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Memorial 'still on path' to join MaineHealth despite Maine Med's financial problems

By Erik Eisele
CONWAY — News of a multimillion-dollar budget shortfall at MaineHealth's flagship hospital has captured the attention of officials at Memorial Hospital, but it hasn't derailed plans to make Memorial a MaineHealth member hospital.

Maine Medical Center suffered more than $13 million in operating losses in the first six months of the most recent fiscal year, according to a memo from Maine Med CEO Richard Petersen to hospital employees, putting the hospital in "a negative financial position that it has not witnessed in recent memory."
"Our operating loss [from October to March] is $13.4 million," Petersen goes on to say in the memo. "This places us significantly behind budget."
News of the losses broke earlier this week, with stories in several Maine newspapers. The Bangor Daily News reported the shortfall is out of "net patient service revenue" expected to be nearly $900 million.
Petersen said in the memo several factors led to the shortfall, including declining patient volumes, problems with MaineHealth's electronic health record system — the same system Memorial officials point to as one of the major benefits of joining the MaineHealth system — and an increase in charity care.
"Senior leadership has been assessing this situation very closely over the past 60 days," Petersen said in the memo, "and has been working hard to find solutions." He goes on to outline plans to freeze hiring, freeze travel, cut overtime and more, with a goal of saving $15 million over the second half of the fiscal year.
"These expense reductions are being implemented across the medical center," Petersen said, "from hospital operations to management."
"I'm confident that we'll confront this test," he said in closing. "And we'll do this while continuing to maintain the high quality of care that our community and state have come to expect of us."
Maine Med's financial turmoil comes as Memorial Hospital continues to work toward becoming a member of MaineHealth, Maine Med's parent company. State regulators still need to approve the deal, but earlier this year the boards of both Memorial and MaineHealth approved an agreement that would make Memorial a MaineHealth subsidiary.
According to Memorial CEO Scott McKinnon, this latest news does little to change that.
"We still feel MaineHealth is a strong partner," he said.
"I've obviously had dialog with some of our board leadership," he said, but "we're still on that path."
Memorial still has additional due diligence to conduct, he said, but a down period at Maine Medical does not equal a problem with the MaineHealth. Health care is in flux right now, he said. "It's a challenging environment."
"Business cycles are unpredictable," he said, but MaineHealth still looks like the best partner for Memorial "even with the current challenges" at Maine Med.
Memorial officials have to look at "the whole of the MaineHealth system," he said, although he acknowledged Maine Med, as their flagship, carries extra weight as compared to other affiliate hospitals.
As far as the problems with the electronic health record system, he said, "my understanding is they're addressing that quickly," and by the time Memorial would be part of the MaineHealth system the issues should be fixed.
And many of the conditions that created this situation at Maine Med, he pointed out, are poised to impact Memorial too. The hospital needs to be ready. Bigger hospitals have the budget to absorb financial hits like the one Maine Med is currently experiencing, he said. "They can weather that much better than a small independent hospital."
Memorial, however, has to continue to prepare for a changing industry, one that includes a lot of unknowns. The MaineHealth partnership is part of the strategy, but the deal is far from finished.
"There's still more work to be done," McKinnon said.

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