Hospital to raise rates
By Steve Herring
Published in News on September 13, 2015 1:50 AM
For the second consecutive year, Wayne Memorial Hospital's budget includes a three percent rate increase.
The $252.6 million Wayne Health Corp. spending plan approved Tuesday by the corporation board is up from $244.2 million last year. Anticipated expenditures are $247.6 million, up from $238.1 million.
That translates to a two percent net gain of $5 million compared to last year's 2.5 percent operating margin of $6.1 million.
Wayne Health Corp. is the parent company of the hospital, Wayne Health Physicians and Wayne Health Foundation.
The corporation uses a zero-based budget on expenses, hospital President Bill Paugh said.
"So we don't start with last year's expenses and say, 'What is going to be different?'" he said. "We start with a fresh sheet of paper and make our managers justify what they think their volumes will be. Then we match staffing levels with volume.
"It is really pretty much expense driven. What is it going to cost us to provide the care for the number of patients that we anticipate having for the coming year? Then, what do we have to have in terms of revenues to keep that two percent margin?"
Paugh said with $250 million in expenses and having two cents of every dollar left over after everything is paid for is a "fine line."
"What we use that two cents for is for capital," said Becky Craig, the hospital's chief financial officer. "We turn it all back in. There are no shareholders at the table. All of these (hospital) board members are unpaid community members. Every year we put it aside and reinvest it back into the building."
During the budget process, $22.6 million was originally requested for the capital budget. That amount was trimmed to $13.5 million keeping it in line with last year.
It does not include carryover projects: $2.4 million for the main tower air handler unit that has been on the hospital roof for 45 years; $1.7 million for phase 2 of the Women's and Infant's Center; and $1.4 million for the Wayne Health Vascular and Vein Center.
New items on the capital budget are $5.1 million for a surgical services construction project; $2.2 million for the angiography suite; $1.1 million to replace another air handler unit; $1.1 million for Stryker bed replacements (the beds are 10 years old); $1 million for upgrades to the main tower's electrical system; $900,000 for sixth floor finishes and renovations; and $700,000 for DaVinci robotic surgery equipment.
The hospital also has to account for bad debt and charity charges.
Those charges in the prior budget were down by almost one percent -- from 10.9 percent of charges in 2014 to 10 percent of charges in 2015.
In 2014, bad debt and charity costs totaled $59.2 million of $543.8 million in total charges. In 2015, they totaled $57.4 million of $572.3 million in charges.
For 2016, the anticipated cost is $60.7 million of $605.1 million in charges.
"We did not expect as many people to sign up under the Affordable Care Act as has happened in Wayne County," Mrs. Craig said. "So all of a sudden, instead of really high uninsured, we have seen a decrease in it. So we are under budget on charity and bad debt for this year."
There have been no lingering effects of more than 18 months of active negotiations and nearly two months with no contract with Blue Cross and Blue Shield of North Carolina, Paugh said.
A three-year contract was signed in February 2014.
"We are about taking care of people and doing it in the highest quality and most appropriate way that we can do that," Paugh said. "It is not about thumping your chest and fighting with somebody over one thing or another.
"We really feel like if we can demonstrate to the community that they are getting good care here -- all health care is expensive -- but they are getting good health care with good outcomes at rates that are less than you'd find from comparable organizations in other places."
That approach will position the hospital "in the best possible way" to negotiate not only with Blue Cross, but with all of the major insurers, Paugh said.
"We understand what we went through was disruptive," he said. "We didn't want it anymore than anybody wanted us to, but we needed to demonstrate our case. We felt like we did, and we continue to work with insurers about again, how can we reduce the rate and do things to help them (insurers) better look after the folks they insure."
Blue Cross officials have visited the hospital several times since that time, Mrs. Craig said.
"We have signed an addendum with them to help us, that actually could give us an opportunity to earn a little bit more for quality measures and things," she said. "Again this transition from volume to value, they are getting their feet wet with that and we are, too.
"We have been doing it with Medicare for a couple of years now. Now the commercial insures are saying, 'We want to try some of those.' So we signed an addendum to start measuring how to ease into this before this contract is up."
Hospitals and insurance companies are looking at how to get to "this brave new world" where the focus is not on how much a hospital can do, but on value, she said.