Report on collapse of Lakes Region hospital points to a board too deferential to longtime execs
Apr. 25—Many factors led to the collapse of the nonprofit parent company that owned Lakes Region General Hospital and Franklin Hospital until last year, a report from state nonprofit regulators found.
But the group's board did too little to push back on hospital executives who were failing to see the reality of the 2008 recession and the implications of an aging and increasingly poor population, the report states.
"They went forward with an aggressive expansion campaign at a time when there were financial headwinds," said Tom Donovan, director of the Charitable Trusts Unit of the New Hampshire Attorney General's Office.
"They were listening to management," Donovan said, but the board could have been more skeptical.
LRGHealthcare filed for bankruptcy in 2020, and Concord Hospital bought Lakes Region General and Franklin Hospital in 2021. But the report points to problems that began in the late 2000s, actions of hospital executives and the deferential attitude of the board of trustees meant to oversee executives.
"Board members should have challenged management's recommendations to take on so much debt," the report states.
Even as the recession was gathering force, former CEO Thomas Clairmont and former CFO Henry Lipman pursued two expensive projects: an expansion of the Laconia hospital, and a switch to electronic medical records. But as the Lakes Region population got older and poorer, and more patients used Medicare and Medicaid insurance instead of private insurance that tends to pay hospitals more, the hospital was losing money, the report said.
Clairmont has since retired and Lipman now runs New Hampshire's Medicaid program, the health insurance program for poor and disabled people.
Former trustees interviewed by the Charitable Trusts Unit of the Attorney General's Office said they thought the board, Clairmont and Lipman were driven by a desire to serve the community, and did not adequately address the demographic and economic headwinds facing the hospitals.
Clairmont had worked at the hospitals for 40 years, Lipman for 30, the report stated, and board members tended to defer to their expertise. The report's account of interviews with board members said they deferred to the executives they were supposed to be overseeing.
Board members told the charitable trusts unit that Lipman's financial projections were overly optimistic, and Clairmont was emotionally attached to the expansion as his "legacy," as he approached retirement. The board did not bring on any consultants or seek any outside voices as it pursued the expansion, the electronic medical record system and the financing from the U.S. Department of Housing and Urban Development that supported both when the hospital was losing too much money to secure other financing.
The board did not neglect its fiduciary duty, the report found: they were not asleep at the wheel, but could have pushed back against the executives' plans that eventually caused the collapse.
Donovan said the Charitable Trusts Unit issued the report because the failure of a hospital is significant, and because it serves as a warning to other hospitals — and other boards, from those overseeing small nonprofits to those supervising colleges and school districts.
The report advises boards to seek out training and outside guidance, and avoid overreliance on executives.
