Rural hospitals serve 54 million people in the
United States. This is 1/6 of the nation’s
population. One would think that with
that number rural hospitals would be more profitable. However, this is difficult due to the fact
that 9 million of the 54 million are Medicare recipients. According to the American Hospital
Association (2014), rural hospitals have the lowest profitability in terms of
Medicare profit margins.
Couple the inability for rural hospitals to
negotiate favorable insurance contracts, Obamacare, the cost of needed
(government mandated) IT investments, and the increasing self-pay patients;
rural hospitals struggle to be profitable.
MPMC is no different from the typical rural hospital. Large insurers such as United Health Care reimburse us lower than the Medicare rate on majority of the care we provide to their members. Considering the number of United Health Care patients we see is as high as 25%, this is a considerable dollar amount. This is where MPMC’s affiliation with Centura Health (CH) comes into play. CH has the ability to use its’ large size and clout to negotiate much more favorable terms with United Health Care.
Kelly, T. (2010) states that “Systems with 50
hospitals have more leverage in negotiating with a health plan, whether it be a
small regional in their area or one of the large nationals, than a stand-alone
smaller rural hospital has.”
Obamacare, or the Affordable Care Act, has created
another monster of its’ own… In order to afford the plans presented and meet
the criteria to be insured patients are signing up for low premium- high
deductible health care plans. This means
that patients who come into the ER have to meet 5 to 7,000 and sometimes even
10,000 dollar out of pocket expenses before their insurance picks up the
rest. This is difficult for most
patients to pay for.
With the above mentioned, MPMC has a great deal of
money outstanding, or in accounts receivable (a.k.a days in A/R), that is owed
to us. This number is in the 7-8 million
dollar range. In this between 40-50% of
this are self-pay accounts. What is
interesting is that self-pay (non-insured) is only 10-12% of the patient load,
but they account for nearly half of the money owed to MPMC. The chances of MPMC seeing most of this money
are not good. In short, MPMC cannot pay
its’ bills if patients do not pay their bills.
Next, the AHA (2014) has stated that the increased
regulations and need to implement expensive information systems creates strain
on the profitability of small hospitals.
It is common knowledge that MPMC has had IT and EHR struggles in the
past. With the affiliation with Centura
Health, we have a partner that is committed to providing us with an IT and EHR
system that works well. Also, with The
Health Information Technology for Economic and Clinical Health (HITECH) Act,
enacted as part of the American Recovery and Reinvestment Act of 2009, MPMC can
recoup 85% of the cost of the system. That
means that the entire cost of the entire system, nearly 2.25 million dollars,
will be paid back by the federal government.
While most of this sounds like doom and gloom MPMC
does have a plan to be profitable. This
includes:
1. Implement
urgent care services for low level ED visits that require payments up front
before services are rendered
a. Up
to 55% of our ED’s are self-pay and most pay nothing
2. Improved
revenue cycle through checks and balances, and move to Centura EHR and revenue
cycle systems
3. Adjusting
staffing models to become Lean (or Leaner)
4. Re-negotiating
insurance contracts with Centura’s clout.
a. Currently
United Health Care reimburses us about 40% for the cost our services
b. All
other insurers reimburse 85-95% of our costs
c. This
would mean a large increase in revenue
d. This
is already underway
5. Selling assets that are not used
6. Implementing
a price increase to become competitive
a. MPMC
has not implemented one in 3 years
b. Currently
some of MPMC’s prices are at 30% of the prices of other hospitals of our size
and region, according to Craneware (leading chargemaster software in US)
c. A
discharge from St Anthony’s in Lakewood averages around $70K, MPMC around $7k
d. A
CT scan in Summit costs about $3200, MPMC is $1600
7. Increasing
more referrals to Centura facilities to get them returned for increase swing
bed days and services that can be done at MPMC
a. This includes keeping more patients here for
care rather than referring out to other facilities
Those are some of the plans of action that the
senior leadership team has identified to become more profitable and
sustainable. In the next two weeks we
(senior leaders) will be holding mandatory town hall meetings at various
locations to better communicate the issues and address the concerns.
Thanks for all you do!
References
American Hospital Association (2014). Rural health care. Retrieved from: http://www.aha.org/advocacy-issues/rural/index.shtml
Kelly, T. (2010). Small hospitals face heavy weather. Managed Care. Retrieved from: http://www.managedcaremag.com/archives/1003/1003.smallhospitals.html
