Hospitals join to boost Medicare payments
Hospital officials are lobbying lawmakers to change a funding formula that they say is unfair.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- They're usually competitors, but the Mahoning Valley's largest health-care providers are joining forces to tackle a problem that cost area hospitals $7 million in lost revenue this year alone.
The problem affecting hospitals in Youngstown, Warren, Salem and East Liverpool lies in a formula the federal government uses to calculate how much it will reimburse for treatment of Medicare patients.
Under that formula, known as the Wage Index, six Valley hospitals saw their Medicare reimbursements take a precipitous drop this year, even though their labor costs and the community's health-care needs are growing.
And the end is not in sight.
Proposed rules for fiscal 2002 will keep the region in the same reimbursement range, resulting in another $7 million loss for the six hospitals next year.
The institutions affected are Northside Medical Center in Youngstown, Trumbull Memorial Hospital in Warren, St. Elizabeth Health Center in Youngstown, St. Joseph Health Center in Warren, Salem Community Hospital and East Liverpool Community Hospital.
Michael Rowan, president and chief executive of Humility of Mary Health Partners, said top executives from HMHP, Forum Health, Salem Community and East Liverpool are putting together a campaign to convince federal lawmakers that the formula should be changed. HMHP operates St. Elizabeth and St. Joseph.
Representatives from the six hospitals visited local legislators in Washington, D.C., this summer to state their case and conducted a letter-writing campaign, he said. Now petition drives are under way at the affected hospitals to demonstrate voters' interest in the issue.
Basis for reimbursements: Rowan said the government bases its reimbursements for Medicare inpatient and outpatient services on a complex formula in which labor costs are a major factor.
Reimbursements for the same procedure vary widely from place to place, Rowan said. New York City Hospitals, for instance, get 112 percent of the average procedure cost, while hospitals in the Youngstown-Warren Metropolitan Statistical Area get about 95 percent of that cost, he said.
N. Kristopher Hoce, chief executive of Forum Health, said the Valley should be getting paid more, not less, because several new employment contracts and a national nursing shortage have caused local health-care labor costs to rise.
Forum Health, for example, settled two new contracts for registered nurses in the past few months -- one, for nurses at its Youngstown hospitals, came after an 81-day strike.
"After going through a strike, we know exactly where we stack up when it comes to nurses' pay," Hoce said. "Forum, in particular, is at the top in the state for wages and benefits, and we're always at or near the top."
Rowan said HMHP labor costs are also high. "We have very high wage rates, but we're getting paid less," he said. "We're getting squeezed on both sides."
Part of the problem, the CEOs said, is that the government bases its index on figures received four years before -- 2002 Wage Indexes are based on 1998 figures.
The health-care companies would like to see the index calculation methodology completely revised, Rowan said.
Their first goal, however, is for lawmakers to find a more immediate solution that would prevent losses in Medicare reimbursements for local hospitals next year.
Unless a solution can be found, Rowan said, local hospitals may have to look at ways to cut back on services to make up for the reimbursement shortfalls, which this year cost HMHP more than $3 million.
"That's a big chunk out of our budget," he said. "The reality is, something has to change."
Hoce said Forum officials are in the middle of their budgeting process now, but he, too, is concerned about the impact the Medicare reimbursement cuts will have.
"Operating margins in health care are already almost nonexistent," he said. "This problem is forcing us to ask ourselves: How will we stay viable?"