Hospital won't raise rates
By Steve Herring
Published in News on June 24, 2016 1:46 PM
On average there are no rate increases for Wayne Memorial Hospital patients in the new fiscal year that begins July 1. It is the first time in three years that rates have not increased.
Also, there will be a 10-percent reduction in basic emergency department costs.
Overall the hospital's revenue growth is exceeding expense growth thanks to volume growth in the surgical department and in-patient care along with savings realized from the hospital's affiliation with UNC Health Care System, said Becky Craig, chief financial officer for the hospital.
Net revenues for Wayne Health Corporation, the parent company of the hospital, Wayne Health Physicians and Wayne Health Foundation are expected to increase from $257 million to $275 million, all due to volume increases.
Expenses will also increase by about $15 million, from $250 million to $265 million. Primary drivers are supply costs, drugs, and payroll costs to handle higher volumes. Benefit costs continue to rise including higher drug costs and supply costs impact the hospital's own employee health costs.
The hospital's total net revenues are estimated at $255 million, 7 percent ahead of current estimated 12-month revenues of $239 million, also due to volume increases.
Net system revenues in excess of expenses (used to replace equipment and building upgrades) are expected to be $8.5 million (a 3-percent margin).
Investment earnings on cash reserves required by rating agencies to support borrowings are expected to contribute another $5 million for a total margin of 5 percent, enabling purchase of equipment replacements and additions.
"For that reason we have figured out we can have a year where we don't increase our prices," she said. "On average, I would say 98 percent of our prices are probably exactly the same as they were last year.
"Some are up, some are down to get competitive where the rest of the market is -- minor adjustments. That is a good place to be. We are already low compared to other hospitals on our overall prices. We have been low for years."
Hospital officials talked with UNC Health Care System officials who were supportive of the decision not increase rates, she said.
"We are trying to hold down the cost hopefully to allow us to, in Wayne County, attract new employers," Mrs. Craig said. "The hospital is a big partner in the community.
"Not only do we want to have excellent health care, and we think the UNC affiliation has been positive in that respect. But when businesses are looking to relocate that is a positive story to tell that we have a hospital that, No. 1, is already low priced and No. 2, is trying to work with our community to keep health care affordable."
The management agreement with UNC Health Care System will be in place for the first full year in the coming fiscal year beginning July 1.
The hospital will be adding about 30 new employees, due to volume increases.
A few new positions will be added as well -- patient advocate, chief compliance officer and a chief medical officer, sharing responsibility for quality and safety improvements, population health initiatives
"This is a very challenging budget from many perspectives," interim President Bob Enders said. "One is that we changed our fiscal year. Our normal fiscal year runs from October to September. We cut this year short to get in sync with the UNC system. So the folks had a little less time to prepare this budget than we normally do. That was the first challenge.
"We all know that we are getting reduced reimbursement in general so we are expecting that. We are fortunate that we have maintained a good healthy bottom line here at the hospital so we weren't working from the ditch to start with. We also have been seeing some growth that we have been pleased to see in the in-patient side and the surgical area. When you have growth it makes a positive bottom line. That makes it easier when you have some growth that is bringing in new revenue."
On the flip side, the hospital is beginning to realize some savings from its affiliation with UNC Health Care, Enders said.
For example, the hospital will save $50,000 on the service contract for its MRI unit.
The hospital is looking at its other service contracts for major equipment for possible savings, Mrs. Craig said.
There will be approximately $100,000 in savings in drug costs even though the hospital was already doing a "good job" in that area, Enders said.
Another $100,000 was saved by switching to a UNC vendor on consulting for debt service on the hospital's new surgical unit, Mrs. Craig said.
"We are just finding any way we can tag onto a UNC contract that covers 10 hospitals already," Mrs. Craig said. "It is usually benefiting us."
Mrs. Craig said that emergency department visits continue to rise and are expected to reach 71,000 in 2017, despite the successful recruitment of several new family medicine doctors.
The goal is to enable Wayne County residents to have a primary care doctor, assisted by nurse practitioners and physician assistants) who knows them personally and cares for them over time, she said.
Retirements like Dr. Clark Gaither and others in the community continue to create challenges in meeting this goal.
Uninsured patients continue to represent about 25 percent of emergency room patients, Mrs. Craig said.
Basic service costs in the emergency department are reduced by 10 percent in the budget.
For example the basic cost for a level one (the most minor level) visit will decrease from $177 to $159; level two from $354 to $319; level three (the most common) from $532 to $479; level five from $1,004 to $904 and level 5 (the most intensive) from $1,476 to $1,39.
Surgery volume is up 6 percent and more than 10,000 surgeries are budgeted averaging 40 cases per weekday.
There is also an increase in volumes of cardiac catheterizations and special procedures, some in the new angiography suite that is schedule to open in the fall.
Wound care and physical rehabilitation volumes continue to grow as residents see outcomes that can make real differences in their everyday lives, Mrs. Craig said.