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Porter Medical Center crafts tight budget, explores new partnership

Editor’s note: This is the second of a two-part series. In Monday’s Independent,Porter Medical Center Interim CEO Dr. Fred Kniffin discussed his first nine weeks on the job and what the hospital has done to recruit more health care providers.
MIDDLEBURY — When Dr. Fred Kniffin took over as interim CEO of Porter Medical Center on March 21, he faced a number of challenges — not the least of which was to tend to the financial health of a vitally important community hospital.
Kniffin last week sat down with the Addison Independent to share his thoughts on how PMC is doing in its quest to recapture its stability after some stormy times.
A story in Monday’s edition addressed recruitment of health care providers to bring Porter services back in line with demand. In today’s story, Kniffin addresses the financial challenges the hospital faces, and the possibility of some sort of affiliation with another hospital.
FISCAL YEAR 2017 BUDGET
Porter Medical Center officials have put the finishing touches on a fiscal year 2017 budget that looks to spend just shy of $90 million, which will soon be submitted for review by Vermont’s Green Mountain Care Board. That state regulator has set a cap of 3 percent on net service patient revenue growth. PMC is pitching a 0.7-percent jump in that category.
“We are well under the cap,” Kniffin said.
The PMC budget also reflects a 5.3-percent increase on pricing for services, “which we anticipate will be middle of the pack, or rear of the pack” in comparison to other state hospitals, Kniffin said. That 5.3-percent price increase would generate what Kniffin called a “thin” $600,000 margin for error. That margin, officials stressed, reflects around $2.7 million in operating revenue through the federal 340b Drug Pricing Program.
The 340b Program, which requires drug manufacturers to provide outpatient drugs to eligible health care organizations at significantly reduced prices, is funded by large pharmacy companies. This program is mandated by Congress and has faced an assault in recent years from the pharmaceutical lobby, though hospitals across the country are fighting for the funding.
It is a draft spending plan that also frees up $4.3 million for PMC to invest in capital improvement projects on campus. Such projects have been delayed amid the tight financial constraints that PMC, like hospitals nationwide, has had to endure amid health care reforms and an underfunded federal Medicaid insurance program.
“It’s an ambitious capital goal, but that’s what we’re going to shoot for,” Kniffin said.
If the Green Mountain Care Board approves the PMC budget this September, it will allow Porter to accrue an additional 3.8 days of “cash on hand,” or savings. That would bring PMC’s savings up to a little more than 83 days of cash on hand, an improvement to the 39 days of cash the institution reported back in 2012.
Moving from 39 days of cash on hand to 83 days represents some progress, according to Kniffin and Porter spokesman Ron Hallman, but they conceded it is still substantially below the industry standard of 120 days of cash on hand to be deemed a healthy/sustainable organization.
“The good news is that we are not going broke,” Kniffin said. “The bad news is that it looks like our budget of the last three or four years, where we are just not performing well enough to really fully support our capital needs and save at the rate of savings that we need to really become a financially healthy organization.”
PMC maintains a graph showing a “survival” line, a “sustain” line and a “thrive” line. Porter is currently tracking close to — but still below — the sustain line, according to Kniffin.
NEW CEO
Kniffin made a commitment to serve one year as interim CEO, a period set to expire next March 21. He feared a shorter commitment might have forced PMC trustees to rush into hiring a new person who might not ultimately fit the bill.
“A year seemed like a reasonable agreement,” Kniffin said.
Tentative plans call for the CEO search to begin in earnest this summer and result in a hire who would begin work next March.
AFFILIATION
The consulting firm of Stroudwater Associates is preparing a strategic plan for Porter Medical Center that will include the notion of its affiliation with a larger medical institution, such as the University of Vermont Medical Center. As he did at the PMC annual meeting in early April, Kniffin stressed affiliation at this point is just a concept that PMC is exploring, and any such action would need to be vetted by the hospital board and community.
To that end, PMC has formed a 25-member Community Advisory Committee that will help Porter explore the pros and cons of partnering. The committee will seek feedback from three major constituency groups: Porter’s medical staff, its employees and the community at large.
Later this month the Independent will publish a follow-up article on the affiliation, or “partnering,” exploration that PMC has launched.
Stroudwater consultants have spent the past few months interviewing around 40 PMC stakeholders — including members of the medical team and trustees — to gather data for a PMC long-range vision. Porter convened a retreat in January to further discuss the organization’s future.
“We are now rebooting this process of communication, where we are reaching out to our employees, medical staff and community to bring them up to speed on where we’re at and to seek their input on how they envision Porter’s future,” Kniffin said.
For example, PMC’s constituents will be asked what kind of core medical services they’d like to see Porter maintain or acquire. Then the dialogue becomes about how PMC can go about measuring up to the desires of its service population.
“Are we better served going it alone, or are we better served to partner?” Kniffin said of the broader questions. “We’ll be sharing and receiving information and looking hard at the issue during the next couple of months.”
While partnering decisions usually take around a year of exploration, Hallman said PMC will not tie itself to a specific timeline.
“We need to do it right, we need to do it comprehensively and have it be an honest process, not one where the decisions have already been made and we are going through the motions,” Hallman said.
“We need the input we receive to dictate where and how we go, and at what pace.”
Members of PMC’s medical and nursing corps are giving Kniffin some good marks for his performance thus far.
“The medical staff is partnering with the new administration under Dr. Kniffin to move Porter forward after the turmoil of the last half year,” said Porter Medical Staff President Dr. Kris Anderson. “Though there are still some hard feelings and a lot of work to do to rebuild our primary care network in Addison County, I feel that morale has certainly improved since Dr. Kniffin was appointed interim CEO.
“Many of the financial and logistical challenges Porter has been facing are still active problems,” Anderson continued. “The medical staff are looking forward to working with Dr. Kniffin, and whomever the new CEO the board identifies, to work in a spirit of respect and collaboration to overcome the hurdles Porter is facing and make sure we all are able to continue to provide the best quality healthcare available to our patients and community.”
Alice Leo, RN, president of Porter Federation of Nurses and Health Professionals, said she and her colleagues are looking forward to working with Kniffin.
“We are cautiously optimistic about working with the Porter administration for our shared goal of high-quality, safe patient care,” Leo said. “It’s clear Dr. Kniffin is very committed to Porter, and that’s a plus.”
Reporter John Flowers is at johnf@addisoninidependent.com.

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