Medicare funding formula is costly to area hospitals

Federal agencies have no qualms about lobbying Congress for more money every year, contending that operating expenses, especially those related to employee costs, continue to mount. Their argument, in a nutshell: You can't expect us to keep doing what we've been doing without an infusion of new revenue.
Yet, that's exactly the federal government's position when it comes to the Mahoning Valley's largest health-care providers and the reimbursements they receive for treating Medicare patients. Even though the six Valley hospitals' labor costs and health care needs are growing, the government has short-changed them about $7 million this year. And it could get worse in 2002.
The problem, according to Michael Rowan, president and chief executive officer of Humility of Mary Health Partners, and other top executives from Forum Health, Salem Community and East Liverpool, is that Washington uses four-year-old data in calculating the rate of Medicare reimbursements. A complex formula in which labor costs are a major factor is used by the government to determine how much a hospital will receive for inpatient and outpatient services under Medicare. But because of the outdated figures, hospitals in the Youngstown-Warren Metropolitan Statistical Area are receiving only 95 percent of what it costs them to provide the services.
By comparison, New York City hospitals get 112 percent of the average procedure cost.
Why? Because when the bureaucrats in Washington look at the Youngstown-Warren area, they turn a blind eye to the fact that wage rates have risen greatly since 1998 -- the year used for data to calculate what is called the Wage Index.
Reality: It is inconceivable that the federal government would ignore the following reality: several new employment contracts that have gone into effect since 1998 and the national nursing shortage have caused local health-care costs to rise. As far as Washington is concerned it's all about the formula -- albeit a flawed one.
Therein lies the problem and the challenge that confront Northside Medical Center, Trumbull Memorial Hospital, St. Elizabeth Health Center, St. Joseph Health Center, Salem Community Hospital and East Liverpool Community Hospital.
How can this region persuade the federal government to correct the glaring shortcoming in the Medicare reimbursement program? The executives of the hospitals have undertaken a two-pronged campaign: they have visited members of the Valley's congressional delegation in Washington, D.C., seeking a legislative solution and have written letters to various officials in Washington; and, they recently launched petition drives at their hospitals to demonstrate the level of public support for the effort.
The $7 million that Medicare is withholding from the hospitals -- HMHP was dealt the biggest financial blow, more than $3 million -- is forcing the health-care providers to consider cutting back on services.
"Operating margins in health care are already almost nonexistent," says N. Kristopher Hoce, chief executive of Forum Health. "This problem is forcing us to ask ourselves: How will we stay viable?"
Congress must urgently address this problem or else patients will ultimately suffer. Immediate action is needed to ensure that the six Valley hospitals don't lose another $7 million next year. In the long term, the method of calculating the Wage Index must be changed to incorporate the latest date relating to labor costs and the community's health-care needs.