Telehealth department dissolving, Marshfield Clinic Health System facing financial difficulties

MARSHFIELD, Wis. (WSAW) - Another department within the Marshfield Clinic Health System has been dissolved as of Thursday. The Telehealth team of 18 employees was told in a meeting Oct. 27 that their positions were being eliminated due to “business reasons,” effective Dec. 1.

It is a change that adds to a series of other developments within MCHS over the fall.

In August, MCHS filed a notice that it was modifying its loan terms related to “financial difficulties.”

On Sept. 21, system leaders sent out a memo to some staff that 7 Investigates obtained saying the system had lost $25 million in August, “and without the positive factors we shared this morning, we’d have lost $114 million year to date.” It continued mentioning positive team efforts to cut expenses and increase access to care. “We’re seeing some success, but we are not moving fast enough. In fact, if we keep going at the current pace, we will be forced to make much tougher decisions.”

Its second-quarter report issued in September noted its chief financial officer left in August. The system is also in the process of implementing a new electronic medical record system and while disruptions were expected, “there has been greater disruption to reporting and revenue cycle billing and collections than anticipated and the realization of expected benefits from the system has been slower to materialize.” This was noted again in its next quarterly report.

“...the System is showing a negative operating margin and losses and rising operating expenses greater than the rise in revenues,” the report notes for the period ending June 30. “The negative financial results of the System are driven by a continuing convergence of factors, including additional costs related to contract labor and inflation pressures on wages and supplies, the effects of the One System EHR implementation that is causing an expected level of productivity disruption reducing revenues, and additional operational costs to support the activations, and a higher net negative effect due to the pandemic.”

MCHS has since told 7 Investigates in an email, “The Health System has been operating its own homegrown electronic medical record for 30 years. We began transitioning to a new EMR over the past year that is integrating our 12 hospitals with our 65 medical offices across our health system. Doing so requires providers and staff to become familiar with the new system, and identify and resolve issues during the implementation process. This may slow the billing process as providers learn to use the new system. This is not unusual. Any organization implementing a new EMR would expect a temporary slowing of the process and temporary dip in productivity, which may lead to patients receiving a bill later than they normally would.”

In October, MCHS and Essentia Health announced discussions of a possible merger. MCHS told 7 Investigates over email, “it was not motivated by financial challenges that we and the rest of the industry are experiencing this year. Rather, our motivation to pursue a merger and our choice of merger partner are strategic and arise from conversations which began in earnest in January. Our leaders and Essentia’s leaders are motivated to employ a merger of equals to create a premier integrated health system serving rural populations across the northern tier.”

Nov. 14, the day before Sexual Assault Nurse Examiners at Marshfield Medical Center-Marshfield were notified that the program was being eliminated due to “business reasons,” it filed a notice of new financial obligations. In its third-quarter report, it noted that obligation was the system issuing $50 million in taxable bonds at the end of October “for the purpose of (1) financing the pension liability of MMC-Dickinson, (2) paying off or reimbursing the MCHS for all indebtedness, obligations and liabilities under a legacy Term Loan Agreement and (3) financing any other lawful corporate expenditures.”

MCHS declined multiple requests for interviews as these developments progressed, but issued a statement in response to this story Thursday, which says in part:

“Great organizations continually re-organize to become more efficient, effective and resourceful, particularly in today’s environment where high inflation, labor shortages and skyrocketing labor costs are affecting the health care industry across the country. We owe it to our patients to adapt, and we fully expect to overcome those challenges successfully.”

It also mentioned another medical group’s losses, previously citing the pandemic’s impact nationally on the industry.

The financial health of hospitals, and their communities

Marshfield Clinic is rooted in Marshfield. For more than a century, it has been branching out around north central Wisconsin, providing more than $601 million in community benefit, according to its latest community report.

