Summit Health meets challenges of 2010
Summit Health’s expansion of Chambersburg Hospital may be the last major project for the next 50 years. Norman Epstein, president and CEO, said the $72 million addition, with 171 private patient rooms, would be completed in late 2012. He spoke to boards of directors in Chambersburg and Waynesboro on Nov. 23, presenting the 2010 annual report.
The expansion was one cause for celebration during the year of transition, Epstein said. The non-profit regional network of healthcare providers also adapted to the recession, earned a high financial rating, and prepared to face the changes in health care reform.
Citing a downed economy likely to last another year and a half, Epstein said Summit Health would continue to control costs. He and other members of the leadership staff used the last six months to understand the health care reform bill, technically called Patient Protection and Affordable Health Care Act, signed into law by President Barack Obama on March 23. Because the federal government had yet to set the rules for the legislation, he planned no dramatic changes until the information was presented.
Numbers on the books
Epstein stated that the recession affected health care for the community. Bad debt had risen 26 percent in the year, and 70 percent since 2008. Physician office visits were down 10 percent as people delayed seeking medical help. Revenue was four percent under budget.
Summit’s response was to cut $6 million in non-labor expenses, eliminate the equivalent of 250 fulltime positions at Chambersburg and Waynesboro hospitals, and join 16 other health care facilities in a purchasing coalition worth $1 billion.
Revenue and expenses were static from 2009 to 2010. Nearly 64 percent of expenses went to employee salaries and benefits.
“We’re a people business,” Epstein explained.
Summit’s operating surplus dropped substantially, he said, by $7 million to $13,504,000. The number of days cash on hand, however, was more promising, at 224 compared to 194 last year.
“That is extraordinarily significant for any organization,” he told the board members.
Summit’s investment in the community was up, with $42 million going to charity care, new technology and educational programs for the public.
Epstein was also pleased with an excellent bond rating, and the sale of $6 million worth of bonds to local citizens who considered themselves “Friends of Summit.”
Impact of health care
What Congress wanted and what it passed were not the same, Epstein declared. It promised increased access to health insurance for 32 million people, better insurance markets, and payments for quality. More importantly, he said, the law did not reform the organization and delivery of health care.
“This change is coming from within the industry and will continue,” he said. “It’s beginning now.”
The law also did not limit demand for services.
“Congress didn’t have it in itself to limit care. It will let the marketplace set the direction. The marketplace will decrease demand by co-pays, shared premiums and reduced availability,” he predicted.
Already, based on clinical criteria, the number of observation cases had grown each year, even though the patients could be in the hospital for up to three days next to an admitted patient. Due to Medicare, those in for observation were billed twice as much as the in-patients and Summit lost $3.3 million per year.
Epstein said Summit would concentrate on value-based purchasing, in order to get back the two percent on payments Medicare was cutting up front. Therefore, the provider would not be rewarded for quality care, but simply earn back its’ full fee with good clinical outcomes and patient satisfaction. He expected physicians to soon be under the same standard.
He also foresaw that PPACA changes would have to be delayed since the law was so complicated. Because more people would be covered by insurance of some kind, but people had to pay more out of pocket, there would not be a cost savings to the health care system or a drop in demand to lower overall costs.
“There will be sharp cuts in Medicare and Medicaid payments in the next 10 years, no question about it,” Epstein said. “Survival will depend on providers reducing costs and managing close to Medicare reimbursement amounts.”
Despite the unknows, Epstein was confident Summit would ride the wave. It had 75 percent of the market share, a strong physician base, modern facilities, and a stratified core of employees, especially nurses younger than the national average.
In the next three years Summit would upgrade the IT infrastructure to host electronic health and medical records, allow medical personnel to order tests or medications through a computer, evaluate all services, be ready for PPACA dictates, be agressive in cost reductions and increase admissions.
“We will make it through, but there may be a few bumps,” he concluded. “In the end, we know our community will be OK.”
Local residents serving on the Waynesboro Hospital Board of Directors are Frank Ervin and Paul Schemel, and for Chambersburg Hospital Bridget Hilliard.