West Virginia's largest hospital, Charleston Area Medical Center, will seek state approval this month for a 2% rate increase to pump $3.5 million into its current budget, which is being dragged down by a money-losing HMO.
The amount seems a mere drop in the bucket when compared with the deficit the hospital reported last year, the cumulative losses incurred by its 5-year-old HMO and $40 million in penalties and unpaid amounts the state's healthcare authority claims the hospital needs to address.
"Obviously, all parts of this system need to move toward a self-sustaining financial position, and that's what our goal is," said Phil Goodwin, president and chief executive officer of Camcare, CAMC's parent company.
West Virginia requires state approval of hospital price increases; the last increase granted to CAMC was in 1993.
Since then, a dispute over CAMC's rate calculations has postponed the application and review of other annual increases. About $40 million that the state claims CAMC owes is under appeal.
The 818-bed medical center is made up of three facilities -- General Division, which specializes in neurology, orthopedics, trauma and kidney transplantation; Memorial Division, which specializes in heart and cancer treatments; and Women and Children's Hospital. CAMC's not-for-profit parent, Camcare, also owns 30-bed Braxton County Memorial Hospital in Gassaway, W.Va., and 79-bed Plateau Medical Center, in Oak Hill, W.Va.
Camcare also owns Carelink, a 63,000-enrollee HMO that has lost a total of $35.3 million since it was created in 1994, according to records from the West Virginia Insurance Commission. In the last two years alone, Carelink has lost nearly $18 million, state figures showed.
Goodwin said Carelink continues to struggle, like many HMOs, because of rising costs and flat premium revenues. It has hired outside consultants to look at the HMO's operations, and it raised premiums by 15% this year.
Only about 11% of West Virginians are enrolled in managed-care plans, said Steven Summer, president of the West Virginia Hospital Association. "Every HMO in our state has essentially been losing money since it started," he said.
But Carelink is the only one in the state owned by a hospital company.
Goodwin said the hospital's rate increase is not tied to Carelink's losses. "If we were trying to finance Carelink through that rate increase, we'd be asking for a lot more money," he said.
Charleston Area Medical Center lost $13 million in 1998 on revenues of about $600 million, said Goodwin. The previous year, the hospital reported a $17 million profit on about the same amount of revenues.
The sharp drop in profitability resulted from unfavorable changes in federal reimbursements and an over-aggressive redesign program, Goodwin said.
CAMC is ranked second only to 331-bed West Virginia University Hospitals in Morgantown when its rates are compared with all other West Virginia hospitals. CAMC's average rate per discharge was $10,168, compared with $14,767 for West Virginia University, according to data from the West Virginia Health Care Authority. The median is $5,005.