Making a profit in the hospital business has gotten tough, and it’s particularly gotten tough locally, a pair of consultants told a task force Friday that is assisting in a study that could potentially lead to the sale of Greenwood Leflore Hospital.
“In the last decade, the health-care industry across the country has experienced a phenomenal wave of disruptions, innovation and overall market change,”said Ryan Sprinkle with Stroudwater Associates.
Stroudwater, based in Portland, Maine, with offices in Nashville and Atlanta, has been hired to make recommendations about the best way to position the publicly owned hospital for the future in response to the changing face of health care and the hospital’s recent run of multimillion-dollar annual losses.
Besides the possible sale of the hospital, other options being considered are a lease, affiliating with a larger medical institution or continuing to operate as an independent entity.
Stroudwater is expected to present its recommendations in about 90 days.
On Friday, the task force, which consists of 10 local government, hospital and community leaders, held its first meeting.
“What we’re looking at is strategizing what things can be done to really help further Greenwood Leflore Hospital as it serves this community,” Dr. Roderick Givens, a radiation oncologist at the hospital who was selected to preside over the task force, said following the three-hour session.
Hospitals nationwide are being pinched by changes that have occurred since the federal Affordable Care Act was enacted in 2010, Sprinkle said. The law, more informally known as Obamacare, further reduced the reimbursements that health-care providers receive from Medicare and Medicaid, changes that also resulted in lower reimbursements from private insurers. In addition, he said, even though the ACA led to more people having insurance, the coverage “isn’t necessarily a great type of insurance,” with annual deductibles running as high as $10,000 in the lower-cost policies.
“They show up for care, they can’t pay for it, even though they’re obligated to do so under their health insurance, and the hospital, being a community resource, delivers that care,” said Sprinkle. “What has happened for Greenwood Leflore as well as a lot of other community hospitals across the country is that their bad debt has increased.”
Moody’s, a bond rating agency, projects that hospital bad debt nationwide is expected to grow another 8% to 9% this year.
Changes in reimbursements combined with advances in medical technology also have shifted procedures that in the past would have required hospitalization to less lucrative outpatient care. That shift has, in turn, left hospitals with an infrastructure that its current mix of services can’t support.
“Increasingly you’ve got this big facility and less revenue being generated inside of it,” said Sprinkle.
The result of all these forces has been the closing of hospitals, more heavily pronounced in rural areas where populations are in decline and the percentage of uninsured is higher. Since 2010, according to Stroudwater’s research, 125 rural hospitals, including five in Mississippi, and 68 urban hospitals have closed.
Greenwood Leflore Hospital’s demographics reflect the bind in which many rural hospitals find themselves. In the hospital’s seven-county service area, 22.3% of the population is uninsured, compared to 8.8% nationally. The decades-long population losses that the area has seen are expected to continue, with another 4.2% drop projected over the next five years. And the population that remains tends to be older, which means more Medicare patients, whose cost of treatment exceeds what most hospitals receive for providing it.
“No one is suggesting Greenwood Leflore Hospital is going to close anytime soon,” said Doug Johnson of Stroudwater. “However, when you look at the trends, that risk exists.”
Johnson provided a historical recap of the hospital’s finances, showing that from 2014 to 2018, operating revenue declined by 0.8% while operating expenses increased by 1.4%. Over a three-year period from 2016 to 2018, the hospital posted more than $37.5 million in losses, although a large chunk of the red ink, about $14.5 million, was the result of a write-off in 2017 of uncollectable accounts that went back several years. The hospital has shown some financial improvement in the past year, but it continues to operate at a substantial loss. For the first nine months of the current fiscal year, the losses have totaled $5.2 million, compared to almost $6.4 million for the same time period the year before.
The hospital’s difficulties appear to be heightened by Mississippi’s refusal to expand Medicaid to the working poor. A map prepared by the consulting firm shows that a majority of the nation’s hospital closures have occurred in the 14 states that have not expanded Medicaid. The Greenwood hospital’s $7 million in uncompensated care a year could be reduced by 40% with Medicaid expansion, according to the Mississippi Hospital Association.
City Councilman David Jordan, a member of the task force who also serves as a senator in the state Legislature, criticized the Republican leadership for its refusal to expand Medicaid, which would bring an estimated billion dollars a year more from the federal government to Mississippi.
“Our hospital lost money because of what the state should have done,” the Democratic lawmaker said.
The task force is scheduled to meet again in September.
•Contact Tim Kalich at 581-7243 or firstname.lastname@example.org.