North Adams Regional Hospital: Attorney General's investigation yields 90-day notice violation, no penalty imposed
Leaders of the former North Adams Regional Hospital will not face penalties for failing to provide adequate public notice of their plan to close in 2014, the state Attorney General's office revealed Wednesday.
The decision was detailed in letters sent to both Berkshire Health Systems Inc. and to a representative of the citizen-led North County Cares Coalition.
An assistant attorney general says that because the former hospital's volunteer trustees "acted in good faith" through the institution's financial crisis, they deserve protection from legal consequences.
"While the closing of NARH was abrupt, deeply disruptive to the community, and did not comply with the notice requirements laid out in state law, the evidence reflects the board's sincere effort to keep the hospital open," wrote Mary A. Beckman, chief of the AG's health care and fair competition bureau.
The office said that as it wraps up work related to the 129-year-old hospital's bankruptcy case, it is ending its yearslong probe of circumstances of the closing.
Emily Snyder, a spokeswoman for the AG's office, said the decision is based in part on the finding that trustees for Northern Berkshire Healthcare Inc. did not violate their fiduciary duty to the organization or benefit personally from the closing. Even so, Snyder said the office disagrees with the failure to provide the 90-day notice required by state law.
The hospital was cleared and locked three days after the news broke.
Rachel I. Branch of North Adams, a member of the North County Cares Coalition, had written on behalf of the group's steering committee to the AG's office twice this summer seeking information on the state inquiry.
In an Aug. 2 letter, Branch said she was still waiting for a promised public hearing on the closing. "To our knowledge no one is being, or has been, held accountable for the hidden actions of what actually took place with only three days notice ...." she wrote.
On Wednesday, the AG's office notified Branch the probe had ended without a finding.
"I expected more from the Attorney General's office," Branch said Wednesday evening. "I'm extremely disappointed but I'm not surprised at all. I believe we deserved more. They never met with us."
Richard Dassatti, co-chair of the coalition, also expressed dismay over the AG's office move to close the case.
"I don't think they were ever advocating for the people of north Berkshire," he said.
The hospital's shuttering March 28, 2014, put 530 people out of work and removed a full-service hospital from northern Berkshire County. Since then, Berkshire Medical Center, which purchased some of the former hospital's assets, has provided forms of outpatient care.
Under state law, a hospital must provide roughly three months notice of a plan to close. A separate federal labor law sets requirements for advance notice based on a workplace's size.
Officials with the North Adams hospital announced the closing and locked the facility in the course of the same week.
Nonetheless, Beckman said the AG's office took into account the "considerable financial pressure" trustees were under as they worked to save the hospital on behalf of Northern Berkshire Healthcare Inc. She wrote that in a letter to John F. Rogers, an attorney for BHS.
Julia Bolton, the former chair of the North Adams hospital's board of trustees, had sent an open letter to the community on the hospital's final day saying the group pursued all avenues to preserve care.
"We are an all-volunteer, local board," she wrote on behalf of the board. "We live in this community and, like you, have depended on NARH and its affiliated practices for our medical care. We are heartbroken that so many of our friends and neighbors are losing their jobs, and that many more members of our community are facing disruptions in their medical care."
She went on to say the board had worked hard to stabilize the company's finances. "We have made difficult — and in some cases unpopular — decisions to reduce costs, including lay-offs, consolidation of services, and closure of high-cost units," she wrote. "These efforts have been particularly intense in the past few months, and until earlier this week, we had reason to hope that such an arrangement would be possible."
The Eagle could not reach Bolton for comment Wednesday on the AG's decision.
The day the closing was announced, trustees said in an open letter to employees and the community that efforts to find a new partner had been hurt by a sudden drop in revenue.
"Everyone in the organization, along with state and federal legislators, has been working to avoid this outcome," the letter said. "For many of us, today's news was unthinkable."
Beckman noted that law prohibits the AG's office from revealing details of its investigation. Despite that, her letters explain that the investigation considered issues that beset the North Adams hospital in its final days, including declines in patient numbers, competition, weakening reimbursement rates and rising debt.
