Determining the future direction of Brooks Memorial Hospital in Dunkirk comes down to the numbers – and many of them are not pretty.

Consecutive years of deficits – expecting to total more than $14 million by the end of 2015 – are forcing the board of directors and its administration to look at changing the direction of how health care is being delivered by the 117-year-old facility. No longer can it bank on the revenues to come from in-patient services. Instead, the pendulum has swung over the last decade to hospitals relying more on out-patient procedures.

Those surgeries that once required overnight stays have become out-patient operations. In 2012, out-patient surgeries represented 65 percent of all surgeries in community hospitals in the nation, according to the Healthcare Cost and Utilization Project Statistical Brief.

While that may be more efficient, it does take a bite out of the funds coming in to a facility that has a track record of bringing in more than $40 million in revenues each year through 2013, according to the Internal Revenue Service 990 filings made public by Guidestar.

“We really have to change our business model,” said Jack Davis, Brooks vice president for administrative services, in a phone interview last week.

What that model is, however, is something the Brooks’ board of directors is currently considering. The board includes Christopher Lanski, chairman; Andrew Burr; Louis DiPalma; Virginia Horvath; Walter Gotowka; Dr. Richard Milazzo; Dr. G. Jay Bishop; Steven Przybyla, Esq.; and Dr. Felixberto Cosico Jr.

Brooks, by board approval, is operating in a consultation agreement with the University of Pittsburgh Medical Center at Hamot. It is not an affiliate organization of that hospital.

Part of the current agreement includes Brooks maintaining two UPMC Hamot executives, including J. Gary Rhodes, interim chief executive officer, and Tracy Couse, vice president of patient care services. The agreement was signed in 2013. Rhodes is at the facility normally two days a week while Couse is currently overseeing the day-to-day operation.

Taking on the ‘shift’

Since 2003, a national trend has become quite evident in Chautauqua County: revenues are not keeping up with expenses in smaller, rural hospitals. Davis has been charged with taking the lead in explaining some of the trends that have led to the change, which include:

Medical surgical discharges declining by 30 percent in Chautauqua County through 2013, including a 26 percent decrease at Brooks.

From 2008 to 2013, the decline in discharges at Brooks was 17 percent.

From 2012 to 2014, the decline was 8 percent.

“This is not unique to our county,” Davis said. “This is pretty much what hospitals are facing. … This is just the trend going forward.”

Unfortunately, the dismal figures do not end there. “When there is a decline in volumes … it truly erodes the bottom line for hospitals,” he said. “These are not unique to Brooks or Chautauqua County. … It’s a decline overall in health care.”

Nationally, Davis said 57 hospitals have closed in the last two years and another 280 are on the cusp of failure and are currently “marginally putting along.”

‘Dwindling

market’

In crafting a new Brooks, the hospital is looking at potential demographics of the community it serves. While many come from Chautauqua and Cattaraugus counties, the main customers – about 70 percent – reside in the Dunkirk-Fredonia region. In fact, Davis notes, ZIP codes 14048 and 14063 represent 60 percent of Brooks patient population.

Good news? Local residents know where to find care. The bad? Dunkirk-Fredonia has lost population over the last three decades and will continue to going forward.

“You’re really dealing with a dwindling market overall,” Davis said.

It’s not forecast to get better. Hospital officials are projecting “significant” shifts in the region’s population, which is likely to maintain a decline. Some of those changes in the coming years include:

A decrease in children through age 17 of 3.5 percent.

A decrease of 7.8 percent in those aged from 45 to 64, who Davis notes are “traditionally the payers who we rely on who help pay for services at the hospital.”

An increase by 14.6 percent of those aged 65 to 84 and about 4 percent for 85 and above.

Just as important is how Brooks is making its money. Since 2013, the private insurer mix for payment has decreased from 19 percent to 16 percent. Medicare, however, has increased from 39 percent to 44 percent. “That shift is significant in terms of revenue actually received by the hospital,” he said.

No county model

Though it has a consultation contract with UPMC Hamot, Brooks is not receiving any cash infusion from the entity. Instead, it is paying a monthly fee and is being left to operate on its own. The arrangement has been far from fruitful.

Davis, who has worked in Pennsylvania, Kentucky as well as the north country of New York state, says one of the biggest pieces to the growing puzzle is the county’s overall vision for health care. Including Brooks, there are three other hospitals: TLC Health Network in Irving, which also is facing financial troubles; Westfield Memorial Hospital, which is working with Saint Vincent Hospital in Erie; and WCA Hospital in Jamestown, which also is tied to UPMC Hamot.

“In order to meet the needs of Chautauqua County we need to think a little bit of a bigger picture than simply as a stand-alone hospital and certainly not as stand-alone independent hospitals competing in a declining market with one another for what’s left in the market here does not work,” he said. “It really does not work anywhere.”

Davis believes change, especially for this region, is tough to accept. “To continue operations just as they are now … these are not favorable demographics,” he said. “One of the hard facts for our community … is it is difficult to be a stand-alone independent hospital facing these challenges.”

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