River Valley Health System leaders blame federal Medicare cutbacks and shifts in the local economy for layoffs and service reductions at the hospital.

Saturday, August 05, 2000

River Valley Health System leaders blame federal Medicare cutbacks and shifts in the local economy for layoffs and service reductions at the hospital.

A hospital’s primary job is to meet the community’s health needs, yet it also must pay attention to finances, RVHS chief executive officer Terry Vanderhoof said.

"We’re a business that’s had to adjust to a changing economy and most of it had to do with the Balanced Budget Act of 1997," Vanderhoof said.

Congress designed the act to halt deficit spending, but it also has cut more and more Medicare reimbursements to the nation’s hospitals each year, he said.

Because RVHS receives about 60 percent of its overall business from Medicare patients, the effect of payment cutbacks is apparent, hospital chief financial officer Sherri Davidson said.

Last year’s audits showed a negative bottom line and a $3 million impact on a more than $40 million budget, Mrs. Davidson said.

That’s the first time that’s happened in Vanderhoof’s 12 years at the hospital, he said.

"It’s caused us to make adjustments in the way we run the business," Vanderhoof said.

Hardest hit? Home health services and skilled nursing services for the elderly, because 95 percent of patients using those services are on Medicare, Vanderhoof said.

RVHS scaled back its home health services and shifted some employee positions. The hospital also laid off between 25 and 29 employees from many areas of operation, most just recently.

And Vanderhoof estimates RVHS has lost about 175 full-time equivalent employees since 1997 through not rehiring or consolidating jobs.

Many employees were offered other positions, including at RVHS’ Portsmouth facilities, but either they chose not to travel or did not like the shift, Mrs. Davidson said.

"Things are tight but we’re just trying to be prudent business people," Vanderhoof said. "It’s terrible for the people who lost jobs; it’s traumatic for people changing jobs. We’re all in this together and we’ve tried to minimize it as much as possible."

But if the hospital did nothing, it could jeopardize the entire business, he said.

Vanderhoof considers layoffs and service reductions a short-term move to protect the long-term ability of the hospital to offer medical care.

"I think most of our adjustments have been completed," he said. "There may be a few more. I’d like to say no but it would be foolish when I don’t know."

The good news is the hospital has maintained employment for more than 400 people and will continue its medical care, Vanderhoof said.

"Yes, we’ve made adjustments, but that’s not because we’re afraid of closing."

Impending financial problems for not only RVHS but all hospitals surfaced in 1997 after hospital associations and healthcare experts studied the Balanced Budget Act, Vanderhoof said.

The federal government phased in reductions of what Medicare would pay for, meaning that even with legislative relief provided last year Ohio’s reductions in Medicare reimbursements will top $4.4 billion statewide by 2004, the Ohio Hospital Association said.

Already, Ohio has seen 80 of 400 home care agencies close, the OHA said.

Hospitals in Ohio and in West Virginia also have faced closures since the Balanced Budget Act took effect, Vanderhoof said.

"Now, the cumulative effect is growing each year," he said, adding RVHS tried to anticipate the financial problems.

"We tried to deal with it by not replacing vacant positions and through attrition," Vanderhoof said.

Also, RVHS can only budget for the Medicare change to a certain extent when considering the hospital must also budget for uncompensated care – services provided to individuals without the ability to pay, he said.

It can dip into reserves but RVHS did not because that jeopardizes the hospital’s future needs and growth, Vanderhoof and Mrs. Davidson said.

A management company dipped into them in the 1970s and 1980s for operational expenses, which depleted them somewhat, they said. It would have been better to use reserves then for investing in future needs, they added.

RVHS can add more revenue-producing services in laboratories and other areas of the hospital, which it began doing by spending more money on technology and is continuing to do with its expansion of the laboratory, they said.

And the hospital began recruiting more primary care doctors, which in turn brings more patient care to boost revenue, Vanderhoof said.

Already there are three new doctors and more expected, he said.

In the long run, though, it’s the use of doctors and services that is a big key to the hospital’s success, Vanderhoof added.

"My biggest message is the community has a say-so in how the hospital is going to thrive in the future and the employment here," he said. "It is truly their hospital."

There is a need for local residents to use the local hospital’s services, Vanderhoof said.

Some people seek primary and specialist care elsewhere even though RVHS offers the same services, he said.

"And then we need help with the Balanced Budget Act," he said.

Congress is expected to take up the issue, but serious debate is not likely before October.

"Contact legislators and tell them it’s important to get money back into this Medicare system," Vanderhoof said.