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Hospital looking at $3M deficit

By
A. Marie Hamilton, NLJ Reporter

Self-pay patients could pay more moving forward
 
William Giles, Weston County Health Services chief financial officer, painted a forward-moving but still struggling financial future for the health care system during the board of trustees November meeting.
 
Giles explained to the board that the hospital will have to tighten its financial reins through the end of the fiscal year and will need to “double up,” if necessary, to ensure the hospital’s financial stability.
 
However, Giles also pointed out some procedural concerns that he believes are contributing to the financial picture’s grim look. Private-pay accounts and the cost-effectiveness of over-the-counter medications for private-pay patients could also use a closer look, he said.
 
Giles suggested that giving trustees an idea of where the hospital is financially at each meeting, with information and figures as accurate as possible, would be a good place to start in correcting the financial picture.
 
“I looked at the prior months instead of averaging it out – when we finish up in December, we are looking at about $320,000 in the hole,” Giles said. “It will be about $3 million dollars we are going to lose this year.”
 
Giles presented the board with financial statements indicating a list of items his department hopes to have cleared before the end of the current fiscal year (June 30, 2024), including tentative dates to be resolved. He did not know how much it would affect the bottom line presently, but assured the board it would significantly reduce the financial hardship the hospital continues to face because “things change constantly,” he said.
 
During the board’s December meeting, Giles said, he hopes to present the cost report to help make further adjustments as needed to reduce the looming deficit.
 
“There are some changes I really feel are contractual – that I’m not used to doing things the way we do it here – and I believe that it is wrong as they are a little bit primitive,” Giles told the board. “So we might be changing it to make it easier to transition through that (tightening the budget until the end of the fiscal year) also.”
 
Giles explained that due to the strategic plan outlined by the now former CEO, Judd Dawson, who was at the November meeting, coupled with imminent changes from his department in finance, the hospital could soon see a better financial future.
 
Dorothy Briggs, board president, asked if this figure is better or worse than the figures given in the spring, and Giles explained that it’s roughly the same.
 
“It was reported that we were about $3 million in the hole in early spring – would it be fair to say we are pretty stable?” Briggs asked Giles.
 
Giles responded to Briggs with a simple “yes,” and further explained he believes that the changes he aims to implement will affect the deficit in a positive manner and that he hopes to present a firmer financial future at the next board meeting in mid-December.
 
Giles explained to the trustees that roughly half of the nation’s hospitals, large and small, typically end the fiscal year with a deficit.
 
The American Hospital Association, in preparation for the end of the last fiscal year on June 30, 2023, reported that it expected up to 75% of the nation’s hospitals of all sizes to end the year with a significant deficit. The organization attributes the widespread deficit to compounding factors still stemming from the COVID-19 pandemic. It has been further compounded by a lack of staffing, and WCHS has seen its share of workforce shortages, as noted by Dawson and the board.
 
Giles reported his department is still working on the hospital audit and hopes to be able to present it at the December board meeting. He said he believes that the audit and the pending cost report will be valuable tools for the board of trustees in lowering the deficit.
 

 
He explained that some of the deficiency stems from outstanding credits from insurance companies, Medicare and Medicaid, but it also includes some inaccurate accounting or improperly managed accounting practices. Although the hospital cannot control when insurance companies or systems send payments, he told the board he hopes to remedy in-house accounting discrepancies for more accurate financial reporting and to streamline the hospital’s finances in general.
 
Giles also advised the board, based on a co-report from Dawson and the finance department, that the hospital may want to consider looking into self-pay, or private-pay, pricing.
 
“A lot of the money we leave on the table is private pay,” Giles said. “Private pay should be almost equal to co-pays from an insurance company.”
 
He felt the facility needed to look very hard at pricing for these customers in the pharmacy.
 
“We need to do some price checking for over-the-counter (pharmaceuticals) – let’s make sure we are posting prices that aren’t underselling us,” he added, indicating that his intent is not to punish private-pay accounts.
 
“I do not want to punish private pay – I want to make sure it’s equitable going forward,” he explained.
 
Dawson had asked trustees to entertain a 24% price increase on pharmaceuticals to incrementally increase roughly 7% every few months to help alleviate the hospital’s financial burden, but not price out private-pay patients.
 
“If we did a 24% increase on something that costs – let’s say $10, instead of paying $10, they are paying $12.40,” Dawson explained. “It feels big – but we aren’t talking about $200 or $300 dollar drugs, we are talking about $5, $10 and $20 dollar drugs.”
 
To illustrate Giles’ proposal, Dawson told trustees that he believes that a 24% increase for private-pay over-the-counter medications would produce an estimated $250,000 in potential profit. He further explained if the retail pharmacy could in fact net $250,000 profit for two to three years, then the hospital could potentially reduce the price again in the future. If reducing the price in the future is not feasible, the hospital could use that potential profit to help fund programs that don’t or could never produce a profit.
 
“Right now, we are losing money on retail pharmacy — which is counter intuitive,” Dawson said.
 
Trustees speculated whether there are enough self-pay or private-pay patients who use the hospital’s pharmacy to net a significant profit, or if an increase of any kind might cause the few remaining self-pay patients to find their over-the-counter medications elsewhere.
 
Dawson said that he did not yet have data about how many residents are self-pay or private-pay but is waiting on a report from other staff members that would include how many self-pay and private-pay patients the hospital sees weekly, monthly and annually.
 
“If it’s just one or two people coming through – it’s not worth it (raising the prices at the retail pharmacy for self-pay patients),” trustee Ann Slagle said.
 
Trustee Karen Drost asked Dawson if he or anyone else at the hospital did a price comparison of other pharmacies nearby, and he admitted that had not been done. Drost noted that patients routinely price-check over-the-counter medications. She does not believe the hospital could be competitive with CVS or Wal-mart but does believe hospital pricing could be within the same ballpark, which in turn could outweigh convenience versus subtle price differences for some patients.
 
Dawson explained that although most patients have insurance, many choose to opt for self-pay or private-pay because a co-pay could cost $20 for one medication, but with self-pay that same medication could be offered at $5. He believes a future report would give the board a better idea of how many patients opt for this option and it is one reason the hospital has not yet done a price comparison on over-the-counter medications or medications at the hospital’s retail pharmacy.
 
Ultimately, Dawson said, the board will need to decide to have a price comparison to either figure out ways to cut costs at its retail pharmacy or implement a price increase in order to make a profit.
 
The board discussed various ways to implement a price increase and to do a price comparison. One idea heavily favored by most trustees was implementing a price increase on cheaper medications, for instance, medications whose retail market price is $20 or cheaper, but they did not come to a conclusion of what price point to include in a price increase at this time.
 
The trustees did not make any motions regarding the hospital’s financial reports or increasing pharmaceutical prices. The discussion was tabled for an undetermined future board meeting when the new CEO, Randy Lindauer, can weigh in.

 

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