Alarming and painful as the announcement has been, the April 2013 closure of St. Andrews emergency room, and the accompanying loss of its hospital license, is not unfamiliar to smaller communities across the state and the country.

“When a hospital is unable to survive, the challenge is to find alternative models of healthcare delivery,” said John Gale, a research associate at the Maine Rural Health Research Center, a part of the Muskie School of Public Service at the University of Southern Maine.

Though few and far between those models do exist, as communities and their local nurses and doctors assume a stronger role in defining their own healthcare needs. In Alaska and Montana, rural health advocates are developing emergency care treatment clinics for “frontier” communities, where weather and distance preclude patients getting immediate transport to a hospital. In responding to those circumstances, the Frontier Extended Stay Clinic model may hold keys to evolving emergency and inpatient care in Maine.

These complex healthcare issues do not get a lot of air time, but they reflect changing notions about what smaller hospitals are, and what they might become.

“Although we picture hospitals as places with people lying in beds, that role is gradually going away,” Dr. Wayne Myers wrote in The Rural Monitor, a newsletter that serves the Rural Assistance Center. Myers is a retired pediatrician, who has practiced in Alaska and Kentucky, and now lives in Maine. “Granted, there are exceptions, but the long-term trend is against acute inpatient care in small non-specialized facilities. The small hospitals I'm familiar with get 70 percent of their money from their clinics and the middle-sized hospitals over half. Hospitals should be looking at every community health need and thinking whether and how they can meet it.”

That is the type of discussion in which Gale hopes the St. Andrews community can engage. He currently sits on a team that addresses the role of Medicare in rural healthcare, assessing the performance of critical access hospitals. He understands the importance of hospitals and healthcare in the local economy, and urges community leaders to talk about community needs.

“You've got to ask, is it a necessary system,” he said.

In 2009, Gale and Jennifer Lenardson wrote a brief for the Maine Legislative Policy Forum on healthcare, describing the state of Maine hospitals. At that point there were 42 (today there are 39) general and specialty hospitals, with 15 of them classified as critical access by the Centers for Medicare and Medicaid Services. That means they are small, with 25 or fewer beds, are low-volume, in rural areas, and receive cost-based reimbursement from Medicare and MaineCare to ensure a degree of financial stability. 

St. Andrews is one of those critical access hospitals, and among the smallest. However, it cannot financially sustain itself according to its trustees and it struggles to remain a viable healthcare facility, a struggle that has played out in other small peninsula towns on Maine's coast. 

In 1988, Castine, a small coastal town in Hancock County, lamented as its own longtime hospital closed. Today, that hospital serves as a clinic, and the town's ambulance service no longer exists; volunteer EMS firefighters respond to emergencies while ambulances are called from 30 minutes away. Blue Hill, another small town, almost lost its hospital in the 1990s, before it became part of the Bangor-based Eastern Maine Healthcare Systems, a growing network of healthcare organizations similar to the Portland-based MaineHealth, of which St. Andrews is a subsidiary.

At one point, there were almost 60 hospitals in the state, said Frank McGinty, executive vice president and treasurer of MaineHealth.

Many Maine hospitals were established, or energized, following the Hill-Burton Act, signed by Congress in 1946, which funded hospital construction and modernization around the country. With the funding came the expectation that hospitals provide care to all citizens, including those unable to pay. But 40 years later, those smaller rural hospitals began to close.

In a 2003 report by then U.S. Inspector General Janet Rhenquist, the federal government observed that from 1990 to 2000, 208 rural hospitals across the country closed. The closures were generally attributed to fewer patients, as well as business decisions, such as relocations, consolidation or mergers.

During that same decade, both St. Andrews (25 beds) and Miles Memorial (38 beds) hospitals became part of what would become MaineHealth, which has been growing over the past 15 years. In 1996, while Maine Medical Center Foundation was laying the foundation of an integrated health service system, St. Andrews signed on, and a year later Miles followed. The next year, the collaboration assumed its current name, MaineHealth, and business grew.

In 1999, MaineHealth's first board president, James Orr III, spoke about its mission. “In January 1997, our organization became 'MaineHealth.' The new name was adopted to begin to articulate for the public that this was something new and different. Our tagline declared us to be 'The Care you Need, the People you Trust'; familiar people and organizations working together in new ways.”

