LEWISTOWN - The decision to merge Lewistown Hospital with Geisinger Health System was largely influenced by the currently evolving health care reform regulations, known as Obamacare, said Kay Hamilton, president and CEO of Lewistown Hospital.
"What we have today and how we deliver health care today is going to be revolutionized and delivered differently in the future," Hamilton said. "We have already sustained economic loss as a result of some of the reforms. We decided to merge because we just don't have the depth and breadth of resources to continue alone."
Without the assistance of investment capital and the larger network of providers that Geisinger has, Hamilton said, Lewistown Hospital might not have survived the coming health care changes.
Since the Accountable Care Act took effect in October 2011, Lewistown Hospital has lost $987,000 due to reductions in the Medicare base rate, reductions in base rate increases, productivity adjustments, value-based purchasing, readmission regulations and audit reviews, said Randy Tewksbury, vice president of finance and CFO of Lewistown Hospital.
The hospital is expecting to lose an additional $862,000 in Fiscal Year 2013 and $1,100,00 in FY14, Tewksbury said.
"Any time a change is made, it requires an upfront investment of equipment, computers, people or resources," Tewksbury said. "As a small hospital, you either have to expand or be part of a larger network that has the support and services."
One of the biggest reform changes, put into effect on Oct. 1, is the Value-Based Purchasing Program, which bases cost of treatment on quality of care rather than quantity of care, Tewksbury said. It's really about trying to put the necessary resources to the optimal quality outcome, he added.
"Today in health care, the more you get the more you pay, but studies have shown that up to 30 percent of what is done in health care today isn't always necessary," Tewksbury said. "Health care is evolving to this point where you are looking at quality: reaching the final outcome with the most efficient use of resources."
The Value-Based Purchasing Program has two components: readmission regulations and bundled pricing.
Readmission regulations refer to an incentive plan that rewards hospitals for limiting the return of patients within 30 day cycles, states healthcare.gov. In 2013, hospitals will receive a payment reduction, or decrease in government reimbursement, if they have an excess amount of readmissions for heart attacks, heart failure or pneumonia, the website states.
Basically, if a patient is readmitted within 30 days from the original treatment, procedure or care, the hospital doesn't get paid the second time around, Tewksbury said. Over the next few years, the list of diagnoses associated with this regulation will expand, he added.
The bundled pricing refers to a pilot program, officially taking effect by January 2013, in which patients are billed a flat rate for an episode of care rather than a collection of bills from the hospital, doctor, rehab center, etc., states healthcare.gov. The payment is then distributed, by undetermined percentages, to the providers involved.
In turn, hospitals must organize a system of bundled payments that requires area specialists, community care services and the hospital to work together, Trembulak said. Though the final rules have not been fully developed, by 2014 Lewistown Hospital must have a bundle system in place, he said.
The ability to adhere to this Value-Based Purchasing Program is then measured through various quality metrics to determine if the hospital gets reimbursement payments or not, Tewksbury said. Hospital scores are based on efficiency of care, number of readmissions and patient satisfaction surveys, he added.
At the beginning of each year the government takes away 1 percent of Lewistown Hospital's payments, or $300,000, Tewksbury said. At the end of the year, if the hospital falls on the positive side of the quality metrics bell curve, the money will be returned, otherwise the hospital will lose that money. As health care reform continues, the percentage taken will grow, he added.
The effect of this reform is twofold: patients will experience a more efficient, cost effective form of care, but the hospital will lose revenue because of payment reductions and decreasing hospital admissions, Trembulak said.
"The hospital has a certain cost structure that it has to maintain to keep the service level that it has and to reinvest in new technology and keep up with things," Trembulak said. "To do that, the hospital has to rely on a certain amount of revenue or payment generation. So if admissions are cut in half, the economic flow to the hospital will be dramatically cut."
According to Tewskbury, the hospital has already seen payment cuts because the number of admissions have declined since the the readmission rules went into affect. On top of that, the hospital has been experiencing a 6 percent decrease in admissions over the last couple of years, he added.
Since October 2011, Lewistown Hospital has lost $365,000 specifically from payment cuts and reductions in rate increases, usually used to account for inflation, Tewksbury said.
For Lewistown Hospital to stay financially stable, it has to capture or make available more market share, Trembulak said. That means growing the service area and increasing access to a larger population, he said.
"Health reform is creating a significant economic burden on the community hospital with the constant reductions in payment as well as the existing overhead," Trembulak said. "Geisinger has more expertise because of the volume and large service area we deal with. It allows us to add that overhead, or required finances, to Lewistown Hospital so they can meet the new Value-Based regulations and other reform requirements."
These reasons are exactly what drives hospitals like Lewistown to look for assistance from larger medical entities, Hamilton said.
As Lewistown Hospital merges with the Geisinger Health System, it will have access to the 1,200 Geisinger employees who specifically deal with meeting the rules and regulations of health care reform, Trembulak said.
Geisinger also has the needed resources, a type of indirect money, to invest in the hospital through facility changes, improved technology, updated equipment and expanding the service area, Trembulak said. The hard money will be used to recruit specialists who are needed for a successful bundle payment program, he added.
"Lewistown is run well considering the increasing challenge, but they need help to make it through this transition," Trembulak said. "Geisinger can bring operational coordination, human resources and investment capital that a community hospital just doesn't have access to."