NORWICH – Taking an impending budget crisis into their own hands, officials at Chenango Memorial Hospital in Norwich last week invited local and state politicians in to see the potential effects firsthand.

“We wanted to give you a glimpse into where things might go,” said CMH CEO Dr. Drake Lamen as he addressed a boardroom full of staff and political figures last Thursday. Among those gathered were Assemblymen Cliff Crouch and Pete Lopez, City of Norwich Mayor Joe Maiurano, Board of Supervisors Chairman Dick Decker and a representative from the office of Sen. James Seward.

After some rough years in the late 1990s, when the financial picture was bleak for the local hospital, CMH has been able to maintain a narrow profit margin for about four years. But that may change if budget proposals made by Governor David Paterson come to fruition.

CMH’s Chief Financial Officer Bob McCarthy presented a sobering roundup of the hospital’s finances, and how proposed cuts would affect the local operation. “Since 2005, we’ve maintained a slim profit margin,” McCarthy said, “and in only one of those years have we exceeded the 4 percent generally considered necessary for reinvestment” in facilities and equipment. The hospital estimates a 1.5 percent profit margin for 2008.

But even that scant amount is in jeopardy in 2009 if Paterson’s proposals go through. “We’re looking at going from a $1.4 million net revenue down to $78,000,” McCarthy predicted. “The total impact would wipe out all the scratching and clawing we’ve been doing over the past five years with the stroke of a pen.”

McCarthy explained in detail for those gathered the uniqueness of the hospital’s business model. While a not-for-profit institution, McCarthy explained that meeting, and exceeding, expenses was necessary not only for the hospital’s continued operation, but for longer-term reinvestment in facilities, personnel and up-to-date equipment as well.

“People may say they remember the charges on their last hospital bill – how can they possibly be struggling to have a profit margin?” McCarthy said. The answer is a complicated one. While CMH levies charges for services, what they charge isn’t always what they end up getting paid. In fact, McCarthy said, CMH averages 42 cents on the dollar in reimbursements.

“Reimbursements are determined by a cadre of third parties who dictate what we get paid for these services,” McCarthy explained, referring to Medicare, Medicaid, HMOs and insurance companies. “The lack of control over how much money we actually get sets us apart from the hardware store in terms of a business model.”