Having survived a challenging 2007, officials from Niagara Falls Memorial Medical Center are looking at 2008 as a period of stabilization and, hopefully, recovery.

Hospital administrators and members of the board of directors say a planned shift in the delivery of services will be key in helping the struggling facility regain its financial footing this year and beyond.

While figures from the first two full months of the year suggest operations are beginning to move in a positive direction, the repayment of pension funds owed to employees, a precarious cash-flow situation and other significant challenges remain.

“We don’t have the cash on hand to sustain large hiccups in business,” admitted the hospital’s CEO, Joseph Ruffolo. “That the line we walk and we have been walking that line.”

Budgetary lines are looking better than expected in January and February, according to Ruffolo, who said the hospital has so far taken in between $400,000 and $500,000 more than it had budgeted for the first two months of this year. Patient volumes also are up at this point with acute inpatient care increasing 7.2 percent from the same time period a year ago and the number of patient days in the adult behavioral unit posting a 10.4 percent increase when compared to January and February of 2007.

As a result, hospital officials say the facility could exceed its projected 2008 operating gain of about $256,000.

Of course, the improvement hasn’t come without its share of pain. The Bridges Child and Adolescent Behavioral Unit — the primary source of care for children with mental illness in Western New York — will close in May, idling 34 employees. To cut costs, the hospital has also restructured management and opted out of the dentistry business altogether.

On the plus side, board members announced plans earlier this week to invest nearly $4 million in renovating the hospital’s adult psychiatric unit which had also been considered for the chopping block.

Although the hospital sustained $2.3 million in losses related to mental health services for children and adults last year, Newly-elected Board Chairman James Roscetti said the board was mandated by the state Health Department to renovate its adult unit, which he admitted is vitally important to the community as the only unit of its kind in Niagara County.

“We’re not doing it to attract more business or for aesthetics,” Roscetti said. “It is because we are mandated to do it. It’s part of the decisions we had to make moving forward.”

Other decisions moving forward will involve dedication of resources to core areas like cardiology, neurology and oncology. In addition, hospital officials are working on an application for grant funding that will allow them to expand the hospital’s primary care center so additional service hours can be offered at nights and on weekends.

Ruffolo said the hospital hopes the move will help patients — especially those who are poor, uninsured or underinsured — get the help they need without having to make emergency room visits that are costly not only to them but to the hospital itself. Hospital officials maintain that the facility sustained $7 million in uncompensated care last year.

A rise in the number of emergency room visits required the hospital to hire 25 more nurses to handle the load. Training those nurses required significant investment, according to Memorial’s Chief Operating Officer Anthony Zito.

Another expense, according to Zito, was an investment in Memorial’s program for hospitalists — physicians who specialize in care for patients during their hospital stay.

Of late, the hospital has received help in areas where it has needed it most, especially with its processing of patients who may be eligible for Medicaid. Niagara County has placed a full-time worker on site to help process applications. In addition, Ruffolo said the county has also made arrangements to do on-site alcohol and drug screening needed to fully qualify for the state-funded medical coverage program.

“They are simple changes, but they are real, meaningful changes,” Ruffolo said.

One thing that will not change anytime soon is the hospital’s commitment to its heart program, including the Heart Center of Niagara. Established in 2003 in response to Niagara County’s high incidence of death from heart disease and stroke, hospital officials say it has helped lower the facility’s heart attack mortality rates from 15.59 percent in 2001 to 9.03 percent in 2006, the last year in which state-verified figures are available.

Ruffolo said the hospital is now working with a local HMO to establish the unit as a “heart center of excellence,” a distinction that could lead to an increase in patient usage. In addition, the hospital is working with a pair of Canadian companies willing to refer executives involved in their health-care screening program to Memorial’s heart center.

While hospital officials were unable to say specifically whether the heart center itself made or lost money last year, they say there’s no doubt it led to an increase in patient volumes systemwide. Roscetti said developing the unit was never an issue of profit, but rather one of community need.

“It is saving lives,” he said. “I don’t know if you can put a price on that.”

Memorial recently paid a rather substantial price to the Internal Revenue Service for falling behind on tax obligations. While hospital officials say they have made good on outstanding payroll taxes that resulted in the filing of a pair of federal tax liens on the facility, nearly $4 million is still owed for outstanding pension payments for hospital employees. The hospital is now working on a payment arrangement that will allow it to forego pension fund obligations for 2006, 2007 and 2008, with plans to resume payments again starting in 2009. Zito admitted there are vendors who are owed money by the hospital as well and added that payment arrangements are being made with each of them.

“We are still working with less than a day’s cash on hand at any point in time,” Zito said.

Roscetti said the cash-flow situation is not foreign to the hospital, in good times or bad.

“Since I’ve been on the board, we’ve been in that boat,” he said.

As Ruffolo notes, it’s not easy turning around an operation that suffered $38 million in losses from 1996 to 2002.

In the years since, despite a difficult year last year, the health care facility recorded modest overall gains of $1.8 million from 2003 through 2007.

“These liabilities don’t go away,” Ruffolo said. “They just continue to grow and to grow.”

“The important thing is that we are turning around a $2 million deficit from last year,” he added.

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