Some of that debt was incurred, according to a 2014 report by the Massachusetts Nurses Association, by the purchase of a Williamstown care and retirement community in 1999. Though the hospital organization paid between $19 million and $25 million for the properties, they were sold a decade later for $7 million.
The institution's balance sheet had been shaky for years. It reported operating losses of more than $25 million in nine of its final 12 years, according to an analysis by The Eagle published in 2015.
Northern Berkshire Healthcare Inc. had $49.8 million in debts when it sought bankruptcy protection in 2011, emerging a year later with a new lease on life. But by January 2014, it notified state officials that it was about to run out of money and faced collapse. What followed was a second bankruptcy filing, this time under Chapter 7 — for liquidation.
That hunt for remedies, in the end, reflected well on the trustees' performance, earning them good faith credit with the AG's office.
Attorneys with the AG's office note that days up until the closing, trustees of the North Adams hospital were seeking affiliations with other organizations to avert closing.
Punishing them, Berkman suggests in her letter to Rogers, could discourage others from helping in similar roles.
"Volunteer trustees like those who served Northern Berkshire Entities," Berkman wrote, "are important to the continued functioning, vitality and connection of charitable organizations, including hospitals, to the communities they serve."
It was former Attorney General Martha Coakley, who grew up in North Adams, who had vowed her office would investigate the closing.
"Our office is very interested in how this happened," Coakley said in a visit to North Adams the week after the closing. "There are regulations that require 90 days' notice."
If the existence of the probe had not been made public then, the AG's office would likely not have announced this week that it is concluded, representatives of the office told The Eagle.
In closing out its review, the AG's office also addressed details of the shift of more than $1 million in endowment funds from the former hospital to BHS.
As part of its work supervising public charities, the office had to weigh in on a recommendation from the bankruptcy case trustee that funds given over the years to support care provided by the former hospital be shifted to BHS.
That money was not distributed to the hospital's creditors in the bankruptcy process. As of this spring, the endowment's value was listed in bankruptcy court documents as $1,135,285.90.
The plan to shift the funds still needs approval from a justice with the Supreme Judicial Court.
Beckman's letter to Rogers, the hospital attorney, spells out how income generated from the principal of the former North Adams endowment can be used.
Restrictions attached to use of that income remain in place, the AG's office says. They include use of proceeds for both diabetes care and to offset costs of maternity care for the poor.
On top of that, the AG's petition for approval of the transfer asks that proceeds be used "to benefit exclusively ... Northern Berkshire communities."
In her letter to Rogers, Beckman notes that BHS is the most appropriate recipient of the endowment funds because it hired former North Adams hospital workers, bought facilities "and ensured that medical care continued in Northern Berkshire communities through its satellite emergency facility, physician practices, and other outpatient services."
As it allocates proceeds from the endowment earnings, BHS is asked by the AG's office to use mechanisms it has in place to gather comment from people who live in northern Berkshire County on their health-care needs. "We fully expect that BHS will take community input to inform its decisions ...." Beckman's letter to Rogers says.
Michael Leary, a BHS spokesman, said the "mechanisms" mentioned by the AG's office include patient and family advisory councils in place throughout the county that it will continue to use to receive guidance about its services.
The councils, he said, are "made up of members of the community including those who have used or may use programs and services provided by BMC." He said the institution also gathers comments from a regularly updated health needs assessment and from its board of trustees, which includes members from the North Adams region.
"Those valuable community resources," Leary said in a statement, "collectively provide us guidance about the services we provide, services we should consider and how we deliver those services."
Ideas generated through those outlets will help guide use of the endowment earnings, Leary said. The amount of those proceeds is expected to be $50,000 a year or less, based on estimates supplied by the AG's office.
Snyder, the spokeswoman for the AG's office, said the letter to BHS makes clear it is expected to agree to continue to take counsel from people in the community. That is meant to ensure that income drawn from the endowment is spent in ways that address health-care needs for residents of the former hospital's market, she said in response to questions from The Eagle.
Reach staff writer Larry Parnass at 413-496-6214 or @larryparnass.
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