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The Brattleboro Retreat is locked in a dispute with the state Agency of Human Services over Medicaid reimbursements for providing mental health care.

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Cash-strapped Retreat pursues shutdown after rebuke by state agency

Legislators, state officials, and the historic psychiatric hospital itself characterize closure as a last resort that would jeopardize 830 jobs and thousands of patients

BRATTLEBORO—Following futile proposals for further state funding and a public rebuke by a state official holding the pursestrings, the Brattleboro Retreat’s board of trustees has voted to begin the process of closing or selling the psychiatric hospital that has been part of the region’s landscape since 1834.

Louis Josephson, the Retreat’s president and CEO, called the scenario “the last and worst option.”

Despite a letter to Secretary of Human Services Mike Smith that presented the decision as a fait accompli, Josephson said the most likely outcome of the Retreat’s financial woes will be a restructuring that would pare down the facility to 80 beds and use temporary traveling nurses to replace more expensive permanent medical staff.

The alternative would put 830 full- and part-time employees out of work and throw the state’s behavioral health-care infrastructure into turmoil.

Each year, the hospital, which has suffered from chronic financial stress for a number of years, serves 2,500 inpatients and 1,900 outpatients, as well as a number of other people and families in a constellation of community programs, including a Suboxone clinic for people with opioid-use disorder.

“When you are operating a $75 million company with less than 45 days of cash on hand, anything can happen,” Josephson said. “The boiler breaks, and suddenly you can’t make payroll.”

“Do we want to close?” he said. “No. But we are in a precarious spot.”

In a blistering press statement on Jan. 5, Smith called out the hospital’s leadership for believing that “continued financial bailouts from taxpayers is an effective long-term solution or is expected when Retreat management makes a financial miscalculation.”

“Despite the investment of millions of state dollars, Retreat management has failed to deliver fiscal stability to the institution,” Smith wrote.

The Retreat is essential to the state’s mental-health system, both in the programs it offers and in the capacity it adds, said State Rep. Tristan Toleno (D-Brattleboro), who represents the hospital’s district.

On Tuesday, Toleno characterized the situation as “complex.”

Any solutions are at more than a few days away, he said, noting that the Windham County legislative delegation remains committed to the Retreat staying open.

Toleno was among 11 of the county’s delegation in the state House of Representatives and both Windham County state senators who issued a joint statement in support of the facility.

“To say we are disappointed by Secretary Smith’s public statement issued today is an understatement,” the lawmakers wrote. “We have no doubt that the State of Vermont will continue to work, responsibly, in partnership with the Retreat to continue to provide care for all patients. We will work diligently with the Scott Administration and the Retreat to ensure that is the case.”

For her part, Department of Mental Health Commissioner Sarah Squirrell told The Commons on Jan. 7 that state officials have “worked hard in good faith to try and understand the situation.” The agency wants the Retreat to remain open, she said.

Simultaneously, Squirrell described the Retreat’s fiscal situation as “ongoing” and “significant” fiscal instability. She added that officials are encouraged by Josephson’s vision of a smaller and more sustainable version of the Retreat.

“The burden of responsibility to address the ongoing fiscal instability rests with The Retreat’s board and management,” she said. “The state’s additional financial support is only part of the solution.”

‘A Medicaid-dependent organization’

In 2011, after flooding from Tropical Storm Irene destroyed the Vermont State Hospital in Waterbury, the state urgently needed acute inpatient mental-health care.

The Brattleboro Retreat ultimately provided more than half of the state’s inpatient psychiatric treatment beds, all of the state’s child/teen psychiatric care, and took a major role in providing treatment for those affected by opioid dependency.

Josephson says that doing so transformed the hospital “into a Medicaid-dependent organization.”

In a Jan. 7 interview with The Commons, Josephson said that 70 percent of the Retreat’s revenues come from Vermont’s Medicaid program and that 50 percent of the Retreat’s inpatient and outpatient treatment is paid for by Medicaid.

“We’re incredibly sensitive to the Medicaid program, and we are serving the most challenging Vermonters, which is our mission,” Josephson said.

However, the Retreat hadn’t seen a reimbursement increase from Medicaid for seven years, Josephson said.

Four years ago, when Josephson started as the Retreat’s CEO, the management team started to look at trying to increase Medicaid reimbursements.

