Top two options involve conversion to Critical Access
The results of a $170,000 strategic options study on the future viability of Sutter Coast Hospital are being shared with the public today during a live online presentation in which questions can be asked.
A steering committee that was part of the study considered two of four potential options to be viable — and both involve pursuing Critical Access Hospital designation:
• Transfer hospital governance from a mostly local board to a regional board overseeing several hospitals of parent-corporation Sutter Health, a process often called “regionalization,” and also pursue Critical Access Hospital designation.
• Or divest from Sutter Health and affiliate with another health system, also while pursuing CAH designation.
The steering committee, comprised of local community leaders, did not think the two other options analyzed, retaining the status quo or becoming an independent stand-alone entity, presented “a clear means of improving the Hospital’s future viability.”
Since Critical Access Hospitals receive a higher reimbursement rate for Medicare-insured patients, which make up more than half of Sutter Coast’s in-patients, the program has been called an obvious aid in bringing the hospital’s finances back in the black. The hospital has not had a positive operating margin since 2008 and the study projected it would have a $10.6 million annual operating loss by 2018.
“Given the magnitude of the Hospital’s projected financial shortfall, deployment of traditional strategies to increase inpatient volume are unlikely to enable Sutter Coast to be viable,” the results say.
A few measures the study references that could be taken to improve the hospital’s finances include “labor expense reductions,” reducing collection time for accounts receivable and strategic clinical growth, but the clearest game-changer for the hospital’s books is Critical Access designation.
The Critical Access Hospital program was created by Congress in 1997 after hundreds of rural hospitals were forced to shut down in the wake of Medicare reforms that paid providers less in reimbursements. The program allows hospitals to collect Medicare reimbursements based on the cost of treatment — not based on diagnosis of the patients like in other hospitals.
In order to qualify, hospitals must be 35 miles away from the next nearest hospital (only 15 miles in mountainous terrain), they cannot have more than 25 in-patient beds, and the average length of stay for inpatients must fall below 96 hours on an annual basis.
Some in the local medical community, including Dr. Greg Duncan, Sutter Coast’s chief of medical staff, have said that the 25-bed cap will trigger a significant increase in the number of patients who are flown to other hospitals due to a lack of capacity.
The study found that Sutter Coast’s average daily census was 21.6 from January 2012 to June 2013.
In the first six months of 2013, there were 29 days when Sutter Coast Hospital had a census above 25, although there were only 11 such days from January to June in 2012.
The hospital already transfers many patients who need services not provided here. Sutter Coast transferred 660 patients out of the hospital in 2012, but only three of those were transferred due to lack of bed capacity.
The study results say that Del Norte’s physician shortage can drive up patient transfers to other hospitals as well, and it also prevents the hospital from expanding “clinical service volumes.”
Parting with Sutter
The Camden Group, the consultants who conducted the study, interviewed senior leaders of four not-for-profit health care systems companies that could potentially replace Sutter Health as Crescent City hospital’s affiliation partner. The health systems interviewed were Asante Health, Adventist Health, Dignity Health, and St. Joseph Health System.
All four companies said they would “explore centralization of billing and other administrative functions for Sutter Coast to improve performance” and would consider Critical Access classification, according to the results.
The steering committee requested that the hospital or its service area have representation on the governing board of a new affiliation partner. The committee also asked for local representation on a Sutter Health regional board if the hospital is regionalized.
Influencing the process
The 15-member steering committee served as an advisory group for the study, and committee members interviewed by the Triplicate said they influenced what was analyzed throughout the process.
The study included 683 responses to a community health survey that was mailed to 4,000 random households in the service area.
The Camden Group also conducted interviews with 45 individuals, including local physicians, hospital administration, local government officials, members of the hospital’s board of directors, Sutter Health administration, and community representatives.
How to watch presentation
The findings will be presented in a WebEx presentation today at 11 a.m. Questions will be accepted during the 90-minute presentation online.
You can listen to the presentation by calling: 1-800-344-6491 and entering passcode: 9361623.
Those wishing to participate online are advised to test their browser at this URL prior to the meeting: http://tinyurl.com/5z52oq .
The link for the actual meeting is: http://tinyurl.com/oqfj99u .
A recording of the WebEx will be placed on www.suttercoast.org within 24 hours after the presentation for anyone who is unable to watch during the scheduled time.