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Hospitals prepare for Medicare funding cuts

<i>Submitted photos</i>

When Congress' special debt reduction committee, the Super Committee, hit a stalemate last month, it was a bad-news/ not-so-bad news situation for the hospitals in River Falls and Hudson.

While they are bracing to deal with a 2% reduction in Medicare reimbursements, at least for now the "critical-access hospital" issue that would have meant much larger cuts for rural hospitals is off the table.

The 12-member federal committee's failure to meet its November deadline to develop a package to save $1.2 trillion triggered automatic across-the-board cuts, including the 2% reduction in Medicare reimbursements.

The automatic cuts will mean annual funding losses of about $200,000 for each of their hospitals, according to River Falls Area Hospital President David Miller and Hudson Hospital President and CEO Marian Furlong.

That cut will come at a time when Hudson Hospital is serving more and more elderly patients, said Furlong.

She said about 33% of her hospital's patients are covered by Medicare, a number that has increased by 9% over the last year.

About 40% of patients who receive services at RFAH are either Medicare or Medicaid funded, said Miller.

He said the reimbursement reduction will mean a new Medicare fee schedule and $200,000 worth of belt tightening for the hospital.

"It'll just make things tighter," said Miller, who has been RFAH's president for 3 ½ years. He added that the hospital is already running very efficiently.

"We have a strong cancer program and a strong surgical program," said Miller, explaining that those programs help the hospital's bottom line.

First, he said, the hospital would look at programs that don't bring in revenue.

Those include such things as providing eye glasses for patients, some educational programs, bike helmet and infant car-seat programs and courses and support for cancer patients.

The funding cut will also affect the hospital's ability to replace equipment as it gets older, said Miller.

"We've worked hard in the last three years to replace old things," he said, mentioning equipment and furniture.

But, he said, just as families don't buy new furniture when income is tight, the hospital has to carefully consider purchases of new equipment.

The problem isn't dire, said Miller.

"River Falls isn't going to close," he said. "We're going to (adjust) without cutting jobs if it's only 2%. I don't see us cutting any jobs."

Hudson Hospital is serving more Medicare patients than ever because the local population is aging, but also because the hospital has added specialists needed by the elderly, said Furlong, who has been president since 1999.

"I think we are looking at all of our programs," she said of the hospital's efforts to deal with a drop in revenue. That means evaluating both income and expenses.

On the revenue side, administrators are looking at the needs of the community and adding specialists and services to meet patients' needs and thus grow income.

On the expense side, Hudson Hospital is continually looking at ways to deliver services more efficiently, said Furlong.

"We're still growing some services, even if they don't generate money if they're right for the community," said Furlong. "We want to be thoughtful about the changes we will be making."

The hospital and its programs aren't and haven't been stagnant, said Furlong. "This is just another piece in the mixture."

Furlong said Hudson, a HealthPartners hospital, takes "the Triple Aim approach."

That three-prong aim is to improve the health of the community, provide great experiences for the individual and do so at affordable costs, she said.

"Triple Aim" is a term used nationwide, but Hudson Hospital "really lives that aim in delivering health care locally," said Furlong.

Critical access

Two proposals from the Obama administration are of concern to critical-access rural hospitals, including both RFAH and Hudson Hospital. One would have reduced Medicare reimbursements to those hospitals from 101% of eligible costs to 100%.

But the most significant proposal would have removed the critical-access designation from any hospital that is within 10 miles of another.

Critical-access hospitals were created through the Balanced Budget Act of 1997. The designation provides higher reimbursement to hospitals in rural communities.

Originally, if a hospital was within a 35-mile drive of another hospital, it couldn't be designated critical-access. But Congress later dropped that provision and left it up to states to designate critical-access hospitals. Wisconsin now has 58.

The critical-access designation was intended to give extra funding to "small little hospitals struggling to stay alive," said Kitty Rhoades, deputy secretary of the Wisconsin Department of Health Services.

The issue, while it's not in play right now, is particularly worrisome because the proposed change originated in President Obama's office, said Miller.

"It still lingers out there," he said.

"There's no current activity out there, but that doesn't mean it can't come up again," agreed Furlong.

Losing the critical-access designation would mean a 20% to 25% cut in Medicare reimbursements. RFAH could lose about $2.5 million in funding, estimated Miller.

"That is significant," he said.

For many other hospitals that offer fewer services, that would be especially problematic, said Miller.

But, said Miller, RFAH is at the other end of the spectrum: "We offer a lot of services here that we've built up over the years."

Judy Wiff

Judy Wiff has been regional editor for RiverTown’s Wisconsin newspapers since 1996. She holds a bachelor’s degree in journalism and sociology from UW-River Falls. She has worked as a reporter for several weekly newspapers in Wisconsin.