Viewpoint - Keith Gnagey, CEO
The Price of Safety - March 2013
The price of medical care in the US is a topic of conversation that leads to sharing of personal stories that can be frustrating at best and shocking at the worst. At TVHC, we agree that overall, healthcare should be more accessible for everyone. The devil is in the details and to get to the details, it’s crucial to understand what drives costs for small rural hospitals in particular. Here are some answers to many of the questions I hear about our hospital costs.
How much does it cost to meet your daily, monthly and yearly expenses? Do you know how much of your expenses are fixed and how much you can vary? A fixed expense is one you pay regardless of usage, like your mortgage or a car payment. You pay the same amount each month whether you are in the house or on vacation, and regardless of the number of miles you drive. A variable expense is where you pay based on usage and have some control over how much the bill will be, like your cell phone bill or cable bill. Why am I talking about this? Because we want you to understand that Teton Valley Health Care, like other companies, has fixed and variable costs, and that we have to ensure that our revenue covers both types of costs.
Like many firms, our biggest expense is the cost of salaries and benefits for our employees – this consumes over 60 percent of our monthly expenses. Some of our staffing costs occur regardless of the number of patients we treat. We staff 7x24 nursing coverage. We average 1.3 inpatients at any time, yet a single nurse could manage 6 or more patients simultaneously. We staff providers at all times in the ER, yet we average only 4.43 ER visits per day. I can go on with examples in the lab, the pharmacy, x-ray and imaging, etc. Why do we do this? Isn’t this the waste and inefficiency Washington keeps referring to? We staff to provide appropriate levels of local care 365 days a year, so we can be there when you need us.
I would love to “fully utilize” our RNs and ER providers. But we can’t staff an RN for only 10 minutes an hour, and you wouldn’t want us to have to call in a provider every time someone visits the ER. Not only would it significantly degrade the health care we provide, it would also put us at odds with some of the regulations governing critical access hospitals (not all regulations are bad). I don’t want to imply that we cannot control our staffing costs, in fact, 43 percent of our staff is part time or pool, and we always keep staff on call for surges in usage. Our ER providers also offer clinic coverage on the weekends and cover our hospital inpatients. Our neurologist, pain management specialist, and general surgeon are only here part time. But there is a base level of staffing (i.e., fixed cost) that we must maintain. Our costs are higher than larger hospitals because this base level of staffing is not as fully utilized as at larger hospitals; our cost is spread over fewer patients.
We maintain a 13-bed hospital and average 1.3 patients at a given time. We have some of the best imaging equipment around and use it 1/100 of the time that larger hospitals do. We have to follow the same regulations, reporting requirements, and documentation requirements as other larger hospitals, but we have fewer patients. We need the same electronic medical record systems as larger hospitals, but we spread that cost across fewer patients. This is not a gripe, this a fact of life for most rural hospitals. It costs more for us to operate per patient served than larger hospitals.
So what do we do? Our community has clearly said that a local hospital is a requirement. We agree. Without a local hospital, people would suffer more debilitating injuries and more people would die from emergency medical conditions. We would lose jobs, productivity, property value, and potential new community members.
We are working to grow, to become more efficient, and to better serve the community. We know that healthcare is expensive and that every dollar counts. We are committed to reviewing and adjusting our prices, making prices more transparent to the community, and working with those in need to assist in payments. But no matter what we do, we are, at times, going to be more expensive than other alternatives for health care that you may find. I don’t want to mislead anyone. The price of having a local hospital is that it will be more expensive. Is it worth it? Absolutely!
You have every right to ask what steps we are taking to lower the cost of health care. Those steps include:
- Increasing the amount of services we offer and therefore the number of people who use the hospital and clinics – when we increase usage, we reduce the average cost per patient
- Consolidating purchasing, constantly reviewing what we spend, and partnering with other facilities to help share or reduce expenses.
