HomeTown Health Managing a Critical Access Hospital

HomeTown Health HomeTown Health Managing a Critical Access HospitalManaging a Critical Access Hospital

HomeTown Health: (HomeTown Health: (www.hometownhealthonline.comwww.hometownhealthonline.com ) )

A Business organization whose mission is to do whatever it A Business organization whose mission is to do whatever it takes legally, morally, and ethically to keep rural hospitals takes legally, morally, and ethically to keep rural hospitals viable in Georgia:viable in Georgia:

56 rural hospital members56 rural hospital members45 Business Partners45 Business Partners2100 enrolled online students2100 enrolled online studentsHTH has 3 core competencies:HTH has 3 core competencies:

Governmental AffairsGovernmental AffairsManagement Advisory ServicesManagement Advisory ServicesOn line education On line education

(http://www.hometownhealthonline.com/)(http://www.hometownhealthonline.com/)

Critical Access HospitalsCritical Access HospitalsCritical Access Hospitals of GeorgiaCritical Access Hospitals of Georgia

Given:Given:35 CAH’s designated in Georgia35 CAH’s designated in GeorgiaFinancial StatusFinancial Status

4 for profits4 for profits27 not for profits27 not for profits4 private not for profits4 private not for profits

Average Net RevenueAverage Net Revenue$10,000,000$10,000,000

Lowest Actual Net RevenueLowest Actual Net RevenueHospital AHospital A $4.5 million$4.5 million

Largest Net RevenueLargest Net RevenueHospital BHospital B $19 million$19 million

Average county size – less than 15,000Average county size – less than 15,000

• Two Types of Hospital Reimbursement designationsTwo Types of Hospital Reimbursement designations

• CAH – Critical AccessCAH – Critical Access– Formerly 101% cost reimbursementFormerly 101% cost reimbursement– Currently no guarantees with CMO’s Currently no guarantees with CMO’s – 25 beds25 beds

• PPS Prospective Payment SystemPPS Prospective Payment System– In patient Payment at 83.1%In patient Payment at 83.1%– Out Patient – APC Ambulatory Payment Classification Out Patient – APC Ambulatory Payment Classification

- as low as 20%-30% of charges- as low as 20%-30% of charges

Critical Access Hospitals are not Critical Access Hospitals are not designed to be profitable due to designed to be profitable due to being cost based but rather to being cost based but rather to

recover costsrecover costs

Critical Access Hospitals:Critical Access Hospitals:

Major Issues to ManageMajor Issues to ManageCost to charge ratioCost to charge ratioEMTALAEMTALAFederal Reimbursement CutsFederal Reimbursement Cuts

Medicare Advantage – Privatized MedicareMedicare Advantage – Privatized MedicareOverpayment Recovery InitiativesOverpayment Recovery Initiatives

RAC’s, PERM, PEPPER, Present on Admission RAC’s, PERM, PEPPER, Present on Admission Indicators, OIG, Medicaid Program IntegrityIndicators, OIG, Medicaid Program Integrity

Georgia State Reimbursement CutsGeorgia State Reimbursement CutsPrivatized MedicaidPrivatized MedicaidOIG Program IntegrityOIG Program Integrity5% Retrospective Budget Cut for 2009 Budget 5% Retrospective Budget Cut for 2009 Budget currently in effectcurrently in effectOngoing ACS recoupments due to computer fixesOngoing ACS recoupments due to computer fixes

Inability to produce a profit Inability to produce a profit Payor mixPayor mix

Total skill setTotal skill setInability to hire full skill setInability to hire full skill setDepreciation unfundedDepreciation unfundedCEO turnoverCEO turnoverOB not profitableOB not profitable

250 threshold250 threshold

Critical Access Hospitals:Critical Access Hospitals:

Major Issues to ManageMajor Issues to ManagePayor mix profitability requirements – standalonePayor mix profitability requirements – standalone

33% commercial 33% commercial 12% or less self pay12% or less self payVirtually no opportunity for excess margin stand aloneVirtually no opportunity for excess margin stand alone

7 year spiral for cost to charge ratio7 year spiral for cost to charge ratioAcquire designationAcquire designationThen hire docs and add significant net revenue Then hire docs and add significant net revenue

Receive $600,000 recoupment due to no cost to charge ratio Receive $600,000 recoupment due to no cost to charge ratio updateupdate

Then cut expensesThen cut expensesReceive $600,000 recoupment due to no cost to charge ratio Receive $600,000 recoupment due to no cost to charge ratio

updateupdateThen revise ChargemasterThen revise Chargemaster

Receive $600,000 recoupment due to no cost to charge ratio Receive $600,000 recoupment due to no cost to charge ratio updateupdate

7th year no place to go7th year no place to goDifficulty converting back to PPSDifficulty converting back to PPS

Less than tow or three nationwide have convertedLess than tow or three nationwide have convertedLost 100% cost reimbursement with CMO’s and Lost 100% cost reimbursement with CMO’s and

privatized Medicaidprivatized Medicaid

Critical Access Hospitals:Critical Access Hospitals:• Major Issues to ManageMajor Issues to Manage

•Cost to charge ratioCost to charge ratio

• EMTALAEMTALA

• Federal Reimbursement CutsFederal Reimbursement Cuts• Medicare Advantage – Privatized Medicare Advantage – Privatized

MedicareMedicare• Overpayment Recovery InitiativesOverpayment Recovery Initiatives• RAC’s, PERM, PEPPER, Present on RAC’s, PERM, PEPPER, Present on

Admission Indicators, OIG, Medicaid Program Admission Indicators, OIG, Medicaid Program IntegrityIntegrity

