Health Care law changes could spell disaster for hospital

Jan 24, 2017 Issues: Health Care

Go Anacortes: Health care law changes could spell disaster for hospital 

By Briana Alzola 

Big changes could come to Island Hospital this year that could result in major revenue losses.

Changes to the Affordable Care Act and the hospital’s current agreement with military insurance Tricare could potentially have disastrous results, hospital CEO Vince Oliver said recently.

Oliver and other Island Hospital administrators met with Congressman Rick Larsen last week and asked him to do what he could to help the hospital this year.

One of the biggest concerns for the hospital is the repeal of the ACA, which President Trump officially signed on Friday, his first day in office.

Though the repeal has moved forward, the ACA is far from gone, Larsen said.

There are many steps to still take, and Larsen said he will keep fighting with each step. He has been holding town halls in the region and urging people to tell their stories and to speak up about what losing the insurance coverage would mean to them.

Oliver spoke with Larsen about the impacts a repeal of the ACA could have on the hospital. If the Medicaid expansion (which expanded coverage to everyone making less than 138 percent of the federal poverty level) is repealed, a lack of a replacement could mean “true disaster,” for the hospital, Oliver said.

In 2014, after the act also known as Obamacare passed, the hospital saw an increase of 46 percent (or about $8.6 million) in Medicaid revenue.

Since the expansion was put into place, revenue from uninsured patients dropped by more than 50 percent, which officials consider a good thing because it means more patients have insurance. In 2013, the hospital collected a little more than $7 million from uninsured people. In 2016, that number was just under $3 million.

The amount of charity care and bad debt also dropped significantly after the act was passed.

In 2014, charity care dropped from $1.6 million to $800,000. It dropped further in 2015 to $311,000. Bad debt dropped from $3.9 million in 2013 to $2.5 million in 2014 and $1.7 million in 2015. The hospital continues to offer more charity care than the state requires, but those expenditures mean less money to run the hospital, Oliver said.

“We’ve truly seen the benefits,” hospital CFO Elise Cutter said of the ACA.

More patients are seeing primary care doctors and getting problems treated earlier. That reduces charity care and bad debt at the emergency level.

Hospital Chief Medical Officer Robert Prins said it’s better for doctors, too, if patients don’t wait until they’re very sick to seek help.

But patients only do that if they are insured, he said.

Cutter and Oliver also asked Larsen to do what he can about drug costs. Significant cost increases over the past few years are hurting the hospital. In some cases, the costs of drugs have almost doubled, Cutter said. For some procedures, the hospital gets from Medicare less money than the simple cost of the drugs. So the hospital loses money on a procedure, even before including the costs of paying for nurses, doctors, facility upkeep and so on, she said.

About 20 percent of the drugs the hospital uses (especially those in the oncology department) make up 80 percent of the hospital’s drug cost.

Cutter said if the costs keep rising, the hospital will have to decide whether to continue some expensive treatments.

The hospital is also in the midst of negotiations with Healthnet, which is taking over the Tricare coverage for military personnel.

Healthnet is proposing a 10 percent decrease in payments, which would put payments below the government-established rates. To accept those rates would mean a loss per year of about $700,000 for the hospital.

The hospital only makes about $900,000 in profit a year, Cutter said.

Currently, the hospital gets about 30 cents for every $1 charged to Tricare. An additional 10 percent reduction would be too much, Oliver said.

He said the hospital just wants to make sure it gets the rates set by the government.

“We can’t do it for less,” he said.

If an agreement is not reached, Tricare holders will have to either pay for care that’s “out of network” or visit the nearest Military Treatment Facility, which is the Madigan Army Medical Center in Tacoma.

“That’s more than 100 miles for these patients to travel,” Cutter said.

The negotiations need to be completed by April 1 when Healthnet officially takes over, Oliver said. Over the past three years, Island Hospital has seen an increase of 94 percent in Tricare patients as services at Naval Air Station Whidbey Island are restricted or eliminated.

Oliver told Larsen there isn’t much he can do now, but asked him to help out as needed as the negotiations move forward.

Oliver and Cutter also asked for Larsen’s support where he can give it in terms of getting the hospital a special classification.

The hospital has no special status, unlike the other hospitals in the area. Whidbey General Hospital is designated as a critical access hospital, and Skagit Regional Health is designated as a Rural Referral Center.

Oliver said he hopes to get Island Hospital designated with Medicare Dependent Status. To do that, the hospital needs to have more than 60 percent of its patient days be represented by Medicare clients (which it does) and be classified as rural (which it is not by current Medicare standards).

Medicare Dependent Status could mean $1 million to $2 million more per year in Medicare reimbursement. If it is granted the status, it will be the first in the state to do so, Oliver said.