The hospital managed to get a rate increase from then-Agency of Human Services Secretary Al Gobeille.

Josephson said the Retreat signed a memorandum of understanding with AHS, cementing the agency’s commitment to look at the rates every year “so we didn’t go through with seven years of nothing.”

According to Squirrell, these meetings led to creating a funding package “in good faith” that included rate increases and long-term funding. This package was on top of a rate increase granted in 2018, Squirrell added.

The AHS and Retreat signed a memorandum of understanding in November. The MOU put several fiscal pieces in place totaling $16 million including:

• A $2.7 million rate increase that the AHS rolled into its fiscal year 2020 budget adjustment.

• An ongoing rate increase for fiscal year 2021 of approximately $2.5 million.

• $250,000 earmarked for capital funds for 12 new Level 1 beds that serve adult patients with acute psychiatric needs. Squirrel said these capital funds were in addition to a previously allocated $5.5 million to support the new beds.

At the start of 2019, Josephson said the Retreat team met with Gobeille. But as the process was ongoing, Gobeille stepped down in June 2019. Martha Maksym, his deputy, was named interim AHS secretary.

Josephson said Maksym was unfamiliar with the arrangement that the Retreat and AHS made. He said that to her credit, she sent a 10-member team to the hospital to do a financial audit and an operational review that lasted several weeks.

In October 2019, shortly after being named by Gov. Phil Scott as the AHS secretary, Smith signed off on a rate increase of nearly $5.3 million for 2020 and 2021.

Josephson said he told Smith and AHS that the Retreat was grateful but that the increase “would not hold us for very long.”

Cash crunch

That prophecy came true in the last quarter of 2019, when the Retreat saw a decline in its patient count.

“When the state says, ‘We gave them $2 million,’ they really didn’t give a $2 million check. They pay us for services person-by-person, day-by-day,” Josephson said.

If fewer patients are in beds, “we get less money,” he said. Meanwhile, he said, the overall cost of running a 130-bed facility doesn’t change.

“Even if we close a unit down for a week or two, the overall cost doesn’t go away,” he said. “For example, there might be fewer nurses working, but we’re still paying for all their health costs.”

Josephson said the Retreat “started to hit a wall” with cash flow. Part of the reason, he said, stems from the hospital’s mission as the mental-health-care provider of last resort.

The Retreat had been able to cover any cash crunches with money from a reserve fund, but Josephson said that fund is now dangerously low.

As a result, the Retreat went back to Smith on Dec. 30 and asked for an additional $2 million.

“We came back with our books and said, ‘Look, here’s where we are at, we’re struggling, we told you that the [rate increase] wouldn’t be enough, and let’s put our heads together and see what we could do.’”

Josephson paraphrased Smith’s response as “We don’t think you are a successful business, the state’s not in the business of fixing businesses like this, and so we’re done, we have no more money for you.”

The Retreat “didn’t go [to AHS] with hat in hand,” Josephson asserted. “We came up there with ideas.”

Smith wasn’t buying it.

In his media statement, the human services secretary rebuked the hospital’s lack of financial stability and called the Retreat’s request for additional funding “not the first, and is in fact just the latest in numerous and large investments Vermont taxpayers have made” in the hospital.

“I rejected that request for the following reasons,” he said. “First, their financial strategy appears to be built on a flawed premise — that continued financial bailouts from taxpayers is an effective long-term solution or is expected when Retreat management makes a financial miscalculation (budgeting a higher patient count).”

“Second, the Retreat has not made any significant management or strategic operational changes,” he continued. “And third, there is little clarity on where they stand financially and the prospects of better financial conditions in the future, including how they plan to pay over $1 million of taxes that are owed to the state of Vermont.”

“The Agency has provided every reasonable financial option it can, but the Retreat is clearly at a point where significant management and operational changes are necessary to save it — and the jobs there. It is the responsibility of the Retreat’s board to accomplish this task or assemble a team that can.”

Squirrell said that the Retreat has an inpatient capacity of 119 beds. The AHS pays “real and actual costs” for its 14 Level 1 beds, she said, and for the other 105 beds, the hospital receives Medicaid rates.

However, Squirrell estimates that these rates are 40 percent higher than those for other hospitals delivering similar programs.

When the hospital returned to the state last week, asking for more money, Squirrell said the agency needed to weigh what it provides one facility against supporting all its providers.

