Hartford Business Journal

HARTFORDBUSINESS.COM | | MAY 15, 2023 21 pace in Connecticut, Shmerling said he sees this as a way of thriving in a changing landscape. "What we've tried to do is be Swit- zerland," he smiles. "Children should have access to care regardless of what health system they go to. How do we have access, then, to those systems so that those children have access to our specialists?" COVID challenges Connecticut Children's financial turnaround pre-pandemic was apparent in both top- and bottom-line growth. The medical center saw its operating revenues climb consistently from fiscal years 2015 to 2020, from $311 million in fiscal 2015 to $399 million in fiscal 2020, a 28% increase. It reported an operating surplus in each of those years, growing from $23.6 million in fiscal 2015 to $27.1 million in fiscal 2020, making it one of the best-performing hospitals in the state. "This is like a flywheel," Shmer- ling said of the hospital's financial progress. "You're trying to get that flywheel moving, and that initial point where there's a lot of inertia takes a lot more effort. But once it starts moving, you start generating revenue and margin, which then we can take and reinvest in additional expansion." For the first four years of his tenure, momentum had begun to build, and by 2019, he was presenting plans to the board for the ambitious new patient tower. It was far from the first time Shmer- ling had driven forward a major hospital expansion program. He was recruited to Colorado Children's Hospital in 2006, tasked with plan- ning a relocation of the entire hospital from the downtown Denver building where it had been for 100 years, to a spacious new suburban campus. He followed that up with a further expansion in 2010: A $230-million, 10-story, 350,000-square-foot addi- tion, to bring the total number of beds at the hospital to 500. That expansion achieved its projected 2012 opening. In Connecticut, Shmerling's expansion plans didn't go as smoothly — they were interrupted by Dr. Timothy M. Crombleholme, one of the nation's top fetal surgeons, joined Connecticut Children's last year. PHOTO | CONTRIBUTED the pandemic. "As we were hitting our stride, COVID hit, which put us in a tail- spin for a brief period of time," Shmerling said. Connecticut Children's furloughed 600 staff during the pandemic lockdowns, and put retirement contributions on hold. Financially, it survived thanks to support from the state of Connecticut and federal government. But, as with most busi- nesses, some work practices were permanently altered. Telemedicine, which had previously been a negligible part of its busi- ness, supported 40% of outpatient consultations through the pandemic. While that percentage has lessened, Shmerling estimates a fifth of visits are still done remotely, and telemed- icine has become another arm of the mission to extend the hospital's geographical reach. Expansion plan reborn By June 2022, Shmerling and his team were back at work on the expansion project, submitting the proposal for state and city approvals. At the same time, Connecticut Children's began to build the clinical programs that will eventually be housed in the new tower. Shmerling last year recruited one of the nation's top fetal surgeons, Dr. Timothy M. Crombleholme, to come to Connecticut from Dallas, prom- ising to build a fetal surgery program around him that could potentially attract patients from across the nation to Hartford. "There may be seven or eight children's hospitals across the country (that) can do fetal surgery in utero, (that) have a comprehen- sive program," said Shmerling. "The closest place to Connecticut is in Philadelphia." That focus on the youngest of patients will be continued in the new NICU, which will provide a level of care that's not currently available at the hospital, including private accom- modations for families. The improvements will also extend to cancer treatment rooms with improved airflow and isolation, and a gene therapy unit. Shmerling said that will mean Connecticut sends fewer really sick patients to Boston for treatment. It's a case that has impressed many, including Wall Street inves- tors. New York ratings agency Fitch Ratings recently called Connecticut Children's planned expansion a "once in a generation transformational project." Fitch opined because the hospital is taking on about $112.4 million in bonded debt to help finance the expansion. This marks the first time Connecticut Children's has gone to market for bond funding. It received an A+ rating from Fitch and an A3 rating from Moody's. "The 'A+' rating reflects CT Chil- dren's excellent market position as the only independent children's hospital in the state of Connecticut, with a 90% market share in its primary service area, which includes Hartford and the surrounding coun- ties, and a growing market share in its secondary service area," Fitch said. Board chair Roth said Shmer- ling has a lot to do with the positive ratings. "I think a lot of the fact that we got the outstanding bond ratings we just received are based on what he's done and the confidence that he's created in our organization," Roth said. $60M $50M $40M $30M $20M $10M $0 $500M $400M $300M $200M $100M $0 Connecticut Children's operating revenue growth Connecticut Children's operating profits FY 2015 2016 2017 2018 2019 2020 2021 FY 2015 2016 2017 2018 2019 2020 2021 OPERATING REVENUE OPERATING PROFITS $311,841,372 $325,481,387 $338,523,187 $359,626,405 $383,416,208 $399,046,034 $441,832,757 $23,643,827 $22,734,519 $24,530,819 $25,997,404 $27,408,739 $27,100,196 $50,535,325 Source: Office of Health Strategy Source: Office of Health Strategy

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