Ray Montgomery
White County Medical Center is taking a surgical knife to expenses to help cover a projected $51 million shortfall over the next six years.
Ray Montgomery, WCMC’s president and CEO, said that he projects the 438-bed hospital in Searcy will miss out on $66 million in revenue over the next six years. Part of that drop in revenue comes from the federal budget sequestration and lower Medicare per-patient reimbursements. To help pay for the Affordable Care Act, the rate of growth in Medicare reimbursements slowed.
A sliver of good news is the hospital is expected to see $15 million in revenue over the next six years from patients who now have health insurance thanks to the state’s adoption of the “private option” alternative to Medicaid expansion, Montgomery said.
But $15 million in revenue from previously uninsured patients won’t be nearly enough to make up for the tightening of federal reimbursements, so Montgomery is looking for other ways to close the gap.
In addition to trying to generate more revenue, the hospital is going through all procedures in an attempt to root out waste. A year ago, Allen McGuirt was hired to help improve efficiencies at the hospital and to find ways to save on supplies.
Montgomery said he hopes to see $1 million to $2 million in annual savings from McGuirt’s work.
McGuirt told Arkansas Business last week that his lean operating changes will take three to five years to fully implement, but there have already been some success stories. For example, in the hospital’s surgery center, McGuirt reported a savings of $194,000 over a one-year period by reducing the inventory, McGuirt said.
Other savings will occur by improving productivity, he said.
The intense focus on the bottom line and improved patient care is coming because state and federal health insurance payers as well as private insurance companies are transitioning from a fee-for-service model to a fee-for-performance structure.
In addition, lab tests are being scrutinized before being ordered to be sure they’re necessary and will improve patient outcomes, Montgomery said.
White County Medical Center is doing its best to keep people out of the hospital, one of the most expensive places to receive medical care. Montgomery said admissions to the hospital have dropped 30 percent since 2009.
Reducing the number of employees also provides savings. In the past 12 months, WCMC, which has 1,750 employees, eliminated 20 positions through attrition. And the workforce constantly is being examined, he said. WCMC has a 20 percent turnover rate, so when people leave, “it gives us an opportunity to look and determine if we have to replace those positions,” Montgomery said.
Doctors who practice at WCMC are supporting the move to a leaner operating hospital, Montgomery said.
“Obviously we’d all like to stay where we are, but the reality is it’s going to change,” Montgomery said. “So we’re beginning to embrace this transformation.”
McGuirt, the efficiency expert, said hospitals in the past were as concerned about watching every penny. “The focus had been on patient care,” he said.
Montgomery agreed. If a doctor wanted a supply, the hospital would get it for the physician, Montgomery said. But that’s no longer the case.
“Today, we’re sitting there at the table, alongside the doctors and alongside the vendors, and really trying to get the best value,” Montgomery said.
Insured Patients a Surprise
Montgomery said he was “incredibly surprised” by the number of new patients with health insurance at the hospital because of federal health care reform. Nearly 4,000 people in White County have been enrolled in health insurance because of reform, he said.
Montgomery said that WCMC projected there wouldn’t be much change in the number of uninsured patients because of all the trouble with the federal website in the fall of 2013.
But WCMC has seen a 50 percent drop in uninsured patients at its emergency room during the first four months of 2014 compared with the same period in 2013. The same decrease can be seen in inpatient admissions, he said.
“I think there was a lot of pent-up demand that existed,” Montgomery said. “People didn’t have insurance.”
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