Numerous analyses and studies have looked at the impacts the financial health of hospitals have on the communities they serve. A 2019 study published in the National Institutes of Health’s National Library of Medicine found strong evidence “that financially stable hospitals have better patient experience, lower readmission rates, and show evidence of decreased risk of adverse patient quality and safety outcomes for both medical and surgical patients.”

While MCHS has continuously declined interview offers, it has answered some questions over email. To many of the questions, about the filings and developments, spokespeople said the activity is not unusual.

“There are costs associated with starting new facilities, however, our cash reserves are significantly larger than they were despite downturns in the financial markets. We are well regarded by the investment community.”

The view from 2021, the pandemic’s ripples

Madeline Tretout, a director at Fitch Ratings handling Marshfield Clinic’s analysis, said MCHS’s vertical integration with hospitals, clinics, and insurance plans is relatively unique.

“We don’t have that many providers that have the same structure, we have a few but not, but it’s not the norm. And in this case, it has been a stabilizing factor. During the pandemic, when you know, people weren’t going and seeking health care, the revenues at the Security Health Plan were stable and really helped to kind of stabilize the group when you look at all three pillars together.”

While she notes that MCHS’s growth since 2017 inches them closer to reaching its capacity for debt, its strategy has been sound, well thought out, and transparent.

“(It) has not been growth for growth’s sake. And we’ve had that conversation with them a lot because they did grow rather rapidly over a short period of time. And with that growth, there’s going to be integration.”

Tretout said as technology improves, that could mean there is no longer a need for particular staff in certain areas, which can cause frustration amongst staff that is not atypical. The pandemic’s impact, however, has thrown a wrench into the plans.

“Before COVID, over half the nation’s rural hospitals, were at risk for closure. It was a terrible time,” Alan Morgan, the National Rural Health Association’s chief executive officer said. “And then we shut down all services for the small hospitals, the federal government through a lifeline to rural hospitals nationwide.”

He was referring to CARES Act dollars, which he said helped to keep some hospitals on the brink of closure, open. However, Kevin Holloran, a senior director at Fitch Ratings said it was not a cure-all and “no one got rich on care’s money; let me dispel those rumors right now.”

“It helped alleviate some of those added expenses and lost revenues that we really experienced in that first wave, so to speak, but it by no means made up the hole that was created. If I had to give you a number, I would say it filled in maybe 40% of the operational hole that was there.”

“The problem is that that money is now run out,” Morgan continued. “And these rural hospitals are stuck with increased costs for delivering care, salaries that many times are double what they were pre-pandemic, but the underlying financial pressures are still there.”

Holloran published 2022 medians which noted surprising strength in 2021 audits, but believes the next medians will reverse next year given the challenging beginning to 2022 and the previously explained impacts the pandemic has had on the health industry. It stated it will likely take another two years to recover.

“About 75% of your revenues, they’re fixed every year; you just simply can’t pass it on to anyone else,” Holloran said. “And about 75% of your expenses, right now labor and supplies are under extreme duress and that is not a tenable long-term solution without some level of transformational care.”

In MCHS’s Fitch Ratings report, rating sensitivities that could downgrade its ‘A-’ rating include operating earnings before interest, tax, depreciation, and amortization (EBITDA) “falls below 6% for a sustained period.” Since the beginning of the year, MCHS’s EBITDA operating margin has been below 6%, but Holloran stated a year, or in this case nine months into a year, is not considered a sustained period of time.

While Tretout stays up on MCHS’s filings, she did not want to comment on current events until after discussing them with MCHS at the beginning of the year for the next review.

MCHS’s latest quarterly report

MCHS’s third-quarter report this week noted many of the same difficulties as in the previous quarter, along with updates on the progress of major capital projects. In addition, it stated, “As of the date of this filing, the Obligated Group has drawn fully their available $160 million lines of credit and is engaged in discussions with its credit banks for additional liquidity support.”

The system has had a negative operating margin of -4.1% from January through September; whereas, at the same time last year, it had a $32 million operating gain. The system has brought in more total revenue, increasing by 7.2% to $2.3 billion compared to the prior year thanks in part to the addition of new facilities in different areas. Those additions have helped to add new patients to the system and new insurance memberships. SHP also increased its Medicare Advantage premium per member.

