There’ll be no pay raises this month or next for employees of Phelps County Regional Medical Center, the hospital Board of Trustees decided Wednesday night.
Responding to the loss of millions of dollars in operating revenue that appears will take the hospital into the red ink of financial loss by the end of this year, Chief Financial Officer Ed Clayton recommended that the budgeted pay raises be put on hold until September.
Even then, there will be no guarantee of any pay raises for hospital workers this year.
“It doesn’t mean there will be or there won’t be increases,” Clayton said. “We’re very concerned and paying a lot of attention to what’s happening in our current financial situation.”
The main reason for the move is that what the federal government giveth it can take away, and the government has been lowering and eliminating its Medicare payments for several years.
Medicare’s annual reductions now mean $1.75 million less every year in federal payments to the hospital. That’s the starting point.
Added to that is another $4.5 million annually in Medicare payments chopped out by Recovery Audit Contractors.
Medicare cuts aren’t the only financial problem facing the hospital, though.
“The one thing we’ve seen spiraling to almost an unsustainable level is uncompensated care,” Clayton said. As a public hospital, PCRMC must provide this care.
In 2005, the hospital provided $16.5 million in charity care. The hospital is expected to double that by the end of this year, $33 million in care that will not be paid for by patients, Medicare or insurance.
There are so-called “DiSH payment” cuts from the federal government that will be $2-$4 million.
The Department of Defense Tricare, which is insurance for military families, is expected to make reimbursement cuts, too. Clayton attached no figure to this.
Moreover, Clayton said the hospital’s operating income so far this year is “flat” because of volume of patients, and there’s no immediate expectation of a volume increase.
The straw that broke the camel’s back this spring is the so-called “sequestration” that too effect April 1 and is expected to bring even more cutbacks, totaling $2 million per year.
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Still questionable is the 2014 fiscal year for the federal government, for that is the year when the Affordable Care Act, known as Obamacare, takes full effect.
Even though the hospital administration had been able to trim $2.5 million out of operating budgets, that’s not enough.
“With sequestration and the potential looming for additional payment cuts associated with Obamacare through disproportionate share payment adjustments, we now expect the hospital’s operating margin to dip into the red as we move forward,” Clayton said in a prepared statement distributed at the board meeting.
If that happens, it will be the first time in at least 15 years that the hospital has been out of the black ink.
“We are truly moving into uncharted territory, a first for our organization,” Clayton said in the prepared statement.
Back in 2009, the hospital had a 4.5 percent operating margin, giving it a little over $8 million to use for new equipment and capital projects.
“That was respectable,” he told the board. “It was better than respectable.”
But by 2010, and again, in 2011, the margin had dropped to 2.8 percent, due to Medicare payment cuts.
In 2012, “the year of the RACs,” according to Clayton, the margin dropped to 0.1 percent.
He projected 2013 ending with a negative 0.2 percent.
Clayton said the current salary review shows PCRMC’s wages and salaries are in the market range.
Given the current state of financial affairs in Rolla, Missouri and the United States, Clayton said, “It will not be wise” to implement the budgeted pay raises.
In addition to trimming the pay raises out of the budget, Clayton said other “opportunities to drive even more costs out of our operations” will be sought from now to the September re-evaluation.
The recommendation for the postponement of pay raises until further review was made in the Finance Committee meeting, which approved the plan and recommended it to the full board, which later approved it unanimously.
In other business or discussion:
All members of the board were present for the first meeting after the April election that was not required, because no candidates challenged. The board was required to reorganize though, and kept its officers: Dr. John T. Park, chairman; Ted Day, vice chairman; Tom Bahr, secretary; Albert Crump Jr., treasurer; and JoAnn Brand-Hoertel, Finance Committee chair.
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The board heard a report on changes planned for patient satisfaction surveys. For years, the hospital has used an outside company to conduct and analyze the surveys. That work will be done in-house beginning July 1, saving the hospital $170,678.11 annually.
The outside company, Press Ganey, will continue to be used for patient surveys that are used in figuring Medicare reimbursement.