Hospital approves 3 percent budget increase
By Steve Herring
Published in News on September 14, 2014 10:24 AM
How Wayne Memorial Hospital patients will be affected by an overall 3 percent rate increase in the coming year will depend on their insurance coverage as well as what services they receive, hospital officials say.
But most patients covered by Medicare or Medicaid should notice very little effect, if any, they said after the hospital board adopted its 2015 budget this past week. The budget is $209 million, up from $203 million this year.
The 3 percent increase represents an average -- some charges went up, some stayed the same and some went down, officials said.
"Every year we try to determine how to provide for our needs, understanding that health care expenses are constantly changing," hospital President and CEO William Paugh said. "We try to minimize any rate increase, and budget only what we think we will need to sustain our ability to provide care, as we are a not-for-profit hospital. The small amount of margin we generate goes right back into operations. Last year that amount was two cents on a dollar.
"To come up with a budget, in addition to looking at our expenses, we compare our charges to others in our market. We also are sensitive to changes in the health insurance marketplace in regard to increased deductibles and co-pays, for instance. The bulk of the increase is on the in-patient side because we realized that, comparatively, our in-patient rates had been very low."
The 3 percent is less than the 5 percent increases in each of the previous two years.
Paugh called the past year's negotiations with Blue Cross/Blue Shield "painful" for the community as well as the hospital. The two sides reached an agreement on reimbursements after months of negotiations.
"We really want to be able to demonstrate, not only to Blue Cross, but to any payer that we are dealing with, that we are serious about trying to be efficient and effective in the way that we spend dollars that we are given to use to provide care for their subscribers," Paugh said. "I am glad I am not going through it again this year."
Jeff Wakefield, the hospital's director of finance, said the negotiations did not have a direct impact on the almost $25 million in bad debt and $38 million in charity care included in the budget. The 2014 budget had $23 million for bad debt and $36 million for charity care.
"The negotiations themselves won't, but what you are seeing, I think folks are having policies with higher co-pays and out-of-pockets," Wakefield said. "Oftentimes that will drive up your bad debt and charity because for whatever reason a family of four might not be able to pay that $5,000 out of pocket as easily as somebody with one person.
"But that was really not part of the negotiations, that is just what is going on out in the market with some of the players."
More employers are trying to keep premiums down by going to plans with higher deductibles, Paugh noted.
It is not clear as yet what effect Obamacare, which has seen fits and starts, will have on Wayne Memorial's budget, Paugh said. He noted that answers posed by the program change weekly.
"Conceptually, I think we really need to get a grasp on our health care expenses and this is one attempt to do that," he said. "Will it be successful? I think there are a lot of moving parts and I think they have to line up together for it to work.
"I think the jury is still out. I think that we are going to have to do something. If it is not Obamacare, there will be changes that will have to be made in the health care system for the future to make sure that we can provide the level of care that people need for all those who need care and come to us."
As for the bad debt and charity care, the hospital will have to look at those costs and determine how it can provide care for those people when they need it, Paugh said.
"I think whether you are for it or against it, that is the itch that Obamacare was trying to scratch," he said. "It forced all of us to look at our efficiency."
Hospital officials are concerned about $10 million in Medicaid Reimbursement Initiative funding -- a program designed to draw additional federal matching funds to help hospitals with the Medicaid payment deficit.
"The low level of reimbursement Medicaid had for hospital, they weren't nearly covering cost, to be distinguished from charges," Paugh said. "They weren't covering costs. It got down for us, it was in the 30 to 40 percent range of cost."
Hospitals in the state found a "creative way" to contribute public dollars from public hospitals and also an assessment for not-for-profit hospitals like Wayne Memorial Hospital, he said.
The state uses that money to get a two-for-one federal match on Medicaid. The money comes back to North Carolina. But this past year, the Legislature decided that the state wanted to take 15 percent for non-health care needs.
"So we ante up the money," Paugh said. "As it stands today, the hospitals in North Carolina taking care of Medicaid patients are getting 85 percent of what comes back. The threat, where it goes at risk, you have heard a lot of conversation about privatizing Medicaid -- essentially allowing a for-profit insurance entity to run the program and to take the dollars and run it just like an indemnity insurance policy."
If that happens, then all of that MRI gap money is at risk unless the state goes about getting a waiver in the right kind of way to do so -- something it doesn't have a good track record at, he said.
"That is the worry," Paugh said. "As simple a solution as it sounds to say, 'We will give it to a for-profit entity to run since the state has such a mess made of it,' that could really cost the community hospitals in this state a lot of money. For us it could cost us about $10 million. So we have grave concerns."
The money is used to balance the budget for other "favored programs," he said.