MSHA: Long-term outlook uncertain

Nathan Baker • Sep 13, 2013 at 3:30 PM

Mountain States Health Alliance CEO Dennis Vonderfecht said Thursday that there are no plans to close any of the system’s soon-to-be 14 hospitals in the immediate future, but said uncertainty in the health care industry leaves the long-term outlook uncertain.

Vonderfecht said reductions in federal funding coupled with a declining patient volume driven by a shift in the country’s health care philosophy could spell the end for many health care facilities, like Lee Regional Medical Center in Pennington Gap, Va., which announced its closure this week.

“With as dramatically as health care is changing, who knows?” he said when asked if any of Mountain State’s hospitals could close beyond the company’s five-year fiscal plan. “I do know there are going to be a lot of hospitals closing in this country, and quite frankly, it’s by design. I think the federal government wants a lot of hospitals to close, they feel there are too many out there, there’s too much cost and duplication and this is the way they’re going to eliminate it.”

A recent drive to reduce the cost of health care to individuals, led largely by the Affordable