Economic Woes in U.S. Hospitals Typically Marion, Cty, Florida

North central Florida hospitals feel economic ills
Unemployed, uninsured patients put squeeze on medical centers

By Diane Chun and Naseem S. Miller
Staff Writers

Published: Tuesday, October 21, 2008 at 6:30 a.m.

The American economy has taken a turn for the worse, and hospitals in 
north central Florida are feeling the ill-effects of the current slide 
toward recession.

Shands HealthCare has seen the amount of charity care it provides as a 
safety-net hospital system increase significantly.

"In the 2008 fiscal year, we did $115 million in charity care at cost," 
said Bill Robinson, chief financial officer for Shands HealthCare. That's 
the cost to the hospital system after all forms of government 
reimbursement have been collected.

In 2005, Shands provided $60 million in charity care at cost, according to 
Robinson.

In Marion County, more than a quarter of the people younger than 65 are 
uninsured. That number is creeping up as unemployment rates increase, 
putting a heavier burden on local emergency rooms at Munroe Regional 
Medical Center, HCA-owned Ocala Regional Medical Center and its sister 
hospital, West Marion Community Hospital.

The Ocala area has close to 12,000 unemployed residents.

Alachua County has an estimated 11,500 unemployed, or 4.8 percent of the 
county's 240,082 residents.

When uninsured patients need care, they often turn to the emergency rooms 
at Shands at the University of Florida, Shands AGH and HCA-owned North 
Florida Regional Medical Center.

The most recent report from the Centers for Disease Control shows that the 
number of ER patients nationally has risen 32 percent in 10 years, while 
the number of emergency departments to serve them has fallen.

Dr. Linda Lawrence heads the Washington-based American College of 
Emergency Physicians, which represents some 27,000 emergency medicine 
specialists. She said the economic downturn has definitely put additional 
pressure on ERs nationwide.

When people lose their job or health insurance, they go without preventive 
care or cut back on medications, then depend on ER physicians when their 
illnesses turn critical, Lawrence said.

"Your stockbroker may not see you, but emergency physicians are always 
there when you need them, 24 hours a day, seven days a week," she said.

"As with most health-care systems in the country, we are seeing an 
increase in uninsured/uncompensated patients treated at our hospitals," 
wrote Jeff Baiocco, chief financial officer of Ocala Regional and West 
Marion in an e-mail.

Through the first nine months of 2008, the number of uninsured patients 
admitted to the two hospitals has increased by 8 percent over the prior 
year.

Munroe is hit hard

The hospital affected the most by the slow economy has been Marion 
County's community hospital, Munroe Regional.

Month after month the hospital's revenue has fallen below projections and 
expenses have risen above expectations. That worries executives, who 
believe that 2009 will prove to be another tough year.

The hospital's admission and surgery numbers also have been dipping below 
expectations for the past several months.

Although there is some competition from Ocala Regional and West Marion, 
Munroe's officials said they believe the drop in surgery and admissions 
reflect a sagging economy.

More and more patients are foregoing elective surgery, even necessary 
treatment, because they just can't afford it, health officials say.

Munroe Regional, a 421-bed, acute-care hospital, had $10 million in bad 
debt during fiscal 2007. That amount increased to more than $16 million in 
fiscal 2008.The hospital is expecting an average of $3 million a month in 
bad debt for fiscal year 2009.

The hospital's total uncompensated care rose from $28.6 million in 2007 to 
$33.7 million in 2008.

More than 93,000 patients visited the emergency room at Munroe Regional in 
fiscal 2008, which runs Oct. 1 to Sept. 30. This number is higher than the 
national average of 58,000 visits for a hospital this size.

Although officials at Munroe have avoided cutting services, they announced 
their first round of layoffs last month. Twenty-one employees from a dozen 
different areas were handed pink slips. Another 28 vacant positions were 
eliminated. In total, the hospital hopes to save $2.4 million annually.

Steve Purves, Munroe's president and CEO, said coming to the decision was 
difficult, but the hospital has been facing growing pressure from the 
increasing number of uninsured and underinsured patients, in addition to 
increasing costs in labor, health care technology, pharmaceuticals and 
utilities.

