PRESTONSBURG — Citing weakness in the local economy, one of the largest employers in the region is announcing plans to “reduce expenses and streamline operations.”
Highlands Regional Medical Center announced the move Monday, citing a need to respond to the Patient Protection and Affordable Care Act commonly known as “Obamacare,” as well as Medicaid managed care, increases in bad debt, and competition from out-of-the-area providers.
“Inpatient admissions are down across our area nearly 20 percent,” said Bud Warman, president and CEO of Highlands Health System. “The hospital is feeling the crunch of much lower than anticipated volumes, so we must ‘tighten up’ to deal with it.”
Some of these drops in activity are believed by Highlands officials to be a result of the uncertainty created from by Obamacare.
“With all of the proposed changes in how health insurance coverage works, a lot of people are worried,” Warman said. “Patients are having to pick up more of the balance of what insurers no longer cover, and this causes some to delay or forego care they may really need.”
Physicians are feeling the pressure, too. Local doctors are struggling with the effects of commercial payor reductions and delays in payments from government programs.
“We’ve had physicians tell us of situations where they are simply not getting paid, or payments are delayed,” Warman said. “Some are even being audited for potential payment refunds. Physician referrals drive patient volumes, so when their business changes, it directly affects the hospital.”
In addition, Highlands has seen a decrease in Emergency Department volume.
“The hospital serves a good portion of the Medicaid population in our area, and the new managed care plans now require patients be screened before entering the Emergency Room,” said Warman. “The screening results in less usage of the ER, it is that simple. A screened patient could also be turned away unless they make a payment on the spot, and this discourages some people from coming to the ER.”
To address the needs of the patient, Highlands opened After Hours Care. Patients who aren’t sick enough to be treated in the Emergency Room, can go to After Hours for treatment on a walk-in basis.
“The program has worked out very well,” Warman said. “We see a lot of folks who would have had to wait until the next day to be seen, or maybe they would have not been seen at all.”
Highlands plans to open a second After Hours Care in Salyersville in late June.
The hospital has been working over the past several months to reduce expenses in many operational areas. A system of micro-cost reduction projects has netted some large savings in areas such as medical supply costs, utility costs, decreased fees for specialty services, and savings from reduced drug expenses.
“We are eliminating waste and reducing costs anywhere we can, without compromising patient care and safety,” said Chris Hoffman, chief operating officer of Highlands. “We have reduced our supply costs considerably by working with larger purchasing groups to get better prices for the items we use.”
According to Hoffman, costs for things like pharmaceuticals have been targeted as well. The hospital qualifies for a government drug discount program called 340b. This program allows access to lower prices on certain drugs for hospitals that treat a disproportionate share of government program patients.
“The 340b program has really been important to our drug cost-reduction efforts,” Hoffman states. “In many cases, we can pass that savings on to patients.”
But the 340b program is already drawing scrutiny from Washington. Some government officials are trying to cut that program too.
“That could eliminate millions of dollars of savings for hospitals and patients in our region who get that discount,” Hoffman said.
One of the greatest expenses for hospitals is the cost of medical supplies. Highlands entered into an arrangement with Central Baptist, of Baptist Healthcare in Lexington, to gain access to better pricing on supplies.
“Baptist Healthcare has tremendous buying power” Hoffman said. “We are able to access better discounts on some supplies that both hospitals use. This adds up quickly. The hospital expects to save up to $1 million on supplies and drugs in the coming year because of these types of arrangements. We are now looking at other services that we could save money on as well by leveraging our combined purchasing power.”
In recent years, health care jobs have been an area of growth. That has recently changed nationwide due to many of the same industry forces that are at play locally. According to the Bureau of Labor Statistics, hospital employment fell by 0.12 percent in May. Although hospital jobs are up overall from last year, that’s 5,900 fewer than in April. Much of the change in employment is due to hospitals having to match their labor with lower demand.
Highlands has some plans to adjust its workforce to match current need as well.
“We have offered early retirement packages to selected individuals that qualify,” said Susan Ellis, vice president of human resources and patient care. “For folks that are close to retirement, we are offering incentives that will help them make a transition to retirement easier.”
Highlands has currently suspended recruiting for open positions and put a temporary hiring freeze in place.
“We need to reassess all vacant positions, to determine if those can be filled internally first,” Ellis continued. “When volumes pick back up, we will be able to resume hiring if needed.”
Contract labor and temporary staffing will be curtailed as well.
“The hospital is reducing the number of contracted people utilized,” Ellis continues. “Historically, Highlands has used contract services for unique positions that are either hard to fill or don’t require permanent employment. Temporary and contract workers are always the first to be cut back when volume drops.”
At a time when communities rely on their local hospital for services as well as economic support, stand-alone hospitals are having a tough time staying independent, Hoffman said. Many hospitals have to get creative and join forces, in some cases, to survive. He added, however, that doesn’t necessarily mean selling out or merging.
Highlands has worked to create several alliances that are intended to improve the delivery of care, while reducing expenses. Highlands, along with St. Claire Regional Medical Center in Morehead, and Our Lady of Bellefonte Hospital in Ashland, was instrumental in the development of the Eastern Kentucky Healthcare Coalition, a collaborative that is intended to make improvements in health care delivery. The coalition intends to expand its network of healthcare providers to improve access to care for patients. With the recent addition of St. Mary’s Medical Center and UK HealthCare, there are already more than 1,700 providers in the Physician Hospital Organization.
Highlands also created an alliance with Big Sandy Healthcare, a regional provider of primary care services such as family and obstetrical care, with five locations in Southeastern Kentucky. Highlands and Big Sandy entered into that agreement in December 2011, and have worked together to provide better access to services to local and surrounding areas.
In March, Highlands announced an affiliation with Pikeville Medical Center for cardiology services. Highlands and Pikeville are working on a collaborative effort to provide clinical services to patients who would otherwise be sent to facilities out of the area.
Not all of the news around health care is bad, according to Warman.
“We still have a lot going for us in the community,” Warman said. “We continue to do a lot for the people of the various areas we serve. Our goal is to meet these challenges head on, and continue to provide great care that is efficient, accessible, and at a lower cost.
“There are hospitals in the greater region who have overspent and have found themselves losing literally tens of millions of dollars now that they have to support expensive facilities and payrolls. We do not want to get ourselves into that position. As the hospital celebrates its 40th anniversary this year, we intend to stay strong for 40 more years.”
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