NARH denied federal status

Tuesday July 26, 2011

NORTH ADAMS -- Although North Adams Regional Hospital recently received notice that its application for designation as a Critical Access Hospital has been denied by the federal Center for Medicare and Medicaid, local health care officials believe the hospital can still emerge from Chapter 11 bankruptcy protection proceedings as a viable entity.

Newly named NARH President and CEO William Frado said on Monday that the hospital's application was denied on a technicality.

"The designation requires our hospital and the hospital nearest to us to be 25 miles apart," he said. "Our problem is, the federal government interprets Route 7 as a major highway. Because of that interpretation, Berkshire Medical Center is not 25 miles away from us. It would have been nice to get the designation, but our financial projections indicated that we'll be able to come out of bankruptcy as a stand-alone viable hospital."

In June, Northern Berkshire Healthcare, the hospital's parent organization, filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court in Springfield, a move officials say was necessary to yield an agreement that would restructure and permanently reduce the organization's $43 million in bond debt. NBH's overall debt, which includes capital leases and mortgages, is $49.5 million.

"Our filing has had almost no impact on our operations," Frado, who also serves as president of NBH, said. "If you take out the costs of the bankruptcy proceedings-- lawyers and consultants -- the hospital is actually doing a little better than breaking even."

He added: "Our volumes have not dropped. It's almost a non-event. People are obviously interested in it, but not a lot has happened since June 13."

However, the bankruptcy proceedings are expected to gain momentum over the next few weeks.

"We plan to file our plan of reorganization with the court at the beginning of August," Frado said. "It's our concept of what we need to do to financially restructure and to succeed."

A majority of the organization's bonds are held by Nuveen Investments, an investment firm that specializes in tax-exempt bonds. The remainder of the bonds are held by various unsecured creditors.

"This is not unique to us," Frado said of the hospital's financial troubles. "It's something that's happening around the state and the nation. Part of the problem is the continued reduction in Medicare and Medicaid reimbursements, which make up 50 percent of our patients."

He noted that Quincy Medical Center, a much larger community hospital, recently entered bankruptcy protection proceedings.

In June, NBH CEO Richard Palmisano said the organization hoped to emerge from the bankruptcy proceedings within six months with a settlement that structures its debt to be consistent with its overall valuation or worth. That figure will be determined by the courts.

NBH administrators began negotiations with bondholders last September as part of a multi-pronged plan to rightsize its debt. It includes the sale of Sweet Brook and Sweetwood in Williamstown; filing for Critical Access Hospital status; the reduction of some 40 positions at NARH; and affiliating with another health care organization.

A critical access hospital is a small, rural hospital that receives special reimbursements from Medicare.


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