Hospital board studies change of designation to aid finances

As one of several necessary steps to achieve a state designation, a public hearing concerning the potential changeover of the local hospital to a Critical Access Hospital (CAH) was held Tuesday at the local hospital. Currently designated an Acute Care Hospital, several years of research and planning for the future by the board of directors of the Heart of Texas Memorial Hospital were the precursor to Tuesday’s meeting. The information provided to a group of some 30 interested McCulloch County citizens, most of whom were medical or hospital staff, included a financial presentation by Deborah Whitley of Parrish, Moody and Fikes, the hospital’s auditing firm located in Waco. Al Lewis with the Office of Rural Community Affairs (ORCA) also addressed the audience and provided background information as to how and why the community should consider approving the CAH program. Over the past four years, the Heart of Texas Memorial Hospital has seen a significant decrease in the number of patients. Subsequent financial reports show that annual operating profits or losses have dropped from a $250,252 profit in 2000 to a loss of $591,000 in the current fiscal year. Each year since 2000, the decline has been between $150,000 and $200,000. Concerns about the financial viability of the local hospital prompted a detailed explanation by Mrs. Whitley about the McCulloch hospital’s financial condition relative to both the immediate area as well as the state. “Your hospital is not going under,” said Whitley. “The simple fact is, there has been a continual decline in patients and the decision to pursue CAH designation is a financial decision that should be looked at as a planning method to move forward in the future.” By achieving CAH designation, the ultimate affect will be an increase in the amount of Medicare reimbursement by the government that would amount to approximately $480,000 in additional annual revenue. “CAH designation is simply a financial decision that will be advantageous to the taxpayers and the hospital district,” said Mrs. Whitley. “Other than a simple change in the Medicare number that the hospital uses in billing, there will be virtually no change in the type and quality of services the hospital offers.” In reviewing the financial situation of the hospital, several members of the audience questioned what measures could be taken to reduce costs in order to decrease the overall operational loss. “The quickest, but not always the most prudent way to reduce costs is in personnel reductions,” said hospital administrator Windell McCord, “but that must be taken under careful consideration. The simple fact is that as in any business, things can be done to reduce expenses, and we are looking at all avenues. In relation to the operational losses shown since 2000, it also must be taken into consideration that the hospital has done more than $5 million in capital improvements in the last five years.” In addressing the financial situation of the hospital, Mrs. Whitley also compared the ratio of profit or loss to the tax base being used to fund the hospital. “Industrywide, the average annual profit or loss is -26 percent with an average tax revenue of $1.2 million,” she said. “Your hospital is at -21 percent and is using a tax rate that generates only $483,000. That speaks very highly of what your hospital is doing to generate revenue from ways other than simply raising taxes.” Within the two-hour meeting, both Whitley and Lewis detailed the processes that must be adhered to in order to be designated a CAH. From the number of acute care beds to the average length of stay for an annual time period, there are strict guidelines that must be met. “According to all of the state requirements, this town hall meeting is simply one more formality that puts the hospital one step closer to receiving their CAH designation,” said Lewis. In all, 51 hospitals in rural Texas are or have applied to become CAH. Hospitals in the area that are CAH certified already include Ballinger, Eden, Comanche and Kimble County hospitals. “The main thing to realize is that this designation only affects the amount of Medicare reimbursement that the hospital receives from the government,” said Lewis. “It does not affect private insurance reimbursement in any way.” In terms of patient load at the local hospital, a survey of patients over the past year shows that 70 percent of the patients admitted at the hospital are Medicare patients. “The higher concentration of Medicare patients is another supporting factor of the pursuit of a CAH designation. “This is something that the hospital and the board of directors has been researching for several years,” said Mrs. Whitley. “We have done our research both locally as well as regionally, and we believe it to be a financially equitable decision. The main reason to pursue this designation is for financial planning. In no way will staffing or services be affected by the CAH designation.” According to Lewis, ORCA has granted the hospital district $10,000 to pay for a feasibility study that must be performed in order to achieve the CAH designation. The next step in the process is to complete the feasibility study which is conducted by the Parrish, Moody and Fikes Accounting Firm. From there, applications and approval are finalized by TDH and CAH status is enacted.

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