Meanwhile, the state and federal reimbursements from Medicare and 
Medicaid, which make up almost 72 percent of the hospital's revenue, have 
remained the same or been reduced.

An analysis of the payer mix at the hospital also shows that the past 
fiscal year did not meet the hospital's expectations: A higher percentage 
of people with Medicaid or "other" form of pay were admitted compared to 
those who had Medicare or private insurance.

Munroe has no community tax support. After 15 years of operating 
independently, hospital officials are now looking into the option.

Munroe has not eliminated any of its primary services, but Purves has 
mentioned in board meetings that that may lie ahead.

The hospital is evaluating all its services, especially those that require 
significant subsidy, such as obstetrics, to see if there are better ways 
to deliver care.

Taking a closer look

In Gainesville, neither Shands nor North Florida Regional Medical Center 
indicated they had cut services or staff in the face of an economic 
downturn.

Here is what Marie Johnson, vice president of operations and quality at 
NFRMC, had to say:

"At North Florida Regional Medical Center, we strive to provide 
high-quality care for anyone entering our doors. Certainly, we are 
concerned about the economy. We understand everyone is thinking about and 
wondering what is happening with our economy. However, we cannot 
overreact."

The hospital will continue to "staff to need," she said, and 
administrators have no plans to limit or cut services.

Shands' Robinson said the Shands system is taking a close look at programs 
and services as part of the annual budgeting process.

"Overall, we want to take about 3.8 percent out of our costs over the next 
two years," he said. "As volume grows, you can become more efficient by 
taking care of a greater volume (of patients) with the same resources."

The CFO said he hopes area residents will not notice a decline in services 
available to them as the analysis is carried out. The cancer hospital, due 
to come online in 2009, will add capacity and personnel in Gainesville, 
but Robinson notes, "there will probably be pockets where we will see some 
changes."

Overall, Robinson said, Shands is trying to find ways to improve 
efficiency that will trim $65 million from its costs over the next two 
years.

Dealing with debt

It's the nature of the business that a hospital delivers services first 
and tries to collect payment afterward, Robinson said. And that gives some 
people an opportunity to shirk their liability.

Overall, he said, although Shands is doing more business, as a percentage 
of revenue, bad debt is about the same.

When a patient comes in and receives services, it generates an expectation 
of payment, either by the patient's insurers or the patient personally. A 
portion is written off because a patient may be incapable of paying, which 
is charity care, or they are deemed capable of paying and just refuse to, 
which is bad debt.

Meanwhile, the state and federal reimbursements from Medicare and 
Medicaid, which make up the lion's share of revenue for a safety-net 
hospital like Shands at UF or Munroe, have remained the same or been 
reduced.

"Medicaid may pay more each year in health care, but that is because the 
number of members to be paid for has gone up, not because they are paying 
out more per patient or per hospital visit," Robinson said.

That leaves a hospital such as Shands or Munroe with fewer days' cash on 
hand for fiscal year 2009, which could affect its bond rating and increase 
the interest rate on its loans.

It's a concern for Robinson, who said, "We have some exposure to variable 
rate debt, and most of the banks have made access to capital more 
difficult and the rates they will charge you have been increasing."

HCA-owned Ocala Regional and West Marion are also taking steps toward 
efficiency.

"As part of a large corporation," Baiocco wrote, "we have the ability to 
negotiate lower pricing for major supply items." The hospital has created 
a Green Team, which works toward making the hospital more environmentally 
friendly and finds ways to cut costs. The hospital so far has eliminated 
more than half the amount of Styrofoam used in food and nutrition 
services.

A hiring freeze of non-clinical positions has been initiated, but 
officials say it will have no impact on patient care. The two hospitals 
laid off a total of 10 employees earlier this month, but would not say 
from which departments.

Baiocco wrote, "We have not had the need to drop any services provided to 
our patients."

Robinson sounded a hopeful note for North Central Florida residents in a 
recent interview, saying, "I believe the picture will be brighter soon."

Contact Naseem Miller at [email protected] Contact Diane Chun 
at chund-v1vBJ9jY/[email protected]