Interim CEO discusses hospital’s future

IRVING – Despite recent turmoil at Lake Shore Health Center – a closure plan and Chapter 11 Bankruptcy filing – Interim CEO of Lake Shore John Galati hopes timing will align for a seamless sale.

In a recent interview with the OBSERVER, Galati, who is familiar with the area from working at WCA, said his goal coming to Lake Shore is to ensure health care continues to be offered locally.

“I think it is important for communities that they can resolve these issues and have care offered locally instead of having to travel distances because as we know and as I have learned, weather conditions change rapidly,” he said.

He said his role in this time of change at the hospital is to bring stability through the Chapter 11 restructuring process.

Also attending the interview was Scott Butler, divisional director of business development for TLC Health Network, who made note that the hospital is not just focused on finances but also on restructuring operations.

“Financing is only one part of the puzzle and with the bankruptcy we still have to reinvent ourselves, trim our costs and reorganize. That has already been in the works. As of October we were at 450 (full-time equivalent employees) and now we are at 300 and most of that was through natural attrition. So, our costs have been trimmed dramatically and we are doing more to shape ourselves to our vision of the future based on what we think this community actually needs. So, that is in the works and it is not as if we are ignoring that part of the puzzle,” he said.

Butler said he believes there is a perception of Lake Shore mismanaging funds by comparison of Brooks Memorial Hospital, but said this is not true.

“Sometimes I think the community has this perception that Brooks is very frugal with their finances and good with their money but a part of that was because they had services that were very successful like obstetric care that people from around the area would come for, that our hospital didn’t have. It wasn’t a matter of mismanagement of funds necessarily; they had more revenues coming in in the first place,” he said, also noting lower reimbursements from Medicare and Medicaid and a lack of leverage with insurance companies for higher reimbursements.

He also pointed out the difference in the care offerings between the two hospitals was by design in order to not duplicate services between the two hospitals. He also said any decisions up to this point to downsize or not were made by the Lake Erie Regional Health System of New York board.

Galati said he believes many of the hospital’s services like emergency, acute care, intensive care, surgery, outpatient clinics, home health care and even nursing in a rehabilitation capacity can be viable services with some changes.

“I think these are all viable services going forward just downsized, more concentrated,” he explained.

Galati explained efforts toward a sale are twofold: First to secure short-term financing and second is a long-term plan.

He said the short-term financing the hospital is looking to receive is the emergency funding found by state Senator Catharine Young’s office through the Dormitory Authority of New York state, a division of the Health Department. He said this loan must be approved by the bankruptcy court. A hearing on this is scheduled for Monday.

Butler also noted the hospital is awaiting reimbursements from the Federal Emergency Management Agency for completed projects. He said once the money is refunded for the approved projects, the hospital can use the funds for operating costs. However, this also comes down to timing.

Galati said the long-term plan involves matching Lake Shore’s interests with interested parties’ interests and determining their role going forward.

“For the long-term plan, there’s a due diligence process that the parties are doing and that is ongoing as we speak – to look at operations and how they can fit in. Then they will assess their actual level of participation, whether it’s more financial, whether it’s as an operator or if they just say, ‘We are not interested at this time,'” he explained.

Galati also confirmed that there has been more interested parties approach the hospital than just confirmed bidder Tony Borrello, a local businessman.

Galati also noted that the TLC board, LERHSNY board and the bankruptcy court would have to approve a sale. He said the Health Department only becomes involved if the operator changes. He said in New York state only nonprofits can operate hospitals, although for-profit organizations can manage them.

Galati said Lake Shore’s relationship with Brooks going forward will be whatever makes sense.

“There are still benefits to not duplicating efforts and common sharing of resources. So, in any event you look to see, ‘How do we maximize the resources available?’ Because no one wants to duplicate services,” he said.

He concluded by saying Lake Shore is still open for business.

“We are open and still taking patients and people can come here for quality services,” he added.

Lake Shore filed a closure plan in October due to a reported $9 million deficit for 2013. At the meeting, Butler disputed this number, saying the amount Lake Shore owes to Brooks is closer to $5 million – $3 million to be refunded in a Heal grant and $2 million from shared salaries – however he did not have information on the loss from operations during that time. No closing date has been approved and it is hoped short-term financing will be approved by the bankruptcy court at the hearing on Monday, which will allow the hospital to remain open until a sale is finalized. At its last hearing, the bankruptcy court approved Lake Shore to use the remainder of a $1 million loan from Brooks to remain open until Monday’s hearing.

Comments on this article may be sent to ngugigno@observertoday.com