Natchez Regional’s woes common in industry

Published 11:56 pm Saturday, March 8, 2008

NATCHEZ — As the hospital sits in financial crisis, much needed federal funding has been greatly reduced and patients are not paying their bills.

Officials have a list of unappealing solutions and community residents have growing concerns.

And they’re over 1,000 miles away in Colorado Springs, Colo.

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Memorial Hospital Central in Colorado Springs, is experiencing almost identical financial woes to those seen at Natchez Regional Medical Center.

Memorial is a city-owned hospital just as the county owns NRMC.

And just as in Natchez, city officials in Colorado are scrambling to find a fix.

Councilwoman Jan Martin, part of a newly formed committee to save Memorial Central, said the situation there is bad.

“It’s a downward spiral at this point,” she said.

Just as in Natchez, Martin said uncompensated care combined with a steady decrease in federal dollars has put an almost crippling strain on the healthcare system.

But the similarities between Natchez and Colorado Springs aren’t just a freak coincidence — they are the new norm in American health care.

The American Hospital Association’s senior vice president for strategic communications, Rick Wade, said approximately one third of the nation’s hospitals are operating in the red.

According to the Mississippi Hospital Association 43 percent of the state’s hospitals operate at a negative or zero profit margin.

And Wade said the future for hospitals looks “gloomy.”

Wade said uncompensated care, expenses and federal funding cutbacks in Medicaid and Medicare found at hospitals, private and publicly owned, are rampant across the country.

“A federal squeeze is inevitable,” he said. “Right now (federal) payment is as good as it will ever be.”

Wade said dwindling federal dollars, that all hospitals rely on, stem from two places — Medicare and Medicaid — and right now both face regular cutbacks.

An ever-growing number of baby boomers who use Medicare and the 47 million Americans with no insurance, many of whom use Medicaid, constantly tax federal reimbursement dollars, Wade said.

Funding cutbacks, he said, coupled with patients who simply cannot pay medical bills, even if they are insured, have put approximately one third of the nation’s hospitals in the red.

Other problems

While NRMC has problems with both uncompensated care — approximately $8 million — and federal funding, Regional’s problems go a bit deeper.

Hospital board attorney Walter Brown said the hospital’s retirement program, Public Employee Retirement System of Mississippi, comes at a great cost to the hospital.

Brown said PERS costs the hospital approximately $1.5 million in employee contributions per year.

“It puts the hospital at a competitive disadvantage,” he said.

Since NRMC decided years ago to participate in PERS, the hospital is obligated to contribute a fixed amount to its employees’ retirement — up to 11 percent of the employee’s compensation.

Conversely most privately owned hospitals such Natchez Community Hospital are not held to the same employee contribution requirements.

And it’s the competitive nature of two hospitals in such close proximity that has also contributed to NRMC’s current problems, Brown said.

While a free-market economy is the essential basis for the foundation of capitalism, it does not bode well for the hospital business.

Chief Operating Officer of the Mississippi Hospital Association Eddie Foster said the laws of free market economy are almost never beneficial to a hospital.

“Hospitals in general are facing tough times lately,” he said.

And the labor and capital intensive nature of a hospital only compounds those problems.

The solutions

Since the financial problems at NRMC have become publicized, the board of trustees has been working with a list of possible solutions to secure the hospital’s future.

Options include sale/lease of the hospital, bankruptcy or conversion to a non-profit hospital.

However many in the healthcare community say the future of any hospital depends on something much harder to attain.

A one-hospital town?

Many in the industry say no two hospitals in an area the size of the Miss-Lou can successfully operate independently of one another.

Greenville’s Delta Regional Medical Center’s CEO Ray Humphreys said in 2005 there were two hospitals in Greenville.

Today there’s just one.

The public hospital, Delta Regional, bought the private hospital, King’s Daughters, Humphreys said.

Before the buy-out the two hospitals were competing against each other and neither was profiting.

Humphreys said the purchase of King’s Daughters, saved both facilities and 1,200 jobs.

No employees from either hospital were laid off in the process Humphries said.

NRMC’s chief of staff Dr. Ed Daly said at a recent meeting of several of the hospital’s physicians most doctors agreed Natchez must come to be a one-hospital town.

“It’s the best thing for Adams County,” he said.

But just how that conversion would take place is unknown.

Humphreys said in many instances when two hospitals join, both institutions recognize mutual benefits in the conversion.

Representatives from St. Dominic — Jackson Memorial Hospital and Mississippi Baptist Medical Center said they either have no interest in the purchase of NRMC or were unaware of the hospital’s situation.

Representatives from Health Management Associates, the company that owns Natchez Community Hospital, could not be reached for comment.

Going non-profit

Foster said conversion to a non-profit entity can often be beneficial to a hospital.

Of non-profits in the state Foster said Tupelo-based North Mississippi Health Services is one of the best run.

North Mississippi’s CEO John Heer said NRMC’s conversion to a non-profit entity could also benefit the hospital.

Heer said that would allow the hospital’s profits to be recycled back into the hospital for continued growth.

Heer also said hospitals, like NRMC, can often expand specialty services when they have financial difficulties.

A long-term acute care hospital is one such specialty service that NRMC is currently considering.

Foster said hospital’s can use LTACHs, with traditionally higher federal reimbursement rates, to ease loss in areas like uncompensated care.

However Natchez Community Hospital is currently trying to discourage NRMC’s LTACH construction.

Community argues that the LTACH needs of the area are already being met by Promise Specialty Hospital in Ferriday.

On Friday afternoon representatives from NCH and NRMC presented final arguments before a hearing officer in Jackson.

State Health Officer Dr. Ed Thompson will ultimately decide on the future of NRMC’s LTACH.

His ruling is expected within 90 days.

Filing for bankruptcy

NRMC officials are also exploring Chapter 9 bankruptcy as a solution to the hospital’s immediate needs.

The Mississippi Hospital Association’s director of rural health issues Mendal Kemp said bankruptcy would simply put the hospital’s creditors at bay, but only temporarily.

Kemp said before entering bankruptcy the hospital must submit a plan to the courts that outlines their exit from bankruptcy strategy.

“It just puts everything on hold,” he said.

The future

On Friday afternoon Brown said the hospital’s trustees had still not reached a final decision for the hospital’s future.

“They’re still weighing their options,” he said.

Approximately one week ago Brown recommended the board reach a decision in 30 days.

But no matter what choice to which the board arrives the healthcare landscape of Natchez may soon change forever.