Healthcare costs poised to increase

Posted 6/16/09

• Rate increases between 0 and 8 percent at Powell Valley Hospital, varying according to costs and revenues in different departments.

• A 5-percent rate increase at The Heartland, beginning around December or January.

• An …

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Healthcare costs poised to increase


Billing rates at Powell Valley Healthcare facilities could increase by as much as 8 percent during the coming year, according to preliminary budget proposals for fiscal year 2010, beginning July 1.Proposed increases include:• A 3.25-percent rate increase for Powell Valley Care Center, from $185 per day to $191 per day, beginning July 1.

• Rate increases between 0 and 8 percent at Powell Valley Hospital, varying according to costs and revenues in different departments.

• A 5-percent rate increase at The Heartland, beginning around December or January.

• An 8-percent cost increase for emergency room, radiology, Express Care, nursing and physicians' services at Mountain View Medical Center.

The Powell Valley Healthcare board approved the 3.25-percent rate increase for the Powell Valley Care Center during its June meeting, with Kathy Bieke casting the lone no-vote.

Bieke said information she obtained from Genworth Financial indicated that the rate increase would put the care center's rates above state and national averages. The increase would bring the annual total cost for a resident to $69,000, while Genworth Financial's statistics showed a state average of $63,000 and a national average of $66,000.

“I'm afraid people won't pay,” she said. “I think we're charging the private-pay people right out of the market.”

The board is precluded by law from making cost-comparison calls to competing organizations, though it can review publicly-available statistics.

Board member Brent Foulger said he believes the increase is necessary to cover rising costs to the center. He noted that the board voted not to raise rates one year, and then had to increase them 10 percent the following year to catch up.

Board member Debbie Kleinfeldt agreed with Foulger.

“It's harder on people if we wait and have a high markup the next year,” she said.

The board will consider the other increases during its meeting on Monday, June 29.

Rod Barton, executive director of Powell Valley Healthcare, said the increases are needed to cover rising costs of operation.

While some might point to the new medical building as the reason for the rate increases, that's not the case, Barton said.

“Two-thirds of those costs are personnel — salaries and benefits,” Barton said. “The other one-third includes insurance, utilities and supplies, all of which are much larger than the (payments on) the building. There is a monthly mortgage payment, but it's not a large part of our expenses.”

The building is scheduled to be paid off in seven years, he said.

Total expenses for Powell Valley Healthcare are budgeted at $40 million next year, he said.

A change in the way the organization bills Medicare beginning July 1 will simplify billing and increase what the federal agency pays Powell Valley Healthcare by about $500,000, Barton said.

“Simplistically, it incorporates the clinic into the hospital from a Medicare standpoint,” he said. “That means we will produce one bill, so there's a simplification process there which will be welcomed by patients and us,” he said.

That change will help offset expenses and improve the organization's bottom line.

“While that's not going to solve all the problems, it's certainly going to provide us with some help,” he said.

With the rate increases and the billing change, Steve Ramsey, PVHC chief financial officer, estimates in Powell Valley Healthcare's annual budget for the coming fiscal year that the organization will have 45 days of cash on hand by July 1, 2010.

Powell Valley Healthcare administrators recently imposed several cost-cutting measures to get the organization through the end of the current year, which ends June 30, without going into the red.

Most of this year's shortfall “has been money we have been unable to collect,” Barton said. “That money has increased dramatically for us, and I don't see that getting better as more and more people lose their insurance.”

Barton said a real solution to the problem won't happen locally.

As more people become uninsured or increase the deductible in their health insurance plans, they put off taking care of medical problems. Those they can't put off, they also can't pay for, Barton said.

“Too many people who have insurance don't think this affects them,” he added. “Part of the reason we're increasing rates is to offset the cost of providing care to those who don't have insurance. Everybody who does have insurance pays more to subsidize those who do not, and that affects all of our insurance premiums.

“There has to be a change somewhere, because the system cannot continue indefinitely. I think we're seeing the results of ignoring the situation for years and years.

“In order to come up with a solution, everybody's going to have to play a part. I'm hoping people who are not married to the current situation will be the ones to come up with a solution. All we can really hope for is that some thoughtful, objective people can take a look at the situation and come up with answers that work.”