Who is MaineHealth? MaineHealth includes:
Lincoln County Healthcare (Miles Memorial Hospital and St. Andrews Hospital & Healthcare Center)

Maine Medical Center

Maine Mental Health Partners (Spring Harbor Hospital)

Pen Bay Healthcare (Pen Bay Medical Center)

Southern Maine Medical Center

Waldo County Healthcare (Waldo County General Hospital)

Western Maine Health (Stephens Memorial Hospital)

HomeHealth Visiting Nurses

Maine Physician Hospital Organization

NorDx and Synernet

Affiliates of MaineHealth include: MaineGeneral Medical Center

Mid Coast Hospital

New England Rehabilitation Hospital

St. Mary's Regional Medical Center

The Portland-based umbrella healthcare organization now incorporates a variety of entities, including hospitals, elder care facilities, doctors groups, visiting nurses and mental care services that stretch from Wells to Belfast, and inland to the western mountains.

It is the largest healthcare organization in the state, rivaled only by Eastern Maine Healthcare System in Bangor, and it owns the largest hospital in Maine, Maine Medical Center. MaineHealth stretches over a complex interweave of smaller nonprofits and functions purely administratively, guiding its members toward a common goal as stated in its 2010 tax return: “To lead the development of a “premier community care network that provides a broad range of integrated healthcare services in Maine and northern New England, and to organize services to improve the health status of the populations served in a cost-effective manner.”

Statewide, nationwide phenomenon

The growth of healthcare networks like MaineHealth are not uncommon. In the August 20 issue of the New Yorker, surgeon and writer Atul Gawande took a hard look at the function of big chains, such as the Cheesecake Factory restaurants and mass production of services, and how medicine might learn from some of those business techniques.

“American hospitals tend to be community-based,” he wrote. “But that's changing. Hospitals and clinics have been forming into large conglomerates. And physicians – facing escalating demands to lower costs, adopt expensive information technology, and account for performance – have been flocking to join them.”

That holds for Maine, where MaineHealth is replicated in concept by Eastern Maine Healthcare Systems and MaineGeneral Health in Augusta.

“MaineHealth is in good financial condition,” McGinty said, citing its 2012 expected income of $1.6 billion. Eastern Maine reported similar income in its 2009 tax return, proving that healthcare in Maine is big business.

McGinty will report the fiscal conditions of each MaineHealth member to the organization's trustees this week. The fiscal year of each member organization concludes at the end of September. The board comprises community representatives served by the MaineHealth organizations, and they convene in meetings not open to the public; this time, they will gather in Biddeford on Friday, Sept. 6.

Yet the recession, unrealized Medicare payments and capital expenditures have all worked to strain MaineHealth this year, and while the organization as a whole is financially sound, it will fall short of its annual financial goals, McGinty said. Last May, Standard and Poor's Rating Services revised its outlook from stable to to negative, while affirming its AA- credit rating on MaineHealth (Eastern Maine Healthcare System's current rating is A-). Analysts at Standard and Poor's said in May that MaineHealth was strong and characterized by steady earnings, excepting the level of unrestricted cash and increased receivables from the MaineCare (the state's Medicaid) program.

McGinty said the depletion of cash resources is attributed to MaineHealth's $150 million investment in a shared health records initiative across 11 counties, as well as flat and reduced state reimbursements. That cash depletion leaves MaineHealth with a 100 days of cash on hand, which he defines as an historic low.

He expects to report that five out of nine member organizations will fall short of their financial goals, three of them falling far short. This is not, he said, a problem limited to the smaller or more rural institutions.

“Waldo County and western Maine (Stephens Memorial Hospital in Norway) have enjoyed very good financial results, and both expected to do well,” he said. “They have the support of cost reimbursements and many more privately insured patients than St. Andrews.”

He also said that, like St. Andrews, both of those hospitals are critical access hospitals, meaning that they too are receivers of at-cost Medicare reimbursements. The difference lies in volume; where Stephens sees an average of 17 or 18 patients per day in the emergency department, St. Andrews on average sees but three.

The MaineHealth problems are no more serious than other Maine hospitals, he said, citing the possible sale of Mercy Hospital in Portland to the Massachusetts-based for-profit Steward Healthcare System as a solution to ongoing financial concerns of that Catholic hospital.

Those universal driving problems include flat or declining state and federal reimbursements; increasing charity care; a reduced demand for hospital services resulting from a deep recession; the increase in price comparison and consumer discretion, as a patient is more apt to shop around for lab work, radiology and other routine healthcare; and the reliance on Medicare funding to keep hospitals afloat.

“People travel where prices are lower,” McGinty said.

St. Andrews prices for those services are among the highest in the state, he said, because the volume of people seeking healthcare is smaller and the hospital's dependence on Medicare reimbursement results in a combined strain.

Who calls the shots

As MaineHealth grows into the largest healthcare conglomerate in the state, the number of applications for its mergers and acquisitions have appeared more frequently before the state's licensing and regulatory services, a division of the Maine Department of Health and Human Services. In 2008, MaineHealth sought state approval to merge with Southern Maine Medical Center, followed in 2009 with Waldo County General Hospital and 2010 by the MaineHealth and Pen Bay Healthcare merger.

With each of those mergers, the hospitals, doctors groups and nursing homes became subsidiaries of MaineHealth, setting their own budgets with their own boards of trustees, yet ultimately governed by a MaineHealth board of approximately 25.

MaineHealth negotiated a consent decree with Maine's attorney general under the Antitrust Improvements Act for its acquisition of Southern Maine Cardiology in Biddeford. Most recently, MaineHealth sought certificate of need approval from the state to acquire the 58-bed Henrietta D. Goodall Hospital in Sanford. The acquisition, approved last month by the state's Department of Health and Human Services, adds – pending MaineHealth and Goodall board approvals – one more hospital to MaineHealth, which includes Brighton Medical Center, St. Andrews Hospital, Miles Memorial, Stephens Memorial, Jackson Brook Institute/Spring Harbor, Waldo County Healthcare, Southern Maine Medical Center, and Pen Bay Medical Center.

MaineHealth is also in preliminary discussions with Memorial Hospital in North Conway, N.H., a hospital that already shares some services with Maine Medical Center, McGinty said. 

With the MaineHealth structure, member organizations all provide some level of financial support to help sustain and grow MaineHealth programs. According to the certificate of need application for the Goodall hospital, dues are currently .045 percent of a member's net operating revenue. For the Goodall hospital, this is approximately $500,000 on revenues of $98.5 million. In the application, MaineHealth said it did not anticipate a significant increase in dues over the next three years.

Adding its subsidiaries together, MaineHealth is one the largest nonprofit networks in the state. MaineHealth is purely a business/administrative organization with just 149 employees. Its largest member is Maine Medical Center in Portland with a 2009 income of $797 million.

In that same year, St. Andrews Hospital, itself overseen by the 21-member board of Lincoln County Healthcare, reported revenue of $21 million and expenses of $20 million, with a cushion left over of $628,085. That year, the hospital reported 3,334 visits to the emergency room.

MaineHealth reported on its own 2009 tax return a revenue of $29.5 million and expenses of approximately $29.7 million. Its highest paid officers included President William L. Caron Jr., who received a total compensation package of $1.15 million, followed by McGinty, who made $654,375 that year.

MaineHealth affiliates “contract with MaineHealth to work cooperatively on clinical integration and community health improvement initiatives,” said Betsy Johnson, a manager of marketing and communications for MaineHealth. Members, on the other hand, take advantage of operational and administrative services, she said. That can include technology, legal and planning services, as well as health and employment insurance, and market research.

“As separate organizations, our members retain a very large degree of control over their organization,” Johnson said. “Local boards and local management teams handle not only the day-to-day operations of their organizations, but also lead planning and budgeting processes. The MaineHealth board does review and need to approve final budgets and asset decisions.”

McGinty said, “MaineHealth reserves the power to approve plans and budgets, but the hard work is done by the organizations themselves.”

To retired Maine pediatrician Wayne Myers, the time has come for healthcare to look at itself, eyes wide open.

“The Affordable Care Act requires a not-for-profit hospital to do a 'community needs assessment'; that is, in return for its reprieve from paying corporate taxes, to study the needs of its local people and how it can meet them,” he wrote, in his article “Look What's Coming,” in the Rural Monitor. “All the premature death in rural America suggests we need more focused, science-based effort on helping people stay healthy.”

“Making this happen will take lots of changes,” he wrote. “There is a body of knowledge on what works and does not work in community health promotion. That technical knowledge will have to be brought to people actually doing the work. Our national public health organizations and agencies focus on large populations and will have to learn to find rural America. Rural health and management professionals will have to learn new skills. Targets and best practices will have to be updated. Payment patterns will have to change.”