The Cook County North Shore Hospital board met by teleconference on April 21 with Jim Spreitzer, a partner with the CPA firm McGladrey & Pullen, regarding its 2010 audit. One piece of good news is that the hospital has no long-term debt, but it continues to struggle with losses from Care Center operating expenses.
In 2010, the hospital’s total operating revenue was $11,411,615 while its operating expenses were $12,337,427, leaving an operating loss of $925,812. Its net assets decreased by $415,987 to $11,712,153.
The firm’s report showed that outpatient visits have decreased from a bit over 12,500 in 2001 to between 9,000 and 10,000 in 2010.
In a later phone interview, Hospital Administrator Kimber Wraalstad attributed this drop to three possible factors: people putting off nonessential medical care such as lab tests because of financial stressors, a drop in visitors from outside the county due to the economy, and the possibility that some people have chosen to go outside the county for the kinds of outpatient services the hospital offers. In 2001, about 28 percent of gross patient service revenue came from outpatient services. In 2010, that number had shrunken to about 17 percent.
Sixty-three percent of the facility’s 2010 operating expenditures went to wages and benefits and about 30 percent went to a category called “supplies and other.” About 7 percent went to interest, depreciation, and loss on disposal of equipment.
Capturing revenue
Spreitzer said that all facilities with attached nursing homes are showing significant losses. To deal with this, they are either downsizing or outsourcing, he said.
In the face of these losses, capturing revenue wherever possible has become important. Hospital Controller Yvonne Gennrich said she has spoken with St. Luke’s, North Shore Hospital’s administrative partner, about trying to get more co-pays at the time of admission.
Board member Kay Olson said she had recently been in an emergency room in another county with a friend, who was asked, “What credit card do you want to put this on?” Accounting Clerk Kelly Swearingen said patients from out of the county tend to be more used to paying a co-pay at the time of service.
Wraalstad told the board that proposed state legislation would bring significant reductions in healthcare funding, leaving more people underinsured or uninsured. If this happens, Wraalstad said, hospitals could expect to see an increase in uncompensated care.
What others are doing
Cook Hospital Administrator/CEO Al Vogt and Ely-Bloomenson Community Hospital Administrator John Fossum met with the board after its regular meeting to talk about how they are handling the serious financial challenges their facilities are facing.
Vogt said Cook Hospital reduced its nursing home from 41 beds to 28 two years ago. Its nursing home now maintains 97-98 percent occupancy. They still face an annual deficit of a million dollars, however, although a new state funding mechanism (Equitable Cost-Sharing for Publicly Owned Nursing Facilities) will reduce their annual deficit to about $600,000 to $700,000. An assisted living facility that went up in Cook about a year ago did not affect the hospital’s situation significantly, he said.
“We’re really getting close to a tipping point in our long-term facility in Cook to where a decision needs to be made,” Vogt said. The community considers the hospital and emergency room important, but the hospital board is wondering if they can continue to operate the nursing home. Community members have been okay with increasing the hospital levy, but he doesn’t think that can continue indefinitely.
The Cook Hospital board is considering separating the nursing home from the hospital, Vogt said, and converting it into a private non-profit organization. If that happens, the employees would lose their Public Employees Retirement Association (PERA) benefits.
Board member Tom Spence pointed out that Medicare is reimbursing care centers at 16 percent less than the rate of 2002 costs.
The average person on the street doesn’t realize the seriousness of the reimbursement shortfall, Vogt said. “We just can’t afford to sacrifice the hospital for the nursing home.”
“If you do sacrifice the hospital,” John Fossum said, “you lose the nursing home anyway.”
Legislators making decisions about health care are facing “a very, very, very hard decision,” Vogt said. “Nobody’s got a lot of solutions. …It’s easy to identify the problem. It’s not easy to identify the solution, even for those with a lot of resources at their fingertips.”
The state’s system of reimbursing nursing homes is broken, Administrator Wraalstad said. The more residents they have in the nursing home, the more money they lose. Tom Spence said critical access reimbursement, a special designation for rural hospitals, was not designed for rural hospitals to carry nursing homes.
Fossum said a few of Ely-Bloomenson Community Hospital’s nursing home residents left for an assisted living facility when it became available in the community. The most responsible alternative, he said, is to provide the least costly level of care that is needed. When he entered the field of nursing home administration in 1985, the residents in the facility he worked in put together a band. That doesn’t happen anymore because people who have that much ability are not in a nursing home, leaving the average length of stay much shorter than it used to be.
Fossum said Ely-Bloomenson Hospital gave Spectrum Healthcare land to build an assisted living facility. They also detached their nursing home program and created a private nonprofit that is set to begin in July with $900,000 of start-up money from the hospital. They converted their nursing home space to hospital use at a cost of $9,000,000, a facility upgrade that was needed anyway.
A hospital-attached nursing home gets better reimbursement rates than a standalone nursing home, Fossum said, so when they converted their nursing home services, they sat down with employees and explained why it was done.
Since keeping people in their homes is the cheapest alternative, Fossum said, communities might need to work with federal housing authorities and public health agencies to access in-home care for people who need help but not nursing home care.
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