However, more members mean more consolidated medical claims, the expense of which outpaced the increase in consolidated premium revenue. More facilities, capital projects, and inflation impacts on wages and supplies increased the system’s total operating costs to $2.4 billion. The cost of salaries, contract labor and benefits increased by $400,000 from the prior year to $4 million. MCHS’s investment portfolio also took a hit, non-operating losses net decreased by 433.3% or $213.9 million.

“As a result of these changes, positions in Telehealth, all positions, are -- as they are today -- are being eliminated.”

In 2001, Marshfield Clinic was the only provider in Wisconsin providing telehealth services. Two decades later, the services will continue for patients, but they can expect to see new faces. The 18 members of the Telehealth team were told their positions were being “eliminated.” 7 Investigates obtained a recording of that Oct. 27 meeting between the team, system leaders, and human resources.

“As all of you know,” Tammy Simon, Vice President for the Institute for Quality, Innovation, Patient Safety began, “as the health system is going through some difficult financial stress, all programs are being reviewed. And a decision has been made to take what we know as the Telehealth department today and put the operations pieces into Operations and then IT pieces into IT.”

The team is made up of a director, manager, three appointing staff, three nursing leads, and 10 registered nurses. The nurses, scattered throughout the service area, would regularly work with patients in their region so they could connect with doctors who are hours away.

Sources with direct knowledge of the team and changes, who did not want to be identified for fear of retaliation, told 7 Investigates the duties will be moved, largely, to primary care staff. IT staff are set to facilitate the technology portion of the appointments. This is on top of the staff’s other duties.

“It’s obviously our goal to retain valuable employees,” Brian Clark, Marshfield Clinic Human Resources’ business partner told the team in the meeting. “So we it’s our intent to try to find a comparable position for each and every one of you.”

For some, there are not comparable positions available within the system. Some of those individuals will be eligible for severance. However, for nurses, there are numerous positions open in other areas, with more than 200 RN positions available around the system as of Thursday. Some members described the positions to 7 Investigates as less desirable for reasons of hours, duties, and/or pay rate.

According to the severance policy, which according to the document was updated two weeks before the Telehealth team was given the news, a position is considered comparable if it meets all of these criteria:

• The employee’s wages in the new position would not be greater than a 15% reduction of the employee’s current base rate of pay.
• The new position must be at a location within 50 miles of the employee’s current work location.
• The new position must remain at the same or higher benefit level.

Sources said some nurses had been offered positions they do not want and at $2-4 less an hour. They added they believe dissolving teams like this is how the system is working to fill staffing shortages elsewhere.

“I just wanted to reiterate nobody, none of us on, on this meeting today are happy about this news,” Dr. Kori Krueger said during the meeting with the team. “And it is very challenging. And, you know, I’ve been impressed by those of you who we’ve talked to thus far at your commitment to your team, to the organization, but most of all to our patients and not wanting to see our patients have cared diminished in any way by changes in structure within the organization.”

MCHS receives some grant funding for the Telehealth program. In 2019, it was awarded $300,000 which is available through 2023. According to the Tracking Accountability in Government Grants System, it has a little less than $55,000 left of the grant.

MCHS responded to 7 Investigates’ request for an interview with a statement Thursday:

“The COVID-19 pandemic has advanced the normalization of delivering care when and where our patients need and want to receive it, whether that’s telehealth or at the nearest health care facility. We’ve been at the forefront of telemedicine. The adjustments we’re making are aligned with industry best practice and the model that other health systems are adopting – per the American Telemedicine Association – moving it from a singular department to an expectation or modality of care. Telehealth visits and in-person patient appointments are equally essential, and aligning the care delivery of both is a more efficient and effective care model. Telehealth brings specialty care to the patient instead of the patient traveling to the specialized services needed. Patients using this valuable service will see no change.”

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