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Lawrence Memorial Hospital braces for cuts from Affordable Care Act

September 18, 2013

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With a major piece of the Affordable Care Act set to go into effect in less than two weeks, Lawrence Memorial Hospital is bracing for cuts in revenue resulting from the 2010 law and the state of Kansas' subsequent decision to not participate in its Medicaid expansion.

During negotiations over the legislation, hospital associations agreed to reduce Medicare payments to help fund the increase in insured Americans, with the planned Medicaid expansion expected to make up for some of that lost revenue. However, after the U.S. Supreme Court ruled last year that states could opt out of loosening their Medicaid eligibility requirements, several, including Kansas, did.

So under the Affordable Care Act, Lawrence Memorial Hospital will not get its annual Medicare reimbursement increase in 2014, projected at about $2.7 million, CEO Gene Meyer said at today's LMH Board of Trustees meeting. Meanwhile, if Kansas had expanded its Medicaid program, the hospital would have received an additional $1.1 million in revenue.

"The numbers are going to be real next year," Meyer said. "The rate of increase we're not going to get is significant."

Another worry for LMH is that the cheapest plan being sold on the online health insurance exchange in Kansas, the bronze plan — there are also silver, gold and platinum versions — pays only 60 percent of costs, with the remaining 40 percent left to the patient.

"We've got folks who are going to choose this plan because of the low premium. Their ability to make up that 40 percent difference may be suspect," Meyer said. "We're very concerned about that from a … financial standpoint about what that will do to our (accounts receivable) and bad debt activities."

Still, he said, many people remain uninformed about the insurance exchanges, which begin open enrollment Oct. 1, and said the penalty for not having health insurance next year ($95 per person) will not be enough to deter people from going without it.

"The closer we get to this the more I believe ... that I don't think we're going to see much of an impact in 2014," Meyer said. "But it's here and I think we can choose to look at this as an opportunity to move forward … so here we go."

With that said, Chief Financial Officer Joe Pedley reported that he and his staff continue to work diligently on next year's LMH budget, which he expects will include a significant decrease in capital projects. "I don't think it's going to be any surprise that this year's going to be a really challenging budgeting year," he said.

In other business at today's Board of Trustees meeting:

—Kathy Clausing-Willis, vice president/chief development officer for LMH, announced that the recent Perry Jones Open golf tournament in Lawrence had 350 golfers and raised $115,000 for the LMH Endowment Association, an increase over last year. The annual event has brought in a total of $1.3 million for LMH. "It really is a way we come together as a community, even if you don't play golf, to support the hospital," Clausing-Willis said.

—Sheryle D'Amico, vice president of the hospital's physicians division, said LMH continues to actively recruit endocrinologists and rheumatologists in Lawrence, two medical specialties the community needs. She added that LMH recently signed on a new oncologist and a new neurologist is joining an existing practice in town.

Comments

cowboy 1 year, 3 months ago

Mr. Meyer , Even at 60% reimbursement your hospital will be better off for every newly covered patient that enters your hospital as opposed to no reimbursement i.e. write off. Medicare is another question , I don't recall that I have heard you or your counterparts speaking loudly to the legislature or the illustrious governors office. Why so quiet ?

weeslicket 1 year, 3 months ago

agree.

1st paragraph again: ... (1) Lawrence Memorial Hospital is bracing for cuts in revenue resulting from the 2010 law and (2) the state of Kansas' subsequent decision to not participate in its Medicaid expansion.

3rd paragraph: (1) So under the Affordable Care Act, Lawrence Memorial Hospital will not get its annual Medicare reimbursement increase in 2014, projected at about $2.7 million... and... (2) if Kansas had expanded its Medicaid program, the hospital would have received an additional $1.1 million in revenue.

Kent Kossoy 1 year, 3 months ago

Okay. So they will lose $2.7 million from Medicare because of the ACA. But with Medicaid they would have received $1.1 million. Still a loss overall. Obamacare will bankrupt an already losing system....just faster. Stop blaming Bush.....or other republicans.

NotImpressed 1 year, 3 months ago

NOT because of the ACA, but due to Kansas electing not to participate. And if you think their system is "already losing", you must not be seeing the fancy houses and cars they have and the Congressional junkets the industry puts on. If it was really losing, how in the world could they spring for that kind of dime?

Stop blaming republicans? They OWN this debacle, full on.

chootspa 1 year, 3 months ago

An already losing system? You did realize that we spend more per capita on health care in this country than any other country in the world, right? Heck, we spend more tax money on health care, and that includes countries with socialized medicine that fund all health care expenses for citizens. Hospitals are making money hand over fist, including "nonprofits." They're nowhere near the brink of collapse.

"Lawrence Memorial had one of the highest revenue figures of non-profits in the area, as it had a total net revenue of $324 million in fiscal year 2010." - http://www.beckershospitalreview.com/compensation-issues/ceo-of-kansas-lawrence-memorial-is-second-highest-paid-non-profit-leader-in-area.html

Thomas Bryce 1 year, 3 months ago

I read it as we lost 2.7 million due the the ACA implementation AND an additional 1.1 million due to the fact that the Kansas Legislature decided not to Participate in the Medicaid Expansion. So, Approximately 3.8 million is lost total. How many people could have been insured for that?

