Hospital board OKs rate hike, freezes salaries
By Phyllis Moore
Published in News on September 10, 2009 1:46 PM
Rates will go up and staff salaries will stay the same, as Wayne Memorial Hospital attempts to keep its budget balanced in the face of an unpredictable economy, officials said.
The Board of Directors this week passed the hospital's 2009-10 budget, which contained a 4 percent rate increase designed to cover higher costs and position the hospital to meet the county's needs in the future.
At the same time, adjustments had to be made in salaries and benefits, which make up about 47 percent of the hospital's expenses, said William Paugh, hospital president.
"This year, our wage and salary program is going to be right at $99 million," he said. "It's obvious that in our marketplace, looking at pay-for-performance, we will suspend that program for the upcoming year. There will be no adjustments to people's base salary for the upcoming year."
There are no plans to cut staff or to freeze jobs, Paugh added.
"If we don't have a demand for services, we may not fill it, but we are not eliminating positions," he said.
Much of the hospital's financial decision-making has been dictated by the state of the economy, rising prices for drugs and equipment, a hard-hit investment portfolio impacting its pension plan and the need to make sure the hospital offers the best, and most up-to-date care possible, Paugh said. And then there are the increases in the health care costs for hospital employees.
While the local economy has fared better than in some parts of the state, Paugh said the recession is still lingering. So even though the economy is unpredictable, the hospital has not seen a decline in the number of people seeking care. At the same time, Medicaid rates for inpatients are declining and the hospital is seeing its highest ever proportion of emergency care patients without insurance.
Its largest single "expense" increase, in fact, is bad debt and charity cases, expected to go up this year from $38 million to $44 million, a 17 percent difference.
Bad debts alone are expected to rise from $22 million to $25.4 million. That represents the largest single increase in the expense budget, projected to go from $196.9 million to $210.4 million for 2010.
"It's a direct reflection of the state of the economy," Paugh said.
"What can we do?" asked Rebecca Craig, the hospital's vice president of finance. "Wait for the federal reform of health care, continue to watch the WATCH van and the 7,000 annual visits it provides to local people without health insurance of any kind, continue to provide care to patients in the emergency department as mandated by the federal government, work with patients to provide options to finance the heavy out-of-pocket costs -- this is the source of the greatest increase in our bad debts."
"All we can really do is budget as efficiently as we can," Paugh said. "There's not going to be room for inefficiency."
Last year's budget showed a 9.5 percent rate increase, the officials said.
"Typically, we are between 3 and 5 percent, so we're in range with 4 percent," Ms. Craig said.
Salaries and benefits are one of the few areas where there is some element of control. Unfortunately, it means having to tell staff that the "pay-for-performance" program is suspended at least for the foreseeable future.
Officials said their approach for the coming year is, in part, to purchase only "mission-critical items," replacing what is absolutely necessary on an as-needed basis. Routinely, an estimated $7 million to $8 million a year is allocated for this purpose.
Also on the horizon are moves to keep pace with other hospitals, replenishing the physician pool and upgrading surgical equipment.
This past year, the board supported launching Wayne Health Physicians to help in recruiting and retaining key medical staff members. The sister company employs the doctors and handles the business end of the practice. Already, a plastic surgeon has been hired and two psychiatrists will soon join the staff.
"It's where the world is going," Ms. Craig said.
"If we're going to be competitive, we have got to have that piece in our recruitment package," Paugh added.
The hospital is also in the process of upgrading its clinical information system, becoming one of 2,000 hospitals using the Meditech system. The mobile computerized work station on wheels, or "WOWs," allow nurses and physicians to increase time spent with patients while updating clinical information.
Perhaps the biggest investment will be the acquisition of DaVinci robotic surgery equipment, which will be leased over the next five years. The instruments are controlled by a surgeon from a console with 360-degree capabilities, allowing intricate maneuvers impossible under traditional methods.
Urology and gynecologic surgeons will able to perform prostatectomies and hysterectomies with better outcomes, Paugh said. Several area physicians are already being positioned to receive training for the equipment, he added.
"This is something I think a community hospital like ours needs to be doing," he said. "We hate to see patients have to leave the community for surgeries."
"We do about 1,000 a month, 10,000-12,000 surgeries a year," Ms. Craig noted.
The hospital is also anticipating an eventual replacement of the existing emergency department, built to accommodate 35,000 patient visits, and currently handling 52,000 annual visits. A certificate of need is expected to be submitted by November, with the $1 million to $2 million project expected to come before the board and be completed within the year.
"It's not a static environment. Things are changing all the time," Paugh said. "We take it very seriously being an up-to-date community hospital."
"Our board is very conscious of what's going on in our community, with the economy," Ms. Craig said. "Patients continue to come here. It's a little bit different. We're really not seeing the kind of slowdowns others may be."
Except for elective surgeries, it's business as usual, and while the stock market and economy might have impacted Wayne Memorial this past year, there are still some positives, its administrators say.
"This hospital has a solid base of doctors and staff," Ms. Craig said. "For the things that we do, I think we have a very good market share that's helped us go back to the market time and again and be able to borrow."