(August 29, 2016) A potential change in Medicare reimbursement models could provide a big boost to Coffey County Hospital’s bottom line in 2017. At its August 22 monthly meeting, the Coffey Health System Board of Trustees approved the first steps toward a potential change to Critical Access Hospital (CAH) status. The hospital hopes to gain an estimated $500,000 annually.
Chief Executive Officer Leonard Hernandez recommended applying for CAH status with the Centers for Medicare & Medicaid Services. He assured that the change would not impact patient care, as it primarily changes only the Medicare payment model.
The hospital is currently designated under the Prospective Payment System (PPS), through which Medicare reimburses a pre-determined amount based on the patient’s diagnoses. This current fixed rate does not take into account the level of services provided; meaning the hospital often loses money when caring for Medicare inpatients. If the hospital meets all CAH criteria, Medicare reimbursement increases to 101 percent of reasonable costs.
Hernandez cited three factors leading to his recommendation. Auditors estimate that the hospital would receive an additional $200,000 in Medicare reimbursements annually, based upon data from the first six months of 2016. Conversely, under the current PPS designation, the hospital risks losing $300,000 annually the 340B pharmacy reimbursement program if Medicaid percentages take even a slight dip. CAH facilities are not held to this Medicaid threshold. The final factor is declining trends in inpatient admissions.
“When you take each one of those things into consideration, and then factor in the reduction of inpatient admissions from 879 in 2015 to an estimated 560 in 2016, the potential increase is probably $8,000 to $10,000 per admission,” he summarized. “That’s a lot of money, and it’s a lot of money that we’re not going to make up any other way.”
In past years, Coffey County Hospital’s proximity to other Critical Access Hospitals was cited as a possible disqualifying factor. Hernandez stated that the auditors have carefully reviewed CAH regulations and believe that the application will be approved; however, the only way to receive a formal determination is to submit the application.
Hernandez has overseen CAH conversions at three other hospitals, and reviewed the application process with the board. There is no application fee or need for third-party consultation. He estimates that the application will take a couple of weeks to complete internally.
“I can tell you there are 84 Critical Access Hospitals in Kansas and (1,332) in the nation and no one has ever converted back to PPS after they converted to critical access,” Hernandez stated.
The board instructed Hernandez to submit the application in order to determine Coffey County Hospital’s eligibility. He will report on the progress at the September board meeting.
Under the consent agenda, the board approved medical staff appointments for: Jennifer Chamber Daney, A.P.R.N. and Teresa Pearson, A.P.R.N., emergency room temporary staff; James Piko, D.O., teleradiology; and Sally Sewell, C.R.N.A., anesthesiology coverage. Reappointments were approved for Beverly Clark, M.D. and Jon Sides, M.D., family practice and obstetrics; Christin Weller, M.D., pathology; and Julie Neuenswander, M.A., audiology. Privileges were extended for Traci Hoffman, A.P.R.N., gastroenterology.
Chief Financial Officer Jim Van Hoet reported that decreased patient volumes led to lower gross and net revenue compared to recent months. July financials saw total revenue at $1.7 million. Expenses came in at $1.9 million, resulting in a loss of $226,835 for the month. Year-to-date numbers are still in the black at $60,394.
“July year-to-date last year we had a $1.7 million loss, so our gross and net revenues are higher than last year’s year-to-date,” Van Hoet said. “Our FTEs (full-time equivalencies) are at 93 percent of where we were last year, so we are still seeing better expense management.”
The board entered three executive sessions to discuss non-elected personnel with Hernandez and Executive Assistant Terri Tweedy present. The first session lasted 20 minutes followed by two 15-minute sessions.
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