diabetes, pulmonary care and medical cardiology would also remain in Gary.
Staff cuts, which could approach 275 positions, have been discussed, Kruse acknowledged, though he said layoffs are not part of the plan administrators are pursuing now. The job cuts would come from several different departments, none dealing directly with patient care, and could save the hospital nearly $14 million.
“No jobs in which the employee has any contact with patients would be lost under any plan,” Kruse said.
Another scenario envisions a Northlake Campus with only 100 beds, and no trauma center.
But hospital officials also have discussed the possibility the Northlake Campus may close.
“For the first time, when managers ask me what they should tell their employees, I say 'I don’t know,’ ” Kruse said.