• Georgia State Reimbursement CutsGeorgia State Reimbursement Cuts– Privatized MedicaidPrivatized Medicaid– OIG Program IntegrityOIG Program Integrity– 5% Retrospective Budget Cut for 2009 5% Retrospective Budget Cut for 2009

Budget currently in effectBudget currently in effect– Ongoing ACS recoupments due to Ongoing ACS recoupments due to

computer fixescomputer fixes

• Inability to produce a profit Inability to produce a profit – Payor mixPayor mix

• Total skill setTotal skill set

• Inability to hire full skill setInability to hire full skill set

• Depreciation unfundedDepreciation unfunded

• OB not profitableOB not profitable– 250 deliveries threshold250 deliveries threshold

• Payor mix profitability requirements – Payor mix profitability requirements – standalonestandalone– 33% commercial 33% commercial – 12% or less self pay12% or less self pay– Virtually no opportunity for excess margin stand Virtually no opportunity for excess margin stand

alonealone

• 7 year spiral for cost to charge ratio7 year spiral for cost to charge ratio– Acquire designationAcquire designation– Then hire docs and add significant net revenue Then hire docs and add significant net revenue

• Receive $600,000 recoupment due to no cost to charge Receive $600,000 recoupment due to no cost to charge ratio updateratio update

– Then cut expensesThen cut expenses• Receive $600,000 recoupment due to no cost to charge Receive $600,000 recoupment due to no cost to charge

ratio updateratio update– Then revise ChargemasterThen revise Chargemaster

• Receive $600,000 recoupment due to no cost to charge Receive $600,000 recoupment due to no cost to charge ratio updateratio update

– 7th year no place to go7th year no place to go

• Difficulty converting back to PPSDifficulty converting back to PPS– Less than two or three hospitals Less than two or three hospitals

nationwide have convertednationwide have converted

• Lost 101% cost reimbursement with Lost 101% cost reimbursement with CMO’s and privatized MedicaidCMO’s and privatized Medicaid

So what is So what is most most

important?important?

Critical Access Hospitals most Critical Access Hospitals most critical attribute to manage is critical attribute to manage is

the cost to charge ratiothe cost to charge ratio

Critical Access Hospitals next Critical Access Hospitals next most important attribute to most important attribute to manage is the payor mixmanage is the payor mix

Typical Critical Access Typical Critical Access Hospitals payor mix is as Hospitals payor mix is as

followsfollows

Typical Critical Access Rural Hospital Payor Mix

% cost reimbursement

% Net Revenue by Payor

Weighted Reimbursement by Payor

Medicare 95.000% 45% 42.750%

Medicaid 95.000% 14% 13.300%

No Pay 2.000% 15% 0.300%

Commercial 150.000% 26% 39.000%

To Break even 100% 95.350%

Critical Access Hospitals next most Critical Access Hospitals next most important attribute to manage is important attribute to manage is

the Business Office Claims the Business Office Claims Processing Processing

Benchmarks include:Benchmarks include:Accounts ReceivableAccounts ReceivableBad DebtBad DebtSelf PaySelf Pay

Critical Access Hospitals Self Critical Access Hospitals Self PayPay

must be measured as must be measured as

Uninsured Uninsured

UnderinsuredUnderinsured

Critical Access Hospitals Critical Access Hospitals must use telemedicine to must use telemedicine to increase service diversityincrease service diversity

Critical Access Hospitals Critical Access Hospitals must prepare for must prepare for regionalizationregionalization

Critical Access Hospitals must Critical Access Hospitals must prepare for Loss of ICTF and UPL prepare for Loss of ICTF and UPL as state and federal government as state and federal government

cut subsidiescut subsidies

HomeTown Health HomeTown Health Managing a Critical Managing a Critical

Access HospitalAccess Hospital

A few Critical Access Hospitals A few Critical Access Hospitals may plan for conversion back to may plan for conversion back to

PPS which has never been done in PPS which has never been done in GeorgiaGeorgia

• Regionalized Health CareRegionalized Health Care

Forecasts and Trends in Forecasts and Trends in GeorgiaGeorgia

• RegionalizationRegionalization– Rep. Mickey ChannellRep. Mickey Channell describes describes

•Demographic circle – 40,000 populationDemographic circle – 40,000 population

•Hospital net revenue $35-$40 million Net Hospital net revenue $35-$40 million Net RevenueRevenue

•Many hospitals will close in next ten yearsMany hospitals will close in next ten years

HomeTown Health Industry Overview _ HomeTown Health Industry Overview _ Purple overlays illustrate Purple overlays illustrate regionalization (per HTH estimates) regionalization (per HTH estimates) after Grants per 40,000 population after Grants per 40,000 population podspods

HomeTown Health Industry OverviewHomeTown Health Industry Overview

• Regionalization as Regionalization as supported by State supported by State BudgetBudgetThe following proposals were approved for the listed amount of funding:The following proposals were approved for the listed amount of funding:

1. Central Georgia Regional, Forsyth 1. Central Georgia Regional, Forsyth $321,500 $321,500

2. Ty Cobb Healthcare, Royston 2. Ty Cobb Healthcare, Royston $302,500 $302,500

3. West GA Rural Health, Bremen 3. West GA Rural Health, Bremen $250,000 $250,000

4. Spring Creek, Blakely 4. Spring Creek, Blakely $225,000 $225,000

5. REACH, Greensboro 5. REACH, Greensboro $201,000 $201,000

6. Three Ring Health Care, Hinesville 6. Three Ring Health Care, Hinesville $200,000 $200,000

TOTAL TOTAL $1.5 million$1.5 million

Questions or Questions or comments?comments?

HomeTown Health Managing a Critical Access Hospital

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