FARMINGTON – Facing an estimated $3.5 million deficit for this fiscal year, Franklin Memorial Hospital’s board voted to freeze salary increases for employees in 2009. Currently, the deficit totals $1.5 million for the first five months of the fiscal year.
To blame, hospital officials said today, is the decline of the economy, which is causing large financial problems for many local residents and organizations as well as for the hospital’s parent organization, Franklin Community Health Network. In order to protect employment, the FCHN board and the board of Franklin Memorial Hospital voted to freeze salary increases and market adjustments for employees in 2009.
“Clinical activity at the hospital and Evergreen Behavioral Services is down, and the percentages of patients seen requiring charity care or defaulting on co-payments for services are sharply up,” said Richard Batt, FCHN president. “We have to adjust spending to match our lower income, otherwise we would eventually have very serious financial difficulties.”
In the first five months of the current fiscal year, FCHN has experienced a financial loss of $1.5 million, and estimates that without changes operating losses could total over $3.5 million annually. By freezing salary increases for one year, the health network will achieve a $1.5 million savings, although a combination of additional $2 million of revenue gains and other expense reductions is also needed.
“The board considered our situation and alternatives for slowing expenses. The board and I, and the leadership team, felt that highest priority should be given to protecting employment for currently employed physicians and staff, sustaining our high clinical quality, and continuing programs essential to the patients and communities we serve,” said Batt. “We agreed layoffs should only occur if other options have been exhausted.”
The financial problem FCHN is experiencing is also being felt at almost every other hospital in Maine, according to officials from the Maine Hospital Association.
Noting that other local and state organizations are acting in response to similar financial pressures Batt added, “We understand the challenges to other organizations resulting from similar financial conditions and we respect that each organization will find the best means of reducing expenses
in relationship to their specific mission and the people they serve.”
FCHN is also implementing additional spending reductions including: reducing rehiring and travel; suspending new equipment purchases and renovations; reviewing programs to identify alternatives for cost saving; and reducing energy consumption. Ways to achieve revenue gains such as expanding grant writing capabilities and rebuilding a medical care system in the Livermore Falls area to improve market share will also be explored.
Compounding the financial problems for FCHN is the fact that the debt owed by the State to Franklin Memorial Hospital has increased to $11.5 million for services the hospital already provided to MaineCare patients as far back as July 1, 2004.
“Our hospital would not have to implement these changes adversely affecting staff and patients if the state paid their bills like every other organization in Maine is expected to do,” Batt said. In addition, the hospital anticipates in early 2009 the state may sharply decrease what it pays to all hospitals for services provided by employed doctors to MaineCare patients. “The resulting cutback could reach upward of $1 million per year for Franklin Memorial Hospital,” he added.