1 year, 3 months ago

LHM was going to lose the $2.7 million no matter what but would have gained an additional $1.1 million in revenue if Kansas had expanded Medicaid. So the loss would have been $1.6 million if the expansion happened, but is now going to be $2.7 million. Hospital associations actually supported the loss in Medicare reimbursement because the money was being shifted to insuring more Americans. —Giles Bruce, LJW

Thomas Bryce 1 year, 3 months ago

Thanks for the Clarification GB! Much Appreciated.

Catalano 1 year, 3 months ago

And then there are those who would have been covered by the Medicaid expansion because they're too POOR to qualify for a federal subsidy, i.e. under 100% of the poverty level. If one of those people have a catastrophic event, the hospital's charity program will have to kick in. More losses, thanks to our illustrious governor and cronies.

I do wonder if Mr. Meyer testified before the legislature about his concerns.

tomatogrower 1 year, 3 months ago

Yeah, like justifying $10 for one aspirin. Some of their charges are ridiculous.

akt2 1 year, 3 months ago

Congratulations to all the nurses that will be retiring this year. You won't have to worry about budgets or staffing issues.

anotherview 1 year, 3 months ago

I think there's more to this story than the two examples the Mr. Meyer stated. I suggest that people read the 2012-2011 Mid-Year Report of Lawrence Memorial Hospital that was inserted in the Lawrence Journal World a few days ago.

On page 16 of this report are the Financial Highllights for 2012 and 2011. In 2012, the hospital provided Charity care of $12,595,000. and provided for uncolllectible accounts of $18,227,600. Combined, this is over $30,000,000. of services that the hospital provided without receiving any payment. If everyone had health insurance, this is additional revenue that the hospital does not now collect. That $30,000,000 is nearly four times the hospitals net income. So the hospital could have a huge surge in income or perhaps reduce their fees to everyone else, which would result in a decrease in all of our health insurance premiums.

tomatogrower 1 year, 3 months ago

Thanks for the numbers. People don't understand how much free care we give to the uninsured. Some people don't get insurance even when they could afford it, because they know they will get free care. Why are Republicans so against people being forced to be responsible? They don't like food stamps, but they think it's ok for people, some who are in a position to buy insurance, to bum free care off the rest of us?

jafs 1 year, 3 months ago

Thanks. Good points.

But, I wonder about that numbers - according to an above post, the gross revenues are 10 times that, at about $300 million. Are you saying that they spend so much on salaries, etc. that that gets whittled down to $8 million? That sounds very unlikely to me.

anotherview 1 year, 3 months ago

I'm not sure where you came up with the $300 million. The net operating revenue for 2012 was $175,070,284. Expenses for salaries, etc were $166,957,840. Leaving net operating income of $8,112,444. That's what I meant when I said the $30 million of charity care and uncollectible accounts were nearly four times net operating income.

jafs 1 year, 3 months ago

chootspa's post comments that their net revenue was $324 million - that was in 2010 though.

btsflk 1 year, 3 months ago

and there are those working for LMH who have no healthcare ins

Centerville 1 year, 3 months ago

Go to healthcare.org on Oct 1. There you can renew the same policy you have this year, but will pay at least $2,500 less for it in 2014. That's the promise. I can hardly wait.

grammaddy 1 year, 3 months ago

Be patient. I expect the websites to crash that day.

funnygirl26 1 year, 3 months ago

Most of you don't realize how much LMH write off to bad debt or charity each and every year and most of those people can afford to have health insurance and use our ER as their local doctor office. This Affordable care act is going to be tough on all providers. NO thanks to Mr. Brownback... All the providers that agreed to take the cut in Medicare payments was under the impression there would be MORE people with health insurance and hoping that would balance out... and NOW Sam Brownback put a stop to that!
And health insurance even if you work at the hospital is costly especially if you have to pay for family coverage. Most companies insurance cost increase each year but our salary does not... so I now make less money today because of the cost of my health insurance.

Carol Bowen 1 year, 3 months ago

"...Lawrence Memorial Hospital will not get its annual Medicare reimbursement increase in 2014, projected at about $2.7 million..."

Are we talking about a cut in Medicare reimbursement or a lost increase? Will LMH get the same Medicare reimbursement as last year?

OlDan 1 year, 3 months ago

LMH is not the only hospital dealing with Obamacare cuts. Cleveland Clinic has a much bigger problem.

"Administrators at the Cleveland Clinic announced on Wednesday that the health care giant would be cutting as much as $300 million from its 2014 budget, and that the cuts will likely include layoffs."

