Central Maine Healthcare was set to become an anchor tenant of a $70 million redevelopment project at Bates Mill No. 5, center left, along with the YMCA. On Thursday, the Lewiston health care company announced it was pulling out of the project.

LEWISTON — In response to continued revenue losses, Central Maine Healthcare officials announced Thursday that the organization is dropping plans for a project at Bates Mill No. 5, while also laying off 28 employees at the hospital.

President and CEO Jeff Brickman said the move was in response to “uncertainty” in the health care industry, with cuts in Medicare and other factors contributing to a $12 million revenue shortfall in 2016.

He said the organization was seeing continued losses so far this year.

“Today we announced decisions that will put the organization back on solid footing,” Brickman said.

Central Maine Healthcare also announced it is partnering with the YMCA of Auburn-Lewiston, which will take over operations of the Central Maine Medical Center Fitness and Wellness Center at 12 High St.

Brickman said the decision comes as the company continues to form a long-term strategic plan, for “transformative” changes to CMH. Shortly after Brickman became president and CEO in September 2016, the group announced it had hired a consultant to study the system’s future.

Its service area covers about 320,000 people, with roughly 4,200 workers. It’s one of the largest employers in the area.

Brickman declined to give details on the positions eliminated Thursday, but said they represent “management and front-line staff.” The cuts did not affect any bedside care providers, such as nurses, he said.

“Our care remains unaffected, but some of our supporting services we had to pare back in order to maintain the essential core of patient care services,” he said.

The announcement is a setback for Bates Mill developer Platz Associates, which is hoping for a 2018 construction start at Mill No. 5, the largest building at the Bates Mill complex. Central Maine Healthcare was set to become an anchor tenant of the $70 million redevelopment, along with the YMCA.

“After close examination of our strategic priorities and financial obligations, CMH has decided not to pursue the project at Bates Mill No. 5,” Brickman said in a statement Thursday.

He said the Centers for Medicare and Medicaid Services recently changed how services are reimbursed at hospital-owned outpatient facilities. The changes were effective Dec. 31, 2016, he said. 

“Unfortunately, this change would greatly reduce the reimbursement from Medicare for operating a medical facility in the Bates Mill location,” he said. “A sizable projected loss of revenue makes the project financially unfeasible.”

Following the announcement Thursday, Tom Platz of Platz Associates was unfazed, saying, “The project will go on.”

As of Wednesday, Platz had said CMH and the YMCA were still set to be the core tenants of the Bates Mill project. They had laid out plans to use 75,000 square feet each and to work together.

Platz said that ever since the change in leadership at CMH, there had been no communication between the parties. During that time, he said, his company began looking at alternatives.

“It’s unfortunate that the major health care provider won’t be involved, but the project will certainly move forward,” he said, adding that he’s hopeful it will still include a health care component. 

Former CMH President Peter Chalke had been outspoken about big plans to move the hospital’s sports medicine, outpatient physical and occupational therapy, weight management programs and more to the mill. The initial plans with the YMCA also called for a pool and a one-sixth-mile indoor track. 

Steve Wallace, CEO of the YMCA of Auburn-Lewiston, said the YMCA “absolutely” still intends to open a facility in Bates Mill No. 5.

“(CMH) had to make a strategic decision, but we’re still going ahead with the new Y,” he said, adding that the organization will begin fundraising after the city and Platz finalize the development agreement.

Wallace said the announcement may alter the group’s plans for the project slightly, but he’s optimistic.

“They’re still a major partner,” he said of CMH. “It will be different, but at the end of the day I think it will be better.”

He said the partnership with CMH has been in the works for more than a year, with the two organizations trading staff on the wellness operation. He said taking over the hospital’s wellness center would be “a seamless transition.” 

“It takes a little wind out of the sails, but it’s still a very viable project,” said Lincoln Jeffers, director of economic and community development, after hearing the announcement from CMH.  

He said the loss of CMH puts a “sizable gap” in the level of commitment from tenants, but said, “Bates Mill No. 5 is far from dead.” 

“It’s disappointing, but I certainly understand the decision,” he said.

He said the City Council will discuss another one-year extension of Platz’s option for redeveloping the mill at its next meeting, Tuesday, Feb. 7. The city recently applied for a federal Brownfields cleanup grant, and Platz would not close on the property until the environmental work is complete.

For CMH, Thursday’s announcement comes in the middle of a strategic planning process, Brickman said. He said that by this summer, other long-term changes could be announced.

He said the organization will focus on becoming more efficient, while providing more low-cost, high-quality health care.

The nonprofit CMH is the parent of Central Maine Medical Center in Lewiston, and Rumford and Bridgton hospitals, the Dempsey Center, the Central Maine Heart and Vascular Institute and a collection of medical practices throughout Central and Western Maine.

Brickman said a number of changes at both the federal and state level, combined with economic factors in Central Maine, have created the uncertainties and shortfalls in revenue.

“We’re trying to buck that trend, and really take some bold steps to work through the uncertainty,” he said.

Ericka Dodge, vice president of public affairs for CMH, said funding cuts in Medicaid and MaineCare have disproportionately affected Central Maine because of the average income level and rural demographics of its population.

Brickman said one-third of the hospitals in Maine are losing money as a result of the changing industry. He said Maine is one of 19 states in the country that did not expand Medicare as part of the Affordable Care Act.

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