VMH CUTS BUDGET IN VARIOUS AREAS TO ENSURE FUTURE VIABILITY

As hospitals throughout the nation continue to struggle financially to, at best, break-even in the midst of decreasing Medicare and insurance reimbursements coupled with increasing costs, reevaluation of expenses has become a necessity for the vitality of even the largest hospitals. Budget and program cuts, lay-offs and, in extreme cases, closing of some outreach centers has resulted.
Rural hospitals, among them Veterans Memorial Hospital, have been hardest hit during this time. Close evaluation of expenses and the potential for relief that critical access designation and expansion into new services may offer in the future help ensure the local hospital's viability in this largely senior community. But although these measures give the hospital a strong foundation on which to weather this financial storm, they will not be enough. For this reason, hospital trustees during their June 19 regular meeting approved budget and personnel cuts totaling near $160,000,
Specifically, the plan includes elimination of two positions within the hospital, affecting both the financial services and nutritional services departments; a decision to combine the personnel and public relations departments; elimination of overtime in designated areas; the elimination of long-term disability insurance provided employees as an additional health insurance benefit; reevaluation of a contract that would raise pharmaceutical expenses by 10%; restructuring of the lab department; and research into alternative funding sources for the emergency services department to eliminate the cost to the hospital to implement the county-wide system.
"While we're waiting for critical access designation to come into play and with the building project soon to come due, it is extremely important that we watch closely our expenses," says Administrator Mike Myers of recent cuts. He adds that he does not anticipate the necessity for further cuts, at least in the way of personnel, due to the fact that the pattern of patient census throughout the last several years has remained, for the most part, consistent. Additionally, new services including bone densitometry testing and CT scanning have already begun to realize a benefit in increased services and revenues. In reference to recent cuts, Myers also stresses that the cost of the building and renovation project has had no impact on and is not scheduled to hit the bottom line until January of 2001.
On a related topic, a misunderstanding in the wording of the bill that created critical access designation, if not resolved by Nov. 1, may make it difficult for many rural hospitals to realize the benefit that critical access designation would have afforded them. "Throughout the bill, Congress cited that Medicare reimbursement to critical access hospitals should be made on a 'fee schedule' rather than 'cost basis', which would change little the way in which Medicare currently reimburses hospitals," explains Myers. According to the administrator, the cost basis form of reimbursement was to be the factor that would most greatly impact the bottom line for hospitals that sought such designation. "Health care representatives from throughout the Midwest have convened with officials in Washington D.C. to try to resolve the issue," says Myers. "Senators Grassley and Harkin, as well as U. S Representative Jim Nussle, plan to support rewording of the bill in the next legislative session." Myers further points out that letters of support to local congressional representatives would serve to make such changes a priority among lawmakers in the upcoming months.
Additionally, amidst this time of financial uncertainty, the Blue Cross/Blue Shield health insurance bid for the upcoming year reflects a 52% increase in premiums. Hospital staff are nearing the end of an 18-month contract with the health insurance provider. However, in light of significant increase in premiums, the health insurance contract will be relet. "In rebidding the contract," says Myers, "there has been great interest." Employees will continue coverage under the current plan until December of this year, at which time the current contract will renew or a new contract will take effect.
In other discussion, Myers reported that a meeting with the advisory committee for Northeast Iowa Community College in Calmar did affirm that an increasing number of students are enrolling in the nursing program offered at the institution. Though this will offer some relief in the near future to the nursing shortage currently being experienced throughout the nation, competition for recruitment of these individuals will remain strong due to the vast number of vacant positions in the field. "A shortage of individuals entering the nursing field, combined with the fact that many practicing nurses are experiencing 'burn out', means that many hospitals will be dealing with shortages for some time yet," says Myers. He adds that the average age of nurses throughout the nation is 46,
According to Myers, Veterans Memorial Hospital has recruited a massage therapist, expected to come aboard pending successful completion of the licensure exam in July.
In regard to construction progress, crews continue as scheduled for a target completion date of October 2000. A total of four patient rooms have been completed to date, while work in progress continues in the same area. Medical records will soon relocate to their new area pending resolution of an issue with carpeting. VMH Community and Home Care is scheduled to relocate from their current location within the Allamakee County Courthouse to a site within the hospital July 12. Additionally, work within the ambulance garage continues, however at a somewhat slower pace than was anticipated due to conflicts with weather.
And in final discussion, Myers reported receipt of $30,000 from Wellmark. The funds were directed to Veterans Memorial Hospital as part of a universal contract in which a predetermined amount of money is paid to the hospital each contract year to cover anticipated services to Wellmark patients throughout that year. Upon completion of the contract year, actual expenses are evaluated and any underpayment for services provided to Wellmark patients is, at that time, reconciled. The $30,000 check balances charges and payments, as set forth in the contract, for the last contract year.
It was with the Wellmark payment that the hospital showed a profit of $64.40 for the month of May. Without it, the bottom line would reflect a deficit of $6,000 year-to-date.
Specifically, inpatient revenues reflected in May were 6.3% under budget and 29.3% under last May. On the other side of the coin, outpatient revenues were 6.4% over budget and 25. 1% over last May. During the same month, total operating revenues met budget expectations, but were 7. 1% under last May's figures. Expenses were 3.4% over budget and 6.2% over last May. In combination, these figures contributed to a profit of only $64 in a month when budgeted revenues totaled $11,414. In May 1999, the bottom line reflected a profit of $59,206.
Year-to-date, gross patient revenues are 1.7% over budget and 7% over last year, while total operating revenues are only .8% over budget and 3.4% over last year. In addition, it was also reported that since expenses are 2.9% over budget and 3.6% over last year, profit is down. Currently, the hospital has realized a profit of $26,586 compared to a budgeted $100,164 and last year's profits of $35,276.
"This gap would have only continued to widen without serious intervention," points out Myers, "which is why we were forced to enact expense cuts."