- Making smart decisions on what services are necessary -- offer those services with the greatest benefit to the community and the most attractive cost profile for our size of hospital
- Partnering with other local hospitals to expand medical services that we don’t have the volume or capabilities to offer locally – expanded oncology care is one good example; we offer chemotherapy now and would like to offer further exam and treatment services.
In my next column, I’ll talk more about prices- how we set them, what we are doing to adjust them, steps we are taking to make pricing more transparent - and how to compare prices for healthcare. As always, I welcome comments and suggestions from the community. Please email me at email@example.com.***
Our focus is your focus - February 2013
I hope you’re aware of TVHC’s hospitalfocus 2015 project. This project is focused on planning for the future of our hospital to ensure that our services are relevant and well-supported by our community in the coming years. It’s not possible to plan for the future without hearing from you, and one method of communication has been through community forums that we have held.
During our series of forums last fall, you told us you were interested in several primary areas: affiliations, billing accuracy and pricing structure. We’ll talk about affiliations and billing now, and discuss pricing in the next article.
Let’s talk about affiliations first. The overall goal for affiliations at TVHC is to sustain the long term viability of TVHC as a local hospital. Whatever the outcomes may be for small rural hospitals through mandated healthcare reform, we can trust that cost reimbursement rates will drop. This means that we have to increase our utilization – adding services that utilize existing staff and facilities so revenue goes up faster than expenses; and become more efficient in our spending. As we discussed in our meetings, regulatory changes, combined with advances in technology, have to be integrated with community needs and desires for healthcare. This will require collectively broadening our view about the delivery of healthcare.
Core services, such as the ability to perform X-rays and staffing a round-the-clock Emergency department, must remain at the hospital. Some core services, such as general surgery and pain management, can only be supported on a part time basis given our community size. Certain services can be performed remotely, such as reading X-rays (currently outsourced to Medical Imaging Associates) and coding our bills (outsourced to a firm in Wyoming and to Madison Memorial Hospital). Certain functions are best performed if we are part of a larger group, such as being part of a purchasing organization (we currently belong to Amerinet) or sharing clinical resources.
We need to function effectively. We can read X-rays 24 hours a day because we contract (like many hospitals in the region) with a group of radiologists. We do not have enough volume to hire a radiologist to cover 24/7 on-call; our current affiliation lowers our cost per X-ray read. We are also exploring telemedicine alliances with specialty facilities, and sharing back-office duties. As a small hospital serving a small community, we do not have depth in key roles. Establishing management agreements to improve our capacity is key to our long-term survival.
Next up is billing accuracy. Nationwide, the number one complaint about hospitals is related to cost for services. Hospital billing runs a close second. TVHC has had significant problems in the past with billing and billing accuracy. This has had significant impact on both our financial performance and on the community. Moving forward, we continue to improve billing timeliness and accuracy. We know we have to enhance readability and the level of detail in our bills. What does all of this add up to? Better accountability for you.
In November and December 2012, we served 2,978 clinic patients and 1,487 hospital patients for a total of 4,465 people. Complaints received for the same time period equaled 21 with 18 directly referencing billing. Most of the billing complaints were resolved through an explanation of services rather than finding errors on the bill. While the percentage of actual errors was very low, several complaints led to finding an error in our process that caused a small percentage of bills to be stated in error. We have corrected the process and we’re grateful for the patients who posed the questions. Fortunately, although the printed bills had errors in amounts owed, our internal systems maintained accurate balances. We’ll continue to share our patient complaint status report with you every two months, and as always, we encourage you to share your concerns with us.
We’re making progress on the subjects that you consider to be most important. Our next article will focus on hospital pricing structure with tips for you about price comparisons.
Our next hospitalfocus 2015 forum, is scheduled for Thursday, February 28 from 6 – 7 p.m. at the Senior Center in Driggs. I hope to see you there. If you have suggestions for us but can’t attend the forum, please feel free to share your thoughts via Facebook or firstname.lastname@example.org.*****