Rural Hospitals Look For Savings

Jul 27, 2009

The bottom line at West Shore Medical Center in Manistee has swayed from red to black in recent years. Red in fiscal years 2006 and 2007. Then the hospital actually made money in 2008. CEO Burt Parks says West Shore reigned in expenses that year, and added some new medical services for the community - including the latest cardiac CT scanner. He says those were just temporary fixes. In fiscal year 2009, which just ended last month, the hospital once again barely broke even. And, unless something was done, it would be expected to drop back into the red for 2010.

"Without doing something," says Parks, "which could include further cutting expenses."

Patient care is getting more and more expensive, and all the time hospitals are getting paid less and less. For 10 years, Elizabeth Gertz has led the North Central Council of the Michigan Health and Hospital Association and she says hospitals are continuously loosing money providing care to patients in Northern Michigan.

"Maybe they make a little money in the cafeteria and the gift shop, and that may off-set what they loose in patient care," says Gertz.

She says there are more patients these days with little-to-no-health insurance to pay for their care.

"And in addition to that, those folks who have insurance through the federal programs, like Medicare and Medicaid - which care for our elderly, pregnant moms and children - those federal payment programs do not pay for the cost of care for the patients in the hospital setting," she says.

That's where the government can and does sometimes step in and help rural hospitals steady their financial status. This is the route West Shore is now taking in Manistee. Smaller medical centers that are pretty far away from other hospitals can apply to the federal government for something called "critical access status." Once a hospital is designated "critical access"  it actually gets paid the full cost to treat Medicare and Medicaid patients.

It's the government's way of keeping small hospitals around, so that people don't have to drive long distances for critical care. There are critical access facilities in Frankfort, Cadillac, and Kalkaska. And, though Burt Parks doesn't yet have the certified letter in hand from the federal government, he has seen a copy of it. So, it seems, Manistee's West Shore is the latest regional hospital to get the designation.

Critical Access does have its drawbacks. The biggest one seems to be that it can inhibit growth, or even reverse it. Critical Access hospitals are only allowed 25 inpatient beds and an average length of stay of four days. Offering complicated services with longer recovery times may be problematic. And Manistee has to get rid of some of its beds, in order to slide in under the limits.

But that may be less problematic than you might think. Bill Jackson, who runs the Charlevoix Area Hospital, says in 2005 his hospital slashed its bed count from 44 to 25 and became a critical access hospital, one of the largest in the region. Jackson says Charlevoix actually needs fewer hospital beds today than in it did in 1955 when the hospital was built. The area's population has grown, and there is more demand for medical services. But there's also been a fundamental shift in how medicine is practiced, and patients don't have nearly as many recovery days in the hospital as they once did.

"The practice of medicine has recognized that lying in bed is not the solution for the recovery of many patients," says Jackson. "You need to get them up and mobile as quickly as possible."

And Jackson says Charlevoix Area Hospital continues to grow, but by expanding outpatient services, not with more beds. In Manistee, leaders of West Shore Medical Center say they continue to add doctors and to grow - even as they shrink their hospital bed count this summer.