Officials say Affordable Care Act, Medicaid/Medicare cuts lead to drop in payments

Last updated: June 05. 2014 10:14AM - 16374 Views
By - mstrother@lagrangenews.com



The south tower, which serves as entrance to West Georgia Medical Center since the addition opened in 2010, was a major construction project for West Georgia Health to update services. However, in the years since the health system began expansion, operating profits have dropped off, which officials tie to the Affordable Care Act, leading to recent lay offs and consolidations to cut expenses.
The south tower, which serves as entrance to West Georgia Medical Center since the addition opened in 2010, was a major construction project for West Georgia Health to update services. However, in the years since the health system began expansion, operating profits have dropped off, which officials tie to the Affordable Care Act, leading to recent lay offs and consolidations to cut expenses.
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West Georgia Health has laid off 12 people and is consolidating surgical and nursing departments as part of recent cuts in the wake of strangled revenue.


About 75 total jobs are being “affected” by the cuts, health system officials announced. In addition to the layoffs, other positions are being eliminated, but employees may transfer to currently vacant positions. Some currently vacant positions will be eliminated.


WGH public relations officials said employees who were laid off were offered severance packages, but were unable to elaborate on what positions were eliminated and if all employees who were offered transfers took them.


The health system also is closing a nursing unit, consolidating two nursing floors into one, and moving outpatient surgery from the Enoch Callaway Cancer Clinic building into the main operating room suite on the second floor of the medical center. Those moves are expected to be complete by September.


“Some of these changes have resulted in displacement of a few employees from a work site where they felt most comfortable,” West Georgia Health president and CEO Jerry Fulks wrote in a recent employee newsletter. “This is unfortunate, but the decisions had to be made in the longer term best interests of our patients. We are not facing any imminent crisis, but can see that such a point exists two or three years in the future if we don’t act now.”


Fulks said the health system last year had frozen capital expenses to only spend on critical operations. That and other cuts to expenses saved about $5 million.


Prior to the announcement of the cuts, the Daily News spoke with Fulks about the health system’s financial situation, specifically regarding its repayment of a county-backed bond for the south tower expansion. Fulks said despite the health system’s losses, the bond repayments and other financial aspects are in good shape.


The county backed with its taxable capabilities $46.5 million of a $70 million bond for the West Georgia Medical Center south tower, which broke ground in 2007 and opened in 2010. The south tower now functions as the hospital’s main entrance and houses the updated emergency room, intensive care unit, labor-delivery unit and cardiovascular center.


The bond deal came with covenants that the health system meet certain financial strength measures, like requiring at least 60 days’ cash on hand. Cash on hand is the amount of reserve funds measured by how many days the system could operate with no income. Fulks said the health system’s current cash on hand is about 100 days’.


“We’re in a strong position and have made all of our debt payments on the bond issue,” Fulks said. “The problem that we have encountered is that the profitability from operations is almost impossible.”


The health system is seeing people with insurance policies that carry high deductibles where the individual apparently can’t cover the out-of-pocket expense, leaving the health system with more unpaid bills. It’s costs of indigent care for people without coverage also has increased “dramatically in the last 10 years.”


Fulks said in the last few years, a 2 percent sequestration cut on Medicare and Medicaid reimbursement to health care providers and additional 1.5 percent cut from the Affordable Care Act has significantly cut into the hospital’s returns from those programs. In addition, since the state did not expand Medicaid as part of the ACA, there has been no apparent increase in the amount of people covered by any type of health care plan, except those that can stay on their parents’ plan until age 26.


“We took the cuts, but we didn’t expand the coverage,” Fulks said.


He added that the health system’s patient business constitutes 12 percent indigent care and bad patient debt, and more than 50 percent is medicare and medicaid.


“So we’re left with only about 25 percent of our business being insurance-based, for commercial insurance,” Fulks said. “So we advised the county of our financial situation, we continue to have a strong balance sheet, but the reality is … of all the rural hospitals in Georgia, 55 percent are losing money.”


Fulks said West Georgia Health has seen consecutive months of loss, but stock investments and other incomes have helped generate some revenue.


Fulks said outpatient and inpatient services also have changed, where the system used to see 60 percent in-patient procedures to 40 percent out-patient, that percentage has now reversed. That is leading to a change in surgery focus to more on outpatient procedures with the consolidation.


Fulks said the hospital still has a strong balance sheet and savings, and is secure for the foreseeable future. However, he compared the loss of revenue to a car race where the driver is worried about running out of fuel before reaching the finish line, “but we don’t know where finish line is.”


“It’s troubling, but we are managing it,” Fulks said.


He said the number of days’ cash on hand “probably is the most important measure.” The health system is seeing positive cash flows from operations, but it’s not funding its aging facilities and future replacements of equipment and technology, he added, which is constantly advancing.


“It will become more troublesome if the expansion of insured coverage doesn’t happen,” Fulks said.


He denied that the health system’s expansions have contributed to revenue losses.


“The current situation is not because of overspending, it’s because of underpayment,” Fulks said.


He added that plans for expansion all were put in motion years before the Affordable Care Act was even proposed.


The south tower, Fulks noted, was the first major construction project at the medical center in more than 40 years.


“That tower was meant to catch up with the volume we already had,” Fulks said.


The original ER had about 35,000 visits per year, and that volume has now almost doubled to about 65,000 per year at the current ER in the south tower. Fulks said women and children’s health hadn’t been expanded in more than 35 years and intensive care was “grossly undersized,” about half the size it needed to be.


“Those helped us expand the services we were able to offer to our community,” Fulks said.


The health system also expanded with West Georgia Physicians, a subsidiary that employs physicians working in standalone, specialized clinics. Fulks said more doctors, especially those who have recently completed a residency, are preferring the ability to work under a health system than strike out in private practice.


Although that means more employees, Fulks said they “aren’t just another mouth to feed,” because they help generate revenue that the health system otherwise wouldn’t have.


“Our ability to attract and sometimes retain the medical talent needed for our community was sometimes dependant our ability to take them on as employees,” Fulks said.


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