Phelps County Regional Medical Center will experience a decline in net operating income because of lower payments from the federal government for care given to people insured by Medicare.
"It's because of RAC's," Ed Clayton, senior vice president and chief financial officer, told the Finance Committee of the Board of Trustees Wednesday night as he reviewed the figures for the 2013 operating budget.
The committee later recommended approval of the budget to the full board, which met immediately after the committee meeting. The board later adopted the budget.
RAC stands for Recovery Audit Contractors.
"PCRMC's budget assumes significant take-backs from Medicare associated with the ... program," according to a document handed out at the meeting. "The hospital has budgeted a $4.5 million loss associated with the RAC program for 2013. This represents services provided to Medicare beneficiaries for which the Medicare program chooses to not reimburse providers."
The hospital is also expecting to see more "bad debt expense" in 2013.
"In 2012, PCRMC's uncompensated care expense was $27.8 million. In 2013, the amount for PCRMC's uncompensated care is expected to be $31.5 million," the document stated.
To offset these losses, the hospital will continue to look for ways to create efficiencies in its operations "which will lead to a reduction in cost without compromising the quality of services being provided," according to the document.
In that document, Clayton pledged the hospital would continue providing world-class care to all patients "whether they are un-insured or underinsured without compensation from the government."
In addition to the lowering of revenue from the federal Medicare program, the hospital also foresees more expenses in key areas.
Notable is the 33 percent increase in operating costs of the PCRMC Medical Group, bringing the total expenditures on that group to $25,447,000. Much of the increase is attributable to the expected addition of 10 physicians to the group, as the hospital seeks more diverse specialties to offer.
Another expense that is seeing growth is the hospital's own employee health plan, which will increase from $14.1 million to $16.1 million. "Just because PCRMC is a provider of healthcare services does not mean it is exempt from the ever-increasing cost of providing healthcare coverage to its employees," Clayton noted in the hand-out document.
There is good news in the budget. The number of full-time employees will be 1,452 in 2013, "a significant impact on our local economy.”
The hospital is also expecting a 2.8 percent growth in outpatient services.
Clayton said in a prepared statement: "PCRMC assumes the expense of uncompensated care and continues to invest in its medical group for the benefit of our local communities. We know offering access to world-class healthcare to our local communities is the right thing to do for our patients, neighbors and friends."
In other business or discussion:
Page 2 of 2 - • Clayton presented November financial highlights, saying, "It was a slow month, primarily related to the Thanksgiving holiday." Although the hospital was $333,000 short of meeting its operating income budget, thanks to a good month for its investments, the net income was just $137,000 short of budget.
• Board chairman Dr. John T. Park presented plaques of appreciation to the officers of the medical staff, who will be replaced with new officers at the next meeting. Park thanked them for their service to the hospital and their assistance to the board in working to offer world-class health care close to home.
• In the Integrated Quality Assessment Committee report, the third year of no central-line infections was noted.
• The board adjourned into a session closed to the public.