"Health care reform has really changed things, and the burden of cost is going to be falling on patients," spokeswoman Eileen Shiel told The Plain Dealer. "We want to make sure we can keep care affordable."

http://www.usnews.com/news/articles/2013/09/18/citing-obamacare-cleveland-clinic-to-cut-300m-warns-of-layoffs

Carol Bowen 1 year, 3 months ago

OiDan, Ohio has not adopted expanded Medicaid and defaulted to the federal insurance exchange. They are in the same predicament as Kansas. The difference is that Ohio is still discussing its options and the governor supports Medicaid expansion.

Here's a thought. Why is a representative from Kansas pleading his case before Congress? Kansas knew or should have known the consequences of its decision. Even though I live in Kansas, I do not believe fedgov should bail the state out for a problem of its own making. We could have chosen differently. We wanted to be separate. So be it.

Sam Crow 1 year, 3 months ago

May I suggest that all you selfprofessed experts in health care financing attend a hospital board meeting and explain to them why Gene Meyer, who has over 30 years experience, is wrong in his budget projections.

Since LMH is community owned, you have an obligation extend to them your expertise and show them where they are miscalculating. The Board of Trustees meets at 9 a.m. the third Wednesday of the month in the LMH Auditorium. Meetings are open to the public.

And while you are there chootspa, you can ask, since LMH is “making money hand over fist”, where all the money is going since, being a nonprofit, there is no way disperse the extra dollars.

And, anotherview can demonstrate the proper way to interpret and analyze a financial report.

jafs 1 year, 3 months ago

Well, I forget the details, but clearly non profits are allowed to make more than they spend, if the numbers quoted above are accurate.

LMH had a "profit" of approximately $8 million last year.

Sam Crow 1 year, 3 months ago

Of course non profits can make more money than they spend. If LMH did not have excess revenue, it would have to borrow money on the open market to make up the difference. Public hospitals in large cities such as Chicago, New York and LA have to do that.

Most of the numbers quoted here appear to be correct. From the actual 2011 annual report which is available online, net operating revenue was 185 million with expenses of 175 million, leaving operating income of 9.5 million. But there is no way to disperse those moneys. Those dollars help pay for the improvements in capital, facilities, equipment and services.

Health care finance is much more complex than is typical business finance. It is because the consumer of the services does not pay for those services. Instead they are paid by a third party, insurance. And 60 percent of those payments on behalf of people are made by government. It may be Medicare ,Medicaid,Tricare or any other government insurance system. The ACA is a total unknown for planning at this point.

My point is simply this. Remember that the board consists of people from this community, and the monthly meetings are open to the public. Rather than people anonymously complaining here about the data, they should become actively involved and attend the meetings and ask questions. They may be surprised what they learn.

chootspa 1 year, 3 months ago

You could start by reading the linked article. I did cite a source. Nonprofits can "disperse the extra dollars" in salaries, buildings, and equipment, for one. Gene Meyer, who earns well over 400,000 per year for his nonprofit work, is familiar with how this works. Nonprofit structure isn't about profit. It's about taxes.

Maybe I might attend one of those BoT meetings, which are I notice are public but held during the day when people with jobs outside of the hospital are less likely to be able to attend. So kind of you to invite me.

Sam Crow 1 year, 3 months ago

Tax structure is but one facet of many complex issues in a non profit. More so in the health care business.

Here are some facts you may be interested in.

  • There are 2,919 private nonprofit community hospitals in the U.S., representing 59%of the total number of community hospitals and 77% of all privately owned community hospitals.

*State or local governments own 23% of the community hospitals, while private investors own 18%.

LMH is certainly not unique.

Most people don’t know that BCBS of Kansas is a not for profit mutual insurance company. They see their premiums and imagine stockholders profiting off of them. In fact, excess revenues go back to the policy holders, whether some people want to believe it or not.

From your comment, your problem seems to be the compensation that Meyer receives. How much do you think he should make?

chootspa 1 year, 3 months ago

You're attempting to distract. The hospital industry is such that I'm sure his compensation level is on par with other hospital CEOs. Not with other nonprofit organization CEOs, since the average salary there is $57,000.

My point, all along, has been that while LMH is "bracing for cuts" according to this article, they're in better shape than we're commonly lead to believe. You're right. LMH is certainly not unique. What they do is very much in line with current industry practices. They're run like most community hospitals. That doesn't mean that they're not doing very well for themselves in spite of upcoming legal changes.

Ironic that you should bring up BCBS. The excess revenues - in excess of the 20% administrative costs allowed under ACA - go back to policy holders, just the same as they do for any insurance agency. Prior to that, the money went mainly to building new office space, administrative pay, and large capital reserves. I'm sure some of it made it back to policy holders.

"According to our data, the nonprofit Blues held a total of $52 billion in capital at the end of 2010, or more than $29 billion above minimum regulatory requirements." -Carl McDonald, Citi Investment Research and Analysis

Sam Crow 1 year, 3 months ago

" while LMH is "bracing for cuts" according to this article, they're in better shape than we're commonly lead to believe."

You have no basis of fact to make that statement. It is only your uninformed opinion.

Once again, I urge you to attend a LMH board meeting to impart your wisdom on them and prove your point.

You also have the ability to seek to be appointed to the board at the next vacancy.

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