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September 25, 2015
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CRH addressing financial issues
by Edward French

 

        The financial challenges faced by Calais Regional Hospital (CRH) have been continuing, with the $3.5 million repayment to the Center for Medicare and Medicaid Services (CMS) placing an additional strain on the hospital's budget. That amount, which CMS says it overpaid to the hospital in 2013 and 2014, is about 10% of the hospital's annual income. CMS initially requested immediate payback of the $3.5 million, and if the federal agency had not agreed to the 36-month repayment plan, interim CEO Bert Whitaker says the hospital would have had to use a line of credit and reduce its vendor payments. However, there would not have been any risk of imminent closure of the hospital.
     Whitaker notes that all hospitals struggle with managing their finances, with lower reimbursement rates from Medicare and Medicaid being a challenge. DeeDee Travis, CRH director of community relations, says that it is not that unusual for overpayments or underpayments to be made by CMS, with a settlement between CMS and the hospital occurring annually following the end of the fiscal year. Usually the overpayments are not that large, though, with Travis noting that the amount the previous year was for about $500,000.
     For the period January through August this year, the hospital is showing a loss of $411,000, but Whitaker notes that this loss is "on budget." The hospital is generating an adequate amount of cash to pay its expenses. "The loss is a result of contractuals with Medicare," he says. The difference between what the hospital bills Medicare and the amount that the hospital is paid is called a contractual adjustment. For instance, in July the hospital was about $900,000 ahead on revenues, but Medicare contractuals took about three-quarters of that amount, which the hospital will not receive. While the CMS payments are made weekly, the reconciliation of the billed and paid amounts takes a longer period of time.
     The hospital has now adjusted its financial modeling to be conducted on a monthly basis, in order to more quickly determine if an overpayment has been made. Budgeting is based on estimates of anticipated patient volumes and what the Medicare contractual adjustments will be. "We have a lot higher confidence in our financial modeling," Whitaker states.
     Payments by Medicaid and Medicare account for about 65% of the Calais hospital's business. "It makes it difficult to make the money we want to make," he notes. However, a high percentage of the hospitals in Maine are not producing a profit, he points out. The hospital's bad debt so far this year totals $1.4 million, which is about a quarter of a million over budget. "We're meeting our budget under very difficult circumstances, with bad debt and write-offs continuing," says Whitaker, noting that the hospital has to absorb the bad debt losses.
     This region doesn't have the level of private pay patients that hospitals would like to have, with private pay amounting to about 24% of the hospital's payment income. Whitaker says the hospital would like to have the private pay level about 10% higher, but the businesses to support that are not in the area.
     The hospital tries to manage its expenses within the industry's norms and they are about as low as they can be now, Whitaker says.
     The budget challenges faced by the hospital have been ongoing, with CRH having had a deficit of over $500,000 in the first two months of 2014. Part of the reason for the deficit had been a significant decline in patient visits. Travis says that patient volumes have now picked up some in most areas. The hospital's primary care base had been hurting when some providers left, but she notes, "We're back to full staffing now, with five new providers this year." For patient visits, in 2013 acute inpatient admissions were 726 and swing skilled nursing care patient visits were 190; in 2015, 895 acute and 261 swing patient visits are predicted. For emergency room visits, the number was 9,696 in 2013, while 10,974 are projected for this year. For operating room visits, the 2013 number was 916, and the projection for this year is 897.
     To deal with the deficit in early 2014, the hospital had laid off four people and reduced over 500 hours of staff time per week, affecting 82 other employees. As patient volumes have come back up, the hospital has been "adding layers of staffing back," says Travis. She notes that a layer of nursing for inpatient care has been added that is the equivalent of 4.2 full-time employees.
     Whitaker comments, "Our employee staffing payroll is our largest expenditure." Management is therefore always evaluating the staffing level and trying "to match it to the volume of business," he says, adding, "We don't plan any further reductions."
     Calais Regional Hospital has been designated a Critical Access Hospital for more than 10 years, but Whitaker notes that it's a challenge to keep up with the complexity of the rules for such hospitals. "You need a reliable and consistent financial model to manage that, and we now have that."
     He notes that with the new providers in place, a stabilizing of senior management and changes in internal processes to improve patient flow, so that hospital access becomes easier for patients, the hospital's financial challenges may be lessened. "We're taking an overall look at all of our processes," he says.
     He points to the hospital's importance to the community and notes that it pumps $26 million a year into the economy.
Whitaker was named interim CEO when Michael Lally resigned in June, after having been CEO for more than six years. The hospital also has a interim chief financial officer, David Pike, with CFO Nancy Glidden having left last summer. Both Lally and Glidden were employees of Tennessee-based Quorum Health Resources, which is also providing the interim management staffing. A new CEO is expected to be in place by late December or the first part of January.
     Some have questioned whether the hospital needs the services provided by Quorum, which provides industry research and consulting services that cost the hospital $412,000 in 2014. The hospital's contract with Quorum continues until 2017, but Travis says there are no plans to not continue with the company.

September 25, 2015    (Home)     

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