I covered a lot of ground at yesterday’s employee meetings

At my ‘Round the Clock meetings for employees yesterday and this morning, I talked about Dr. Frederick Goldberg, who will join CGH this month as Chief Medical Officer.¹ You can say hello to Dr. Goldberg at a welcome reception in the Personnel Lounge from 7:30 to 9:00 a.m. on Friday, June 22. His first day on-the-job will be the following Monday, June 25.

I told of Dr. Goldberg’s background: he was a Phi Beta Kappa² graduate of Franklin and Marshall College, where he won numerous prizes. He received his medical degree from the University of Pennsylvania, and he completed his internship and residency in pediatrics at Upstate Medical Center.³ He also holds a MS degree in health care management from Harvard University’s School of Public Health. Dr. Goldberg joins us after a five-year stint as Senior Vice President/ Chief Medical Director at Faxton-St. Luke’s Healthcare in Utica. I look forward to working with Dr. Goldberg, and I salute and thank Dr. Andrew Merritt, who has done such a good job as interim Chief Medical Officer, a position he promptly and graciously accepted last October.

I covered a lot of ground in yesterday’s employee meetings: (1) our financial performance so far this year; (2) how we fared in this year’s state budget process (with a caution about the cuts in Medicare payments proposed by the federal government for October); (3) an update on the status of the Berger Commission as it affects CGH and Van Duyn Home & Hospital; and (4) a discussion of the payments to our pension fund.

With respect to financial performance, I am glad to report that CGH met its overall budget through the first four months of 2007. That’s a big change from the same time last year. Through April 2007, CGH has a bottom line (what’s left after expenses) of $498,000 on total revenue of $40.5 million – this compares with a loss of about $1.3 million on total revenue of $36.2 million through the same period in 2006. So we are doing better than last year.
As it was initially proposed, the New York State budget would have cost CGH $938,000 annually. Many employees signed letters, Board members contacted elected officials, and members of the CGH family participated in the health care rally last March in Albany. As the budget was passed on April 2, about $495,000 was restored to CGH, but that still means the state budget will cost CGH $443,000 a year – a significant amount we have no choice but to absorb. I acknowledged State Senator John DeFrancisco who secured in the state budget a $200,000 grant for CGH patient care equipment. This is the second time Senator DeFrancisco obtained state funds for CGH –previously he secured $500,000 for the cardiac cath lab. Thank you, Senator!

I am not able to say exactly how CGH will comply with the decisions of the Berger Commission that became law on January 1. The Commission requires CGH to assume control of Van Duyn, to combine its skilled nursing beds with Van Duyn, and to downsize the combined total by about 75 beds. We continue in discussions about how to do this with the county and with the state. Recent developments: the county sued the state to stop implementation of the Berger decisions, and two area legislators introduced bills that would reverse the Berger Commission as it applies to Van Duyn and CGH. Meanwhile, we support the goals of the Berger Commission, we continue working on how to comply, and we are applying for state funds that have become available to assist compliance by facilities that are affected by Berger Commission decisions.⁴

Finally, I told employees about the multi-million payments CGH is making to the pension fund this year and next. I showed employees the accompanying graph, comparing CGH’s current payments to the pension fund with payments dating back to 1987. This picture clearly shows just how much cash CGH is using this year to keep the pension fund properly funded. Over $ 9 million.

The good news is that CGH has the cash to make the required payments to its pension fund.⁵ The bad news: spending so much cash on the pension plan means that buying capital equipment is difficult right now. We have to make priority decisions every day about the equipment or renovations that are the most important for spending the limited dollars we have available. CGH’s capital spending this year is the lowest it has been since I became president (September, 2002).

Why the big pension spending? Because CGH wages have grown significantly in the last five years. Since pension payments are based on employees’ wages, the cost of the pension fund has increased. Pension fund assets grow in two ways – by the appreciation of the invested funds and by employer payments. Because of higher wages, the pension plan assets need to be increased. Because the stock market’s performance in recent years has been lackluster, the pension fund has not appreciated as much as we would have hoped. That means higher CGH payments are required. This is not expected to continue indefinitely. As you can see in the graph, annual pension payments are forecast to come down to about $2 million-plus in two years.

At the meetings, I talked with employees about CGH’s future plans, about patient safety, and about patient satisfaction – important subjects, all. I’ll say more about them in future family letters.

CGH was very busy yesterday, and many employees could not take the time to attend my meetings. My thanks to all those who did stop in, and my thanks to all who did not attend because you were busy with our most important work – patient care.

Sincerely,

Tom Quinn, CEO

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¹ Dr. Goldberg’s official CGH title is Vice President - Medical Affairs and Chief Medical Officer (CMO). Dr. Martin Black, a past CGH Vice President – Medical Affairs, is also a Phi Beta Kappa member.

² Founded in 1776, the Phi Beta Kappa Society recognizes academic excellence in undergraduate liberal arts and sciences. Only about one percent of the nation’s college graduates are invited to become Phi Beta Kappa members.

³ Upstate Medical State is now called SUNY Upstate Medical University.

⁴ The New York State Commission on Health Care Facilities in the 21st Century, chaired by Steven Berger, recommended the closing of 16 hospitals and nursing homes across the state and the restructuring of 62 hospitals and nursing homes. Its recommendations automatically became law when they were not rejected by the State Legislature last year. In Syracuse the Commission recommended the combination of CGH and Van Duyn under CGH control. The Commission also decided that Crouse Hospital and SUNY’s University Hospital should merge as a private hospital that is not a part of the SUNY system.

⁵ Proper funding of its pension plan is critical to a hospital’s long term success. The principal reason Auburn Memorial Hospital filed for bankruptcy last April was the amount of money it owes for pensions. According to the Post-Standard (April 25, 2007), Auburn Hospital’s “debt consists of more than $13 million owed to the federal Pension Benefit Guaranty Corp.”