Hospitals struggle with higher costs and lower reimbursement

Posted 4/7/16

More than 60 rural hospitals in the country have closed since 2010, and another 673 hospitals are considered vulnerable, according to a February report from iVantage Health Analytics.

That’s up significantly since 2014, when an iVantage report …

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Hospitals struggle with higher costs and lower reimbursement

Posted

Rural hospitals in the United States are struggling, partly due to increased federal requirements and decreased federal reimbursements.

More than 60 rural hospitals in the country have closed since 2010, and another 673 hospitals are considered vulnerable, according to a February report from iVantage Health Analytics.

That’s up significantly since 2014, when an iVantage report showed 49 rural hospitals had closed since 2010, and another 283 shared similar characteristics and were considered vulnerable.

The Wyoming Legislature’s refusal to expand Medicaid hasn’t helped hospitals in the state.

Medicaid expansion would benefit an estimated 20,000 Wyoming residents and reduce the amount of unreimbursed care that hospitals provide.

An online report summary in Health Affairs by Kristin L. Reiter, Marissa Noles and George H. Pink states:

“We compared rural hospitals in Medicaid expansion and nonexpansion states in terms of the amount of uncompensated care they provided and their profitability and market characteristics in 2013. ...

“Compared to hospitals in expansion states, those in nonexpansion states provided greater amounts of uncompensated care as a percentage of revenues and appeared to be more financially vulnerable; thus, these hospitals may be more likely to experience financial pressure or losses.”

Neal Hilton, vice president of the Wyoming Hospital Association, said he believes all hospitals in the Big Horn Basin are doing well, but some are tighter on resources than others.

“There’s no question that West Park in Cody is hitting on all cylinders, but good things are going on in the whole region,” he said.

To improve their bottom lines, “hospitals are working together with group purchasing organizations and getting the best prices on items, pieces of equipment, IV solutions and pharmaceuticals,” Hilton said.

In order to remain competitive, hospitals must keep staff turnover low  to have “good, competent, committed people in place. Make an investment in your people,” he said.

Improving quality

They also must continue to review and work on quality improvement measurements and benchmarks to qualify for higher federal reimbursements for Medicaid and Medicare, he said.

Those include meeting federal standards for reducing incidents of hospital-acquired infections, unnecessary readmissions, adverse drug events and nonmedically necessary early elective baby deliveries, he said.

“There’s no question that hospitals are being called to a higher degree of quality performance,” Hilton said. “You’ve got to be good, clinically sound and have good marks.

“Hospitals in your area are aware of that. They’re in it.”

Powell Valley Healthcare leaders review quality measures with PVHC Board of Directors each month.

Rick Schroeder, chief executive officer of North Big Horn Hospital, said, “We are working really hard to improve quality — quality with a capital Q. In addition to quality of care, that extends to cleanliness in the hospital and the taste of the food, he said.

Hospitals also must operate on lean budgets, Hilton said.

But increasingly, that requires a fine-tuned balancing act.

While it’s important to trim expenses, “you can only cut so much from a financial standpoint,” Hilton said. “The organizations that try to survive by simply cutting and cutting and cutting — that never seems to end well. You can’t starve yourself into prosperity.”

 

Challenges increasing

Some of the economic challenges faced by hospitals are beyond their control.

Hospitals now are required to have electronic medical record systems, known as health information systems, and that is a large expense for a small hospital, Hilton said.

In addition, federal reimbursements for hospitals are lower now than they were.

Critical access hospitals — hospitals with 25 or fewer beds — are reimbursed for Medicare services at a higher rate than larger hospitals. That is the federal government’s attempt to partially compensate small, rural hospitals for their higher costs of operation.

However, that reimbursement was cut by 2 percentage points during the federal sequestration a few years ago, and that funding never has been restored, said West Park Hospital Chief Executive Officer Doug McMillan.

McMillan noted that hiring doctors, nurses, technicians and other medical providers is one of the biggest costs faced by rural health care organizations.

“Health care professionals have a choice to go anywhere they want, so we have to ... be able to pay our staff competitively with what the market is paying,” said McMillan said. “With reimbursements cut, that is more and more difficult for us to do.”

Schroeder said the sequester is slated to go away in 2024.

“They keep extending it,” he said. “Who knows if it will ever go away. There are just a lot of things that are making it hard.”

Schroeder said one of his greatest frustrations is the Wyoming Legislature’s refusal to expand Medicaid, which would reduce the amount of uncompensated care Wyoming hospitals provide.

“This is the only business I know of where the law requires that people can come in and can leave without having to pay a penny,” he said.

 

Unreimbursed care

Schroeder said he understands the need for charity care. Some people are uninsured, and those who have insurance often face larger deductibles and copays, “creating a gap between the patients’ responsibility to pay and their ability to pay,” he said.

But charity care often is abused, he said.

For instance, some people routinely go to the emergency room for medical care rather than seeking lower-cost care from a doctor in a clinic.

One reason for that overuse of emergency room care is some patients’ belief that their care will be free in the ER. While that is true under a federal law requiring hospitals to provide free care in emergencies, “I would say in our emergency room, one in seven is a true emergency.”

For nonemergent care, North Big Horn Hospital bills according to a person’s ability to pay in either the hospital or the clinic, Schroeder said.

“If people were using clinic providers more regularly, that would make uncollectible debt go down, and the money they owe the facility would decrease ... so it would be cheaper for them, too.”

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