Though the health care industry continues to show healthy growth in recent years, aging baby boomers, access to care and an increasingly sick population are among the factors forcing financial strain on service providers.
As Branson-based Skaggs Regional Medical Center works to land a strategic partner to combat its recent spate of operating losses and enhance its ability to serve the public, Springfield Business Journal asked officials from Mercy Springfield Communities and CoxHealth to weigh in on the evolving health care landscape.
Today’s environmentSkaggs ended fiscal 2010 with an operating loss of $1.9 million, and it has suffered a similar fate in each of the last five fiscal years with 2009 being the most pronounced deficit at $6 million.
Rising emergency room rates and increases in its percentage of Medicare and Medicaid patients appear to be leading factors in Skaggs’ quest for a compatible partner. SBJ’s review of Skaggs’ financials show Medicare payments have risen to 55.2 percent of all payments in fiscal 2011, up 2.6 percentage points from fiscal 2008, and Medicaid payments increased 1.3 percentage points to 11.2 percent of all payments during the same period. Meanwhile, costly care in the Skaggs emergency room has risen more than 15 percent since fiscal 2008. The numbers reveal that in fiscal 2011, two out of every three Skaggs patients received care through Medicare or Medicaid.
According to SBJ’s analysis of financial data furnished by Springfield’s two largest hospitals, Mercy and CoxHealth are following those statistical trends but to a lesser degree.
Mercy Springfield Communities’ percentage of total net patient revenue from Medicare and Medicaid combined has risen above 50 percent – up from 43 percent three years ago. Mercy’s emergency room visits have increased by 7.5 percent since fiscal 2008.
CoxHealth President and CEO Steve Edwards said health systems across the country are facing the same cost concerns.
“Increasing utilization of (emergency rooms) is a challenge across the nation. It’s driven by a lot of factors, so there isn’t one singular solution,” Edwards said. “Emergency rooms are a complicated mixture of a small number of acutely ill trauma-type cases and a sea of people without access to primary care.”
CoxHealth administrators keep an eye on its government reimbursements by tracking what they call unpaid costs – the shortfall between what Medicare and Medicaid pays and the cost to provide care. Annual unpaid costs through September 2010 climbed 36 percent to $127.5 million, compared to the previous year. Five years ago, CoxHealth covered $79.2 million in unpaid costs.
Rising Medicare and Medicaid dependency is a problem because those patients typically don’t cover the costs to provide care, Edwards said. At CoxHealth, Medicare collections as a percentage of cost are 89.5 percent. Medicaid collections are worse, covering only 58.4 percent of cost. Based on budget projections for fiscal 2013, Edwards said CoxHealth could see $25 million less from Medicare and Medicaid than it expects in fiscal 2012.
Economies of scaleDr. Rob Steele, a pediatrician and senior vice president of market growth and development for Mercy Springfield Communities, agrees that community hospitals could struggle in the current health care environment. “It’s just like with grocery stores – if you have one little grocery store, it costs a lot to get deliveries, to get all your groceries and to get everything to run that store. If you have hundreds of stores, then you have economies of scale,” Steele said.
Skaggs is a community-owned nonprofit hospital with 165 beds. Its Branson campus includes Skaggs Hospital, an outpatient center and two medical office plazas. Skaggs also manages several family medicine and specialty satellite clinics in Stone and Taney counties.
Steele said one thing has become clear in recent years: There is pressure on all sides to reduce health care costs.
“If you talk to anyone working right now and ask, ‘Are you paying a lot for health care?’ They’ll say ‘Heck, yes.’ And they are paying more every year, (which) is untenable,” Steele said, adding that employees and employers are fighting rising costs through third-party payers, who in turn are fighting with health care systems. “All of it is understandable. … And in bad economic times like we’ve seen, that’s tough.”
One of the ways CoxHealth tries to combat rising expenses, Edwards said, is by providing inexpensive access points to care such as through its five Walmart clinics. Also, through the system’s family medicine residency program, which sees about 35,000 people per year, Edwards believes many patients are treated that would otherwise end up seeking emergency care.
CoxHealth’s emergency rooms managed 165,872 visits in fiscal 2008, roughly 6,000 more visits than in fiscal 2011. ER visits dropped by 3.8 percent and 3.6 percent in fiscal 2009 and fiscal 2010, respectively, before climbing 3.8 percent in fiscal 2011. Spokeswoman Stacy Fender said doctors are reporting that patients are generally sicker in recent years, and caregivers speculate that during the recent economic downturn patients were putting off hospital visits to avoid the costs.
At Mercy, Steele said he is beginning to see a shift in approaches toward paying for health care, with a new focus on outcomes.
During the last six years, Mercy has participated in a cost-saving program with the Centers for Medicare & Medicaid Services. The federal program is designed to pay the participating hospital systems a portion of the money they saved based on positive treatment outcomes selected from a random pool of 30,000 area patients. Through August 2011, Mercy saved CMS $17.6 million in services.
“The point of that is not so much about the savings, but to say the focus became less about doing more, and more about keeping you healthy,” Steele said.
Both CoxHealth and Mercy have shown an interest in partnering with Skaggs.
During fiscal 2010, Skaggs reported only 51 days of cash on hand contributing to a “BB” or junk grade rating from Standard & Poors, according to the Taney County Industrial Development Authority, which oversees the hospital’s revenue bonds.
“Small hospitals have shorter cash reserves. They don’t have the flexibility to make changes,” Edwards said.[[In-content Ad]]
