“ Just to meet the standards the feds are going to require is going to cost us a lot of money. Hospital Administrator Kimber Wraalstad ”
It’s not easy being green, according to Kermit the Frog. Nor is it easy being a small, remote Minnesota hospital in the middle of a vast green wilderness. After more than 50 years of operation, Cook County North Shore Hospital and Care Center struggles to remain afloat, and because of this, the hospital levy may be increasing from $425,000 in 2010 to $1.2 million in 2011.
Combined figures for the 16-bed hospital and 47-bed care center show losses from $13,055 to $345,887 in three out of the last five years. This year’s loss is expected to be half a million dollars.
The care center—which has been kept afloat by the hospital— has lost $1.5 to $1.7 million per year in each of the last five years. The hospital board began discussing the possibility of closing the facility down about four years ago, but community members expressed a strong desire to keep it open even at a loss.
Some services cannot be provided cost-effectively in Cook County, but people expect state-of-the-art care for the services that are provided. Both technology and government regulations continue to drive up the cost of that care, however. Hospital Administrator Kimber Wraalstad is well versed in the challenges. “Look at how fast things change and how much you have to spend just to keep up,” she said in an interview with the Cook County News-Herald.
“Just to meet the standards the feds are going to require is going to cost us a lot of money.”
One example is a new standard that requires medical records to be available electronically. Under the new “meaningful use” standards, medications must be listed in a patient’s electronic record. One advantage of this will be that computer programs can alert health care providers to potential interactions when new medications are prescribed. Physicians will be required to input their orders themselves, avoiding transcription errors, for example, if a doctor were to order .5 milligrams of a medication and a nurse or transcriptionist heard “5 milligrams.” Electronic records will store test data, avoiding the need for duplicate tests if a patient is evaluated by a health care provider other than the one who ordered the test the first time.
Sources of revenue
The primary source of revenue for North Shore Hospital and Care Center is Medicare (mostly for people over 65), which brings in 42.3% of the facility’s income. Medicare pays the hospital at a rate of 101% of the presumed cost of services it is willing to pay for at the prices it is willing to pay, but that’s only 94-97% of what those services actually cost the hospital. In addition, some things, like cable TV, are not covered.
” Wraalstad said rural needs are rarely reflected in federal regulations. She figures the people who decided cable TV would not be a covered cost live in metropolitan areas where a hospital could set up an antennae to provide basic TV service to patients lying around in hospital beds.
Medicaid, funded partly by the federal government and administered by states for people who need help with health care costs, brings in 7.5% of the facility’s income. Thereimbursement rates—which were set at 14% less than the cost of services—were frozen in 2002 and will decrease to 16% less than the cost of services in 2011.
Insurance companies bring in 46.6% of the facility’s revenue, and reimbursement rates are set through contracts with the hospital and care center. “You have to try to make your money on private insurance,” Wraalstad said, “but that’s difficult as well.”
State statutes do not allow nursing homes to charge different rates to different payers, and reimbursement rates for nursing homes are lower than those for hospital care.
Other than private pay and co-insurance, the rest of the hospital and care center’s revenue comes through the county’s hospital levy, which because of a legislative change in 2004 no longer has a cap.
Budget trimming
and revenue building
The hospital has cut costs by adjusting staffing levels and discontinuing programs that are not cost-effective. Downsizing either staff or programs too much can reduce the quality of care, however.
Slightly more than 50% of the hospital and care facility’s costs go toward labor and benefits, but a certain staffing level must be maintained. “If you don’t have staff,” Wraalstad said, “and you don’t have quality staff, then you probably shouldn’t be doing it.” One additional patient in such a small hospital can affect the staffing level – and its costeffectiveness — significantly. They do keep employees on-call, but some regulations require a minimum staffing level, and the industry standard is to pay higher rates for time spent working during on-call hours.
Increasing charges would create its own set of problems, because those costs would simply be handed down to insurance customers and taxpayers.
When possible, the hospital adds services to increase its revenue. Some services would require equipment that would need updating before patient revenues could pay for it, however.
The hospital used to offer chemotherapy, but new regulations require a “hood” and special ventilation to avoid contamination of either the chemicals themselves or the air in the room. A request for dialysis was made recently, but that, too, requires expensive equipment and specialized staff.
One area of increased revenue could be certain types of lab tests and X-rays, such as mammograms and bone density tests, that specialists in Duluth order for Cook County patients. “Even if you see a specialist there,” Wraalstad said, “we can do some of these tests and send the results down.”
Another opportunity that could help North Shore Hospital and Care Center decrease costs is its five-year management contract with St. Luke’s Hospital in Duluth. Through this contract, North Shore Hospital and Care Center can take advantage of St. Luke’s continuing education options, technology systems, and pharmacy. Wraalstad has been accessing St. Luke’s policies with the intention of adapting them for use here instead of trying to reinvent the proverbial wheel. In addition, St. Luke’s can provide specialized assistance with things that a smaller hospital would not run across very often. Of the challenges small hospitals will be facing in the future, Wraalstad said, “Independent, stand-alone organizations are not going to do very well.”
Building and
equipment needs
Despite the fact that the facility underwent major renovations 10 and 14 years ago, auditors are saying it is becoming dated in comparison to national averages and advising continued investment in infrastructure. Along with simple things such as beds, old equipment—including testing apparatus, computers, and software—needs to be replaced with state-of-the art equipment, and the spaces the equipment occupies sometimes need to be remodeled to accommodate it. Some regulations even require these updates.
To bring in more revenue, the hospital board is looking into the possibility of converting part of the care center into assisted living and dementia units.
About $5 million is set aside presently for capital improvement projects.
Competition for employees
Many different kinds of specialties are represented among hospital and care center staff, and they require continuing education and licensing to maintain.
A dearth of health care providers is expected in coming years with the advent of national health care and the retirement of many Baby Boomers. Thenation is already experiencing a shortage of primary care physicians, Wraalstad said.
The hospital and care center may find itself competing with other health care providers outside Cook County, especially if wages, benefits, and working environments are not competitive.
The importance
of being here
Wraalstad maintains that the hospital and care center’s being here is important to the community. “I know there have got to be people living here in this community—people that are alive—because we are here,” she said. Without the level of care that is offered in Grand Marais, many patients would not make it to Duluth for the next level of care, and some of the community’s older friends and family members would not be able to stay in the area.
The hospital board will hold a truth-in-taxation meeting with the public Thursday, December 23 at 9:30 a.m. The2011 levy will be discussed.
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