Ultimately, the Retreat is not a state department but a private hospital that contracts with the state to provide services, Squirrell said, noting that health-care providers across Vermont are experiencing similar financial pressures such as a shortage of local doctors and nurses and the need to contract for traveling nurses and doctors to fill out staffing levels.

The Retreat also grapples with unique issues such as maintenance costs for its aging buildings and information-technology infrastructure, she added.

What precipitated the hospital’s recent request for additional funds — a drop in the patient census — “does not align” with what other psychiatric programs in the state are experiencing, she said.

‘Not a threat’

Josephson said the Retreat board’s Jan. 2 vote to begin the process of either closing or selling the facility was a decision made in the service of the board’s fiduciary responsibility to the Retreat. He said he was duty-bound to let the state know that the possibility of a sale or closure would be explored.

“It was not a threat,” Josephson said. “It’s just the responsible thing to do and not to surprise the state.”

Josephson said it was not his intention to have this news made public right away, but once it did, it led to Smith’s Jan. 5 statement — something that rarely happens on a Sunday in Vermont.

In a statement released on Jan. 6, Board Chair Elizabeth Catlin wrote that the Retreat “remains committed to its core mission of providing the people of Vermont with high quality, comprehensive, and compassionate mental health and addiction care.”

Catlin also expressed the board’s “full and ongoing confidence in the Retreat’s senior leadership team. We will continue our efforts to work with all willing partners at every level of government to arrive at solutions that will allow us to achieve financial sustainability.”

Josephson took issue with Smith’s characterization that the Retreat was mismanaged, since AHS audited the facility in June and the secretary himself signed off on a rate increase in November.

“I respect his opinion, but if he has something specific that we should have done differently, I’d be welcome to hear it,” he said.

A third path?

In his Jan. 5 statement, Smith wrote that “I understand, however, the pressure that closing [the Retreat] would put on the mental health system, and the adverse fiscal impact it would have on the Brattleboro region” and that more discussions between AHS and the Retreat were planned for this week.

At the same time, Smith wrote that “just asking taxpayers to put up more money, in order to avoid necessary change, is not an option I can support, or an option I believe the Governor or Legislature would want me to bring forward.”

Josephson said that while a sale or closure of the Retreat remains a possibility, a more likely option will be a downsizing of the facility.

“We’re developing a plan for our board,” he said. “We’ve gotten into this position because we care about Vermonters with mental illness and we don’t like to say no. But we might have to say no, that we can’t have a 115-bed facility and take all patients that nobody else wants to take in the system and not get paid enough to do that work.”

Josephson said the Retreat is considering that, if there is no further support from the state, cutting back to 80 beds. Staffing would be reduced accordingly by using fewer traveling doctors and nurses. Other economy measures would be considered.

The Retreat should have a better idea within the next week or two whether this plan is possible. Josephson said it could be, but “we’ve resisted [cutting back], because we have been so mission-driven.”

The fear is that a Retreat with fewer beds would mean that more people who need help will be unable to get it.

“We know Vermont is not a wealthy state, and we know there is not endless money to pay for things. So, if there’s no money, we will have to adapt.”

Economic impact

With the closure and decommissioning of the Vermont Yankee nuclear power station, the Brattleboro Retreat is now the biggest employer in Windham County, with about 830 people, a workforce that can be measured as the equivalent of 650 full-time employees.

Josephson said officials at the Brattleboro Development Credit Corporation, a nonprofit economic development organization, told him that losing the Retreat would have “a generational impact” on the county’s economy.

“After losing Vermont Yankee, we can’t lose 800 more jobs,” said Josephson.

“If we end up shrinking, the governor has to understand the impact of that decision. We understand there may be no more money coming from the state, and we are trying to prepare for that,” he said.

While he expressed sympathy for the position that Secretary Smith and Governor Scott are in, he would like to know what the plan would be for a mental-health landscape with either a downsized Retreat, or no Retreat at all.

Josephson said that the talk of closing the Retreat “is not a threat,” but something to prompt the state to come up with a long-term plan for the delivery of mental-health services.

“We’ve been here for 185 years, and Vermont has never had a mental health system without the Retreat,” he said, “but that doesn’t mean we have to exist.”

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Originally published in The Commons issue #543 (Wednesday, January 8, 2020). This story appeared on page A1.

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