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Hospitals face increasing costs, decreasing reimbursements

Hospitals in Mississippi, especially rural hospitals, are being squeezed on both ends. Reimbursements for Medicaid and Medicare continue to drop at the same time that health care costs are increasing due to improved technology, higher costs for pharmaceuticals and hospital supplies and shortages of nurses and other medical personnel that have made it necessary to provide higher salaries in order to compete.

“Hospitals are both labor and capital intensive,” said Eddie Foster, chief operating officer for the Mississippi Hospital Association. “You have more demand because of our aging population. You have new technology, which is fantastic. It is saving lives and allowing us to care for people in ways never seen before. But hospitals are also facing worker shortages in certain areas, particularly the new technology areas such as imaging technology.”

The shortage of nurses is a great concern, and pharmacists are also in critically short supply. And while in most businesses adding technology reduces labor costs, in hospitals it is just the opposite. For example, if you add MRI, you have to add MRI imaging technologists.

“You have increased demand with shortages of labor and increased technology,” Foster said. “At the same time you have decreased revenue mostly because of federal programs such as Medicaid and Medicare. You put that all together and you have a business with decreased reimbursement. Revenue may be going up, but payments from major payers are going down. Then you have the economic challenges of the workforce shortage. When you can get workers like doctors, nurses and pharmacists, the cost of labor is increasing faster than other sectors of the economy.”

The slowing economy is also a problem. Millions more people in the U.S. are uninsured each year. Hospitals can’t refuse care to the uninsured, so the amount of uncompensated charges continues to go up.

“It is a tough business to be in,” Foster said. “It really is. They are really coping with this quite well considering the circumstances. Hospitals are very resilient, and are working to improve processes and efficiency. They are using technology as a tool to improve care. Shorter stays help patients to go home and back to work quickly.”

Foster said increased costs for malpractice insurance and the lack of availability of malpractice insurance for physicians has been a concern for hospitals. Only physicians can admit patients to a hospital. And if the hospital has difficulty attracting physicians because of malpractice insurance problems and the state’s legal climate, it hurts the hospital’s bottom line.

Foster said that recent tort reform legislation passed in Mississippi is expected to help provide the kind of relief that hospitals and physicians need.

“Tort reform over a period of time will bring fairness back into the system, which will, in turn, bring more insurance carriers back to Mississippi and bring access to insurance for doctors and hospitals,” Foster said. “It will make it more affordable in the long run. The insurance industry needed some kind of predictability. With the system now there are no caps, no ceilings. There is no way an insurance company can accurately predict what risk they are assuming. Consequently, most of the carriers have left the state.”

The hospital association is also putting a lot of effort into preventing deeper cuts in Medicare and Medicaid and, in certain cases, is advocating increased reimbursement for Medicare.

“It isn’t a crisis for all hospitals,” Foster said. “But it is for some of the smaller, rural hospitals. As a general rule hospitals in rural areas have proportionately greater challenges, although both are facing great economic challenges. Overall hospitals are quite innovative, but we desperately need some federal relief from continuing cuts from Medicare.”

Foster said certain areas in Mississippi are in a crisis regarding access to hospital and physician care. Hospitals can only be as profitable as the economic area where the hospital operates. Hospitals are a microcosm of their community so hospitals in areas where the economic base is poor struggle to survive.

In Mississippi 40% of state residents have incomes below the poverty rate. There are about 500,000 Medicaid recipients. Most hospitals get about 50% to 60% of their income from MedicareMedicaid. In rural areas, those federal programs can represent 70% of the hospital’s income.

Jim Kaigler, chief executive officer, Memorial Hospital at Gulfport, said hospitals in the state are all in the same boat when in comes to economic challenges.

“Somehow or another this continuing ratcheting down of reimbursement needs to stop, and begin to go back to match the costs hospitals incur to provide care to patients,” Kaigler said. “Some stability there would be very helpful. The real challenge is that the number of patients we see continues to go up. As the population ages the demand for health care will continue to rise. So hospitals are busier now than they were a few years ago and Memorial is no exception.”

Bill Oliver, president of Forrest General Hospital, Hattiesburg, agrees the biggest challenge facing hospitals is that reimbursement for Medicare and Medicaid isn’t keeping up with the cost of providing the case. Forrest General is also seeing the effect of more uninsured patients.

“I know it is common nationally,” Oliver said. “We had 1.4 million more uninsured people in 2001 versus 2000. Others may be employed, but they don’t have the same insurance they had in the past.”

Forrest General recently reduced its workforce by 94 people, and has been working on other cost-cutting measures in recent months. The hospital is also working with employers and employees to design programs designed to make the best use of health care dollars.

The North Mississippi Medical Center (NMMC) is also working closely with businesses to keep costs as low as possible. Gerald Wages, NMMC chief operating officer, said the hospital system is working with businesses to help design cost-effective health care plans, and encourage people to use services appropriately.

“For example, we want to keep folks out of the emergency room except in an emergency because it is an expensive place to get health care,” Wages said. “In our case we have developed several walk-in clinics to take the pressure off emergency rooms, and provide medical solutions in more cost effective environments.”

Wages said recruiting physicians is also a top challenge facing hospitals in Mississippi today. Wages said physician recruitment is difficult both because of supply issues and the state’s reputation for its legal climate. Plus, fewer surgeons are graduating from medical schools, which makes recruiting more competitive.

Contact MBJ contributing writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

About Becky Gillette

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