09/16/10 — Hospital announces 4 percent rate hike

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Hospital announces 4 percent rate hike

By Phyllis Moore
Published in News on September 16, 2010 1:46 PM

The board of directors for Wayne Memorial Hospital approved a 4 percent rate increase and a 2011 capital budget at its Tuesday meeting.

The increase, the same percentage as this past year, was described as necessary to cover higher costs and to position Wayne Memorial to continue to be an "essential hospital" for its residents, officials said.

Being able to maintain the quality of care requires having the money available to replace and upgrade equipment and to have the credit balance sheet necessary to attract lenders should the hospital decide on larger scale capital projects, hospital president William Paugh said.

"We want to be the provider of choice," Paugh said. "People can choose where they get care, and we work hard to do the best that we can through the services that we provide, through the people that provide care ... We really take it very seriously that we're the community's hospital."

And that means staying up-to-date on the latest techniques and equipment as well as keeping a close eye on what facilities would best serve the needs of the patients here at home, Paugh added.

The finance committee recommended the 4 percent increase to comply with the hospital's operating margin of 3.5 percent to support long-term capital needs.

Balancing a hospital budget in the midst of an uncertain economy, coupled with concerns about the pending health care reform, is a "tough challenge," said Rebecca Craig, the hospital's vice president of finance.

For now, hospital officials are cautiously planning not only for the potential financial consequences of health care reform, but for the increased reporting requirements that could also result in changing liability needs and reimbursement formulas.

"There's going to be more and more information about care on the World Wide Web, hospitals are going to be more accountable for the quality of care they're providing. Accountability does come with transparency," she said. "We're going to be required more and more to disclose all kinds of quality indicators as well as patient satisfaction indicators and safety indicators and the penalty will be reduction of payment from Medicaid."

This year's budget was built on several objectives, Mrs. Craig said, among them focusing on the fundamentals -- cost savings, eliminating waste and continuous improvement in cost per episode, as well as complying with changing Medicare rules.

Salaries, the largest expense on the budget, are expected to increase by $1.1 million or 1.1 percent, with $77.7 million earmarked for 2011. The amount is $1.2 million less than the $78.9 million in 2009 and $1.2 million ahead of what is projected for 2010.

The amount also reflects restoration of the Pay for Performance program for employees, which was suspended in 2010 when the economy dipped. To defer for another year could be detrimental to the work force, officials said.

As other hospitals in the state have begun announcing pay increases for staff, the finance committee's recommendation will keep the hospital competitive, officials said.

Employees will be eligible for performance-related increases based on their anniversary dates.

Revenue projected for 2011 is $414.9 million, minus $188.3 million in contractual adjustments -- what Medicare and Medicaid will not reimburse -- or a net revenue of $226.6 million before charity.

Admissions are expected to increase by 1 percent, while at the same time officials anticipate greater numbers of uninsured patients, resulting in higher charity and bad debts cases.

Bad debts account for 10.8 percent of charges, officials said, which, after the rate increase, will equate to an estimated $44.9 million in 2011.

The hospital has been able to trim in some areas, such as medical and surgical supplies, which will only go up 2 percent this year. Medical staff was credited with helping in this area.

"A good example, you have probably read about the high cost of orthopedic implants. We worked with our orthopedists here to get a deal with suppliers," Paugh said. "It's staying on top of the expense side. The one thing that we do know that we're going to have to do is squeeze on the expense side and that's what we're trying to do."

"We're squeezing on the expense side because we're being squeezed on the revenue side," Mrs. Craig added.

Traditionally, Wayne Memorial is actually on the low end of the spectrum when it comes to rates charged for services.

The hospital routinely allocates approximately $7 million to $8 million a year for capital items, primarily replacements of equipment that wears out.

On the list of items being considered for the $7.8 million in routine capital planned for fiscal year 2011 are a fetal monitoring system, data storage and digital EKG system.

Long-range plans are to replace the existing emergency department, built to accommodate 35,000 patient visits and now handling 52,000 visits annually. A certificate of need has been completed for this project and the hospital is in the financing stages, evaluating debt capacity.

"We know that there's a need for this," Paugh said. "About 60 percent of the people that come to the hospital are admitted through the emergency department. We don't want our ED to be the primary source of medical care ... it's too busy now to provide them the kind of care that we want to provide."

The hospital plans to continue its partnerships with groups like Wayne Health Physicians and efforts to recruit more primary care physicians to the area, Paugh said.

However, he explained, the two areas -- the burgeoning Emergency Department and the growing need for primary care doctors -- are not mutually exclusive.

In fact, they are reflective of a national trend, he added.

"We think that the way we have gone about recruiting here puts us in a positive position for those who want to come out and do primary care," he said. "If we had several schools graduating classes of primary care (doctors), we still have too many people coming through the ED and we need to do something with that facility.

"We're overextended in terms of the volume we're seeing in the ED and need to be prepared to respond to what we're going to see in the future. We're continuing to do all that we can do with Wayne Health Physicians to attract primary care physicians to Wayne County, and what we would do with the ED will not affect that."