Squeezed by federal budget cuts, 11 North Carolina hospitals will face bankruptcy next year, a report by the N.C. Hospital Association predicts.
And 38 of the state’s 111 acute care hospitals will lose money in 2002, the report says. Those hospitals will be forced to fall back on cash reserves or income from investments or foundations, said Don Dalton, vice president for public relations for the association.
Officials at NorthEast and Rowan Regional medical centers and Stanly Memorial Hospital said they are still making a profit, but each is feeling the pinch since the federal government drastically reduced its payments for Medicare and Medicaid patients.
Larry Hinsdale, chief executive officer at NorthEast Medical Center, said the Concord hospital has so far made the right moves to avoid the rocky financial straits described in the study.
“While we slightly missed our budget last year, we did reasonably well, and feel fairly comfortable going into this year that we’ll keep our heads above water,”he said.”
“Hospitals all over the country are feeling it,” Rowan Regional spokesman Phil Whitesell said. “We continue to have a positive operating margin, but it becomes increasingly difficult when your reimbursement rates have been lowered to the point where they have been.”
The 11 most distressed hospitals will lose money and also exhaust their cash reserves. Dalton said half of them are “small, rural facilities,” like the 25-bed hospital in Cherokee County that already has filed for bankruptcy.
The other half are “urban fringe” hospitals “in communities that are mostly still rural and their service area is rural but they located close enough to metropolitan areas that they are counted in that metro,” Dalton said.
“They’re located close enough to metropolitan hospitals that they’re facing competition and higher costs but still serving more of a rural market. Those hospitals are actually under the most stress.”
Deloitte and Touche compiled the report for the hospital association using publicly available data, though the association did not identify the hospitals.
Dalton said the association purposely used available information so others can confirm the findings.
The hospital association will share the study with the state’s congressional delegation and state lawmakers.
Besides federal budget cuts, hospitals find that some of the largest expenses come in “providing services for the uninsured.”
The group hopes the study will convince state lawmakers to increase financial support for services, such as its children’s health insurance program. Under that program, the state pays for medical services to children of families that don’t have health insurance but don’t qualify for federal health insurance coverage.
“The financial situation is dire enough to potentially close some,” Dalton said.
Others will be forced to cut services and make other changes “to operate close to break even,” he said.
Dalton said he doesn’t think Rowan Regional, Northeast or Stanly Memorial fall in that category.
Rather than cut services, Stanly Memorial has added services and increased marketing “to keep Stanly County patients in Stanly County,” according to spokesman Ben Jolly. Stanly Memorial is a not-for-profit hospital, which answers to an independent nine-member board of directors, much like Rowan Regional and Northeast.
“We’ve been affected (by federal budget cuts), but we’re not by any means in any financial straits,” Jolly said. “The hospital is still doing quite well.
“... We’ve made great strides in introducing new specialists and new equipment, such as our new cancer center.
One of the biggest challenges, Jolly said, is competing for qualified people in ancillary positions, such as radiology departments. “It’s very competitive,” he said. “I look at classified ads in the newspaper. I see ultrasound specialists needed. The jobs definitely are out there.”
Though Rowan Regional has no hiring freeze, “we obviously look very carefully at all our needs to make sure that we’re filling the jobs that we really need,” Whitesell said.
The Salisbury hospital has added some services, including an in-patient rehabilitation unit.
“The big need we have is to find primary care physicians because they are the entry point in the system,” Whitesell said. “We’re still trying to recruit those primary care physicians because many primary care physicians in the area just aren’t accepting new patients.”
The Concord hospital fell in that group. Hinsdale said Northeast set an operating margin goal of 4.3 percent last year but achieved only 4.1 percent. The target this year is 5 percent, he said.
NorthEast’s long term goal is an operating margin of 5 to 6 percent, Hinsdale said. That’s the margin most hospitals need to pay for depreciation and provide adequate staffing and equipment.
Hinsdale said NorthEast’s challenges include keeping pace with Cabarrus County’s booming population growth, keeping residents in Cabarrus for health care and paying for that care when they can’t.
The hospital has continually added to its services and facilities the past several years to stem the tide of referrals to Charlotte hospitals, and plans more expansion this year.
“We offer virtually every service that Presbyterian and Carolinas (in Charlotte) do except for transplants,”Hinsdale said. “We actually don’t lose as many patients to the city as other fringe hospitals do.”
But the increased volume comes with its own problems, especially when many of those patients can’t afford health care or insurance. According to an annual report released last week, about $15 million of NorthEast’s $387 million in expenses last year was for non-compensated care.
A large chunk of that is thanks to the federal Balanced Budget Act, which Hinsdale called “the straw that broke the camel’s back” for health care. “We’ve been hit by many things, but that’s probably the biggest thing over the past couple of years.”
Losses from Medicare and Medicaid reimbursement cuts forced the hospital into a lengthy standoff last year with Blue Cross and Blue Shield of North Carolina, the state’s largest private insurer over reimbursement costs.
The hospital association’s report also said:
- 37 of the 111 acute care hospitals are expected to have operating margins below 5 percent.
- Only 36 of the 111 hospitals expect to have operating margins of 5 percent or greater, down from 56 hospitals in 1997.
- Care for uninsured patients, “which is provided primarily by community hospital emergency departments,” cost $1.4 billion in 1997 and is projected to reach $1.8 billion by 2002.
The study found that for every 1 percent increase in private health insurance premiums, 5,400 lose health coverage, creating more pressure on hospitals’ services.
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