Columbia Memorial CEO says hospital is working to get back in the black An eight-fold increase in its insurance premiums has contributed to the first year-end deficit in 13 years at Columbia Memorial Hospital.

But with some belt-tightening, rate increases and other potential savings, the hospital expects to be back in the black next year, Administrator Terry Finklein said.

"We have to adapt and move forward," he said.

The hospital posted operating losses of about $1.3 million for the 2002 fiscal year. While the biggest financial blow came from the huge jump in its annual malpractice insurance costs, the hospital also has had to contend with growing operational costs, a slump in business and inadequate reimbursement from state and federal health care programs, he said.

Last year, the hospital's insurance carrier, St. Paul, dropped out of the malpractice business, leaving CMH, along with 750 other hospitals and 45,000 physicians across the country, scrambling to find another insurance provider, Finklein said. The hospital eventually signed on with a new carrier, Lexington, but its annual premium jumped from $100,000 to $800,000.

"Only a limited number of carriers underwrite medical malpractice, and the ones that are left could pick the cream of the crop and charge what rates the market would bear, or even more than it would bear," he said. "We were faced with little option."

The jump doesn't reflect the hospital's own malpractice record, which includes only two claims in the $200,000 range over the past 10 years, Finklein said.

Other factors contributed to the deficit, including growing operational costs, especially in pharmaceuticals, Finklein. Business is also down, especially in elective surgical procedures, probably a by-product of the general economic downturn, he said.

To help bring it back to the break-even point - the goal for the 2003 fiscal year - the hospital has raised its rates by 7 percent. It has also instituted a recovery plan that identifies potential cost savings in all areas of operations, he said.

First, the hospital is seeking other insurance options, including shopping around for better rates from other carriers, and looking into self-insuring plans.

One of the biggest reductions is the elimination of the chemotherapy program, which the hospital "begrudgingly" cut, Finklein said. The program was losing about $250,000 a year, largely because of the high cost of the medications.

"It complements our mission, but from a financial standpoint, it had a major subsidy from the hospital," he said.

The hospital has also trimmed staff by letting some positions remain vacant. Individual departments have been asked to look for savings within their own budgets, and to offer money-saving suggestions to the administration.

"People are thinking in terms of working smarter, finding small bits and pieces of money to save," said hospital spokesperson Arlene Layton.

"An economic crisis is not all bad - it's something that forces you to do an analysis of the way you do business, and move in a direction that's positive for the organization and the community," Finklein said.

But the recovery is also dependent in large part on the state legislature and the reductions it makes to the Oregon Health Plan. Lawmakers are considering cuts to the statewide medical coverage program on a number of fronts - cutting overall reimbursement rates, toughening eligibility requirements and reducing supplemental funding to rural "Type B" hospitals like Columbia Memorial.

It's a critical issue because about 15 percent of the hospital's business is with Oregon Health Plan clients, Finklein said.

"The reimbursement picture is tenuous at best," he said.

The hospital recently received designation as a Sole Community Hospital, status that will bring higher Medicare reimbursements. Reimbursement rates, the amount that doctors and hospitals are paid for various services, from state and federal medical programs have always been lower than the actual cost of delivering the service, Finklein said.

That means private insurance carriers, in effect, end up subsidizing to some degree the inadequate state and federal reimbursements. But those carriers are balking at higher rates and are shopping around for cheaper health care programs and can't be relied on to make up the shortfall from public health programs, Finklein said.

"We have to make sure that our quality is high and our cost is competitive," he said.

The hospital is also relying more on its foundation to fund new projects, like the Healing Garden now under construction. The organization will also pay for a new obstetrics surgical suite, a cost the hospital otherwise wouldn't be able cover on its own.


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