A private hospital in Memphis, Tenn., that was slated for the wrecking ball last year is considered sound enough to house a taxpayer-funded safety-net hospital, according to its not-for-profit owner.
And a Roman Catholic hospital in southwest Colorado wants taxpayer help to dig out of debt and get back in the black.
In what appears to be a creative and increasingly popular way to deal with fiscal pressures, stumbling private hospitals are turning to taxpayers or tax-supported institutions to help them regain firm financial footing.
In Miami-Dade County earlier this year, for instance, a new law earmarks 25% of the county's contribution to the Public Health Trust--used to fund the county's only public hospital--for private providers (May 22, p. 66).
"The dynamics are that commercial payers are squeezing and Medicare is cutting back. So not-for-profits and private providers . . . are scrambling for whatever sources of revenue they can scramble for," said Lynne Fagnani, vice president of finance and reimbursement at the National Association of Public Hospitals and Health Systems, Washington.
In Durango, Colo., 81-bed Mercy Medical Center is proposing the creation of a county health district that would tax residents, then dole out the public funds to the hospital and other healthcare providers for specific programs. Mercy officials wouldn't sit on the health district's independent board. Details--such as how much funding would be available, who would get it and for what programs--are still sketchy, but the idea is already meeting skepticism.
Josh Joswick, who chairs the three-member La Plata County Commission in Colorado, said he supports the plan in principle but doesn't believe it has much chance of passing because "it can really be onerous to try to convince people that it's in their best interest to tax themselves (to form a district)."
As the county's only hospital, Mercy recorded small profits in 1997 and 1998 and projects an operating income of "a couple hundred thousand dollars" on $56 million in revenue for fiscal 2000, said Brad Cochennet, vice president of
But Mercy will see a bottom-line loss of $1 million in 2000, he said, reflecting one-time write-offs for bad debt and new adjustments for the difference between hospital charges and actual revenue.
The hospital is $23 million in debt to its parent health system, Denver-based Catholic Health Initiatives, and has at least $12 million in deferred maintenance needs, he said.
Mercy's financial doldrums are largely of its own creation, hospital officials admit. In the mid-1990s the hospital bought money-losing physician practices, which it has divested, and for a time ran a money-losing psychiatric unit. Lower Medicare revenue after passage of the Balanced Budget Act of 1997 made matters worse, they said.
Now Mercy says it's up to taxpayers to decide whether the hospital continues to offer or pares down a wide range of services. County funds totaling $30,000 annually already help subsidize a clinic for the uninsured at Mercy, Cochennet said, so getting money from the health district doesn't raise the question of church-state separation.
"We're in a position where we can't do everything for everybody," Cochennet said. "If there aren't additional monies, the hospital may have to stop funding some programs that we are subsidizing."
Such programs include indigent and home healthcare, he said. Health district money might also be used to re-establish previously pulled services, such as those of a pediatric dentist who accepts Medicaid patients.
The district would act as a grant-making foundation to fund programs it deemed worthy, officials said.
The county health department, community health centers and mental health clinics could also tap into the public funding, hospital officials said.
It wouldn't be the first time residents taxed themselves to support healthcare. A hospital district funded the county's second hospital until 1992, when voters rescinded fiscal support. Mercy later took over the public hospital and converted it to a second campus.
Mercy is to present its proposal to the county commissioners and the Durango City Council at the end of July.
Meanwhile, in Memphis, a not-for-profit health system is exiting a low-income neighborhood by donating a hospital building it wanted to replace to a taxpayer-funded organization.
Baptist Memorial Hospital-Medical Center in downtown Memphis, had "uncorrectable deficiencies," according to Baptist Memorial Health Care Corp.'s 1997 certificate-of-need application to replace it. Now Baptist plans to give the 88-year-old hospital, which it says is worth an estimated $200 million, to the Shelby County Health Care Corp. The plan calls for consolidating the county-funded, 383-bed Regional Medical Center at Memphis, a facility encompassing six buildings, with 111-bed, state-owned University of Tennessee-Bowld Hospital. They'd be housed within the Baptist building.
Baptist has already begun shifting its services out of downtown Memphis into a more-affluent section of town (Aug. 9, 1999, p. 28).
According to the 1997 CON application, Baptist was planning to demolish the downtown facility, which has 1,200 licensed beds, and replace it with a 472-bed hospital on the same site. The CON application said the facility would be cheaper to replace than to fix because it needed $95 million to $100 million in upgrades over 10 years.
The new plan calls for $40 million in costs to retrofit the old building and add a trauma center, burn center, neonatal unit and new signs.
Stephen Reynolds, Baptist's president and chief executive officer, said he does not see anything unusual in the difference between Baptist's projected renovation costs and the new plan's costs.
"That's what they think will be required to (retrofit) in the first two years," he said. "The difference, for us, as we looked at it when we were considering building a facility, was: Do you spend $100 million in renovating an old facility or do you spend $150 million and build a new facility?"
When Baptist asked for the CON, which was granted, the hospital's average daily census was 500 to 600 patients. That number has dropped to about 300.
The Regional Medical Center, or the Med, as it is known in Memphis, has been the area's safety-net hospital, and its patient base downtown has been increasing, said Bruce Steinhauer, M.D., the Med's CEO. In addition, many of the Med's services, such as its trauma center, neonatal center and burn unit, are not dependent on geography or population base.
Officials from the Med and the University of Tennessee approached Baptist officials in January about donating the building. "We thought it was a good idea for the entire community," Reynolds said.
Shelby County Mayor Jim Rout said he is forming a task force to examine the new plan's projected cost, to make sure taxpayers don't end up footing the bill for an extra $60 million.
The county provides the Med with $22.5 million of taxpayer money per year, plus an additional $5 million for capital projects. "Therefore, I believe it is my role to be as excited as the others about it but to make sure from a business standpoint that it has been researched fully," Rout said.
Rout said he wants to double-check project assumptions that Baptist's patient base will remain steady and that physicians downtown will stay on.
Steinhauer said he does not intend to ask the county for more funding than it already provides.
"Some of this we think we can handle from cash-flow improvements," he said. "By moving from six buildings to one, our analysts show a considerable savings in that."