To meet demand, Memorial has hired doctors and support staff and expanded its network of private physician groups under contract, says Rochelle Ayala, Memorial's administrator and chief medical officer for primary-care services.
Since the fall of 2007, the system hired three doctors to provide relief for its full-time physicians to handle the increased volume and five support staff, she says. That's in addition to two full-time doctors and three support staff hired to run the new clinic in Miramar. The private practice network has added 10 physician groups, she says.
Demand may have peaked in March, but volume still exceeded projections between May and July, she says. The clinics' budget projected 5,200 patients would be treated in Memorial's private practice network during the three-month period. Instead, the network received 7,000 patients. For the same three months in the previous year, 3,300 patients received care through the network.
Ayala says surging demand puts clinics under pressure to manage wait times without compromising quality. “It's disturbing,” Ayala says. “It causes me anxiety as an administrator as well as a physician.”
As demand for primary care has climbed, so have operating losses.
Memorial Healthcare's primary-care expenses increased 15.6% in fiscal 2009, which ended April 30, to $25.2 million from $21.8 million the prior year. Revenue from all sources other than the tax district—patients, public and private insurers and a separate Broward County subsidy—increased by 7.6% to $8.5 million from $7.9 million.
That forced Memorial to pour roughly $17 million in tax revenue into primary care to plug its deficit—$3 million more than the previous year, says Matthew Muhart, the system's senior vice president and chief financial officer. The 20% increase in tax revenue earmarked for primary-care exceeds the prior year's 15% growth, which Muhart attributes to the weak economy. Meanwhile, the recession eroded tax revenue, which shrank by just under 2% to $50.3 million from $51.2 million, despite a marginally higher tax rate, he says.
Another sign of the troubled economy, Muhart says: Clinics' modest revenue from patients (rather than insurers) declined despite rising volume. Revenue from patients slid 3% to $835,000 for fiscal 2009 compared with $861,000 the prior year.
“Everybody is holding onto whatever cash, if any, they have and we are viewed as discretionary,” Muhart says. Rent and utility bills take precedence over medical debts, he says, not only in primary care, but Memorial's hospitals as well.
Larger primary-care deficits leave less tax revenue to offset its hospitals' uncompensated-care expenses—charity care and bad debt—which rose 18% in 2009, to charges totaling $724 million, Muhart says. “It's a zero-sum game,” he says. Four months into fiscal 2010, it's unclear whether such increases will continue, but as of August, hospitals' uncompensated care had already exceeded budget by 1%, he says.
Memorial's Sacco says the system's overall positive margins subsidize the primary-care clinic.
The system's operations rebounded in fiscal 2009 despite the economy after cost-cutting measures and a turnaround at 120-bed Memorial Regional Hospital South, Hollywood, which it acquired from Tenet Healthcare Corp. in December 2006, according to financial statements. Memorial's expense growth in 2009 slowed markedly to 3.7% from 11.7% the previous year. Meanwhile, operating revenue growth held largely steady at 6.6%.
Notably, cost-cutting slowed growth for its three largest expenses. Salaries and wages increased 4.9% in 2009 compared with 10.8% the prior year. Supply costs rose 1.8% in 2009, down from 9%, and employee benefits rose 5.8% down from 18.7%.
Sacco says the system's budget faces challenges that could undermine its ability to absorb primary-care losses.
“The crisis isn't today,” Sacco says. He cited the economy's continued drag and an expected hit to Florida's budget once the federal economic stimulus law's $87 billion boost to federal Medicaid spending ends in December 2010. Florida's share of the funding totals
$4.4 billion, according to the Council of State Governments. Sacco says economic stimulus funding to Florida for Medicaid helped the system to avoid a projected $30 million cut to Medicaid reimbursement.
Meanwhile, Florida's effort to overhaul Medicaid faces an uncertain future over stalled efforts to expand a five-county pilot statewide; $300 million in federal funding hinges on the expansion, he says. “Now we're heading to crisis.”