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January 29, 2019

Penobscot Valley Hospital files for Chapter 11 bankruptcy

Courtesy / Maine Hospital Association Penobscot Valley Hospital filed for Chapter 11 bankruptcy protection Tuesday morning, citing the economic blow to the area of the area's major employer, LIncoln Paper and Tissue, closing in 2015 and lack of Medicaid expansion.

Penobscot Valley Hospital filed for Chapter 11 bankruptcy protection Tuesday morning, citing the economic blow to the area of the area’s major employer, Lincoln Paper and Tissue, closing in 2015 and the lack of Medicaid expansion prior to Gov. Janet Mill's recent reversal of her predecessor's policies blocking the voter-approved expansion.

The 25-bed hospital in Lincoln will remain open and operating while it works through the process, which is expected to last 12 to 18 months, officials said in a news release. The town of about 5,000 residents is in Penobscot county, 50 miles north of Bangor.

The ripple effects of the mill closing “have led to high unemployment rates, loss of commercial health insurance coverage, and families moving out of the area,” the release said. “In-patient admissions have decreased 65% and overall patient volume has decreased by nearly 10% over the last four years. When the mill closed, it meant a loss of more than 900 jobs in the area, officials said at the time.

“On a state and national level, the lack of Medicaid expansion and cuts to reimbursements have also had a negative impact on hospital revenue,” the release said.

“The hospital is not closing,” said Crystal Landry, hospital CEO. “Patient health remains our top priority and we will continue to provide excellent healthcare to our community during the bankruptcy process.”

Last March, the hospital cut 17 positions, and said it had reduced its full-time staff since 2014 by almost 25%.

In 2016, when staff cuts were announced, the hospital said it had $1.2 million in operating losses since 2012, and cited the declining regional population, the state's failure to expand Medicaid coverage, a reduction from 100% to 65% in state payments of Medicare bad debts, and increase in the number of high-deductible health insurance plans.

Landry said in the Tuesday release that the issue is “legacy debt.”

“We have made tremendous strides over the last three years in bringing our operational costs in line with revenue,” she said. “Chapter 11 allows us to restructure that debt so we can keep our doors open and ensure that our community continues to have a hospital close to home.”

Administrators expect minimal impact on operations, services and staff during the bankruptcy process. Keeping the hospital open also keeps jobs in the community, the release said.

“Penobscot Valley Hospital anticipates that all employees will be paid in the ordinary course and no layoffs are planned,” the release said. “Over the last three years, the hospital has made numerous changes to operations and is operating efficiently with current service levels.”

Penobscot Valley Hospital management said they expect to emerge from the bankruptcy process in a much stronger financial position. Gov. Janet Mills, earlier this month, signed an executive order to expand Medicaid, which will mean an estimated 70,000 more state residents will be covered. Industry experts have said the added reimbursements and patients seeking care because they are insured is key to keeping rural hospitals open.

“Our patients will continue to receive excellent care here at Penobscot Valley Hospital,” said Dr. Paul Turnquist, president of medical staff for the hospital. “There will be no compromises when it comes to ensuring patient safety and high quality interactions with medical staff. Healthy patient outcomes remain our No. 1 priority.”

Rural hospitals are considered at risk, according to a Portland bankruptcy attorney interviewed for the Mainebiz Biz Money column.

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