St. Francis tries
to halt critical
flow of red ink

The hospital's plucky sister-CEO
fears the nurses strike could
jeopardize its recovery

By Sally Apgar

When Sister Beatrice Tom saw that St. Francis Medical Center had lost almost $17.5 million in its last fiscal year, she knew she needed to act more like a CEO and less like a nun.

At the urging of her bankers, Sister Beatrice laid off 12 people and hired a professional turnaround team to cut costs and find new revenue streams to resuscitate the hospital's failing finances.

"Sister Bea realized you can't have a mission without a margin," said Terry Long, the chief financial officer she hired to help with the turnaround in July 2001.

Last week, St. Francis, which is founded on a mission to treat anyone regardless of cost or their ability to pay, faced a new financial crisis when 340 nurses walked out. The nurses were joined by another 1,030 nurses striking at Queen's Medical Center and Kuakini Medical Center.

Sister Beatrice admits the strike could further weaken or even lead to the closure of the financially frail nonprofit organization, which is in the worst financial shape of the hospitals affected by the strike.

Asked if the strike could close St. Francis, Sister Beatrice said: "Possibly. Certainly if the nurses stay out long enough or don't come back. And certainly, if there is a medical catastrophe."

She said the impact of the strike "could jeopardize the turnaround and we can't really see how we can recoup, especially after this week when we have lost more revenue."

The Hawaii Nurses Association, the union representing the striking nurses, has had its own certified public account review St. Francis' financial statements and feels management is exaggerating its financial problems. Privately, some union members see it as a ploy for public sympathy.

Sue Scheider, director of collective bargaining for HNA, said "according to our CPA's analysis, the whole St. Francis system (its nonprofit and for-profit entities) are viable and healthy."

She said "they have several (for-profit) enterprises, and our CPA says they can prop up the hospital."

Long said the for-profit arm brought in $700,000 last year, "and that won't prop up the hospital."

This year, St. Francis is still operating at a deficit. For the first four months of the fiscal year beginning July 1, it lost $650,000. Nonetheless, that is an improvement over the losses of $1.6 million for the same period the year before.

Cash flow is tight. Long confirmed that the hospital has seven to 12 days of cash on hand. "That doesn't mean we will be out of cash in a week. We still have some reimbursements coming in, but it's tight."

But HNA's Scheider said that St. Francis is also threatened "if they don't stay competitive at what they pay, because nurses will leave, care will degenerate dramatically and it's a death spiral from there."

Long said, "We gave the nurses our best and final offer. It was the most we could spend and still get back on our feet financially.

"We agree that we have to be competitive, but we were asking if they could hang with us for a year to get through the second year of our turnaround so we could get back in the black and then try to catch up (with the other hospitals on wages). It's why we only offered a one-year agreement."

Several nurses picketing in front of St. Francis Friday said they were aware that their employer could go under.

"I fear St. Francis will close," said Christine Kruchen, 52, a dialysis nurse who is familiar with St. Francis' finances from sitting on its labor management committee for the past few years.

"The nurses aren't responsible for where St. Francis' finances stand. Management is," said Kruchen, who doesn't want the nurses to become the scapegoat if the hospital closes.

Kruchen and fellow strikers say a shortage of nurses has led to longer shifts and heavier patient loads, hurting the quality of care.

Nurse Chad Shibuya, 31, said, "I feel as though I rush from patient to patient and can just do the basics but not really give the good quality care that was the reason I became a nurse."

Shibuya added: "The nurses shouldn't be blamed if St. Francis folds. We're not the reason they are where they are."

St. Francis is among the 30 percent of hospitals nationwide that are losing money as medical costs have escalated and state and federal reimbursement plans have been slashed. In 1997, Congress radically restructured Medicare reimbursements to help balance the federal budget. Some hospitals were able to restructure and cut costs. Others, like St. Francis, may have delayed cost cutting too long.

"Not-for-profit hospitals are really struggling all over the country," said Nancy Weaver, a healthcare analyst for Stephens Inc. in New York. "In urban areas, the strong hospitals are getting stronger and the weak are getting weaker."

St. Francis' problems are made more acute by the mix of patients it serves in accordance with its founding mission. In the fiscal year ending June 30, 2001, for example, it wrote off $15 million in bills that people could not pay.

The sisters of St. Francis first came to Hawaii in 1883. At the time, Hansen's disease, or leprosy, was ravaging the population and King Kalakaua asked the bishop of Hawaii to search the mainland for Catholic sisters to help Father Damien care for the afflicted.

The only order to answer the call was the Franciscan Sisters of Syracuse, N.Y. According to a hospital history, the sisters worked with leprosy patients throughout the islands for 40 years. In the 1920s, the sisters founded St. Francis Hospital to "serve the medical needs of people with communicable diseases, including leprosy, and the underprivileged."

In 1965, St. Francis brought the first dialysis machine to Hawaii. Now it has seven dialysis centers throughout Hawaii, performing more than 185,000 treatments on 1,000 patients a year.

In 1966, St. Francis hired Dr. Livingston Wong and began performing kidney transplants. By 1987, St. Francis was doing heart transplants, followed by liver and pancreas transplants in 1993.

Today, St. Francis continues to treat many of the sick that other hospitals avoid.

"Nobody wants to do the renal patients. They will do the acute care, but once they make them better they wait for us to take them for chronic care,'' said Sister Beatrice, who added that government reimbursements "barely cover the cost of (dialysis) treatment."

St. Francis also has a high percentage of patients on the federal reimbursement programs that have been cut. According to Long, about 60 percent of its patients are on Medicare and another 15 to 20 percent are on Medicaid. In the last five years, the hospital has lost more than $31 million in reimbursements.

With tired eyes, Sister Beatrice expressed disappointment Friday that the nurses, particularly in dialysis, walked out even though they believe in the mission.

"I was just so surprised that the renal nurses left. They have a close rapport with their patients and know the repercussions of leaving."

She noted that not all of the nurses walked out and that 20 of the 23 nurses in the hospice program resigned from the union so they could continue caring for their patients.

"St. Francis provides very special services to this state, which no else really does, with our renal and transplant program," said Sister Beatrice. "We feel we do the Lord's work, and we just have to hope and pray that he will see us through this."

St. Francis Healthcare System
Queen's Medical Center
Kuakini Health System

Hawaii Nurses Association

E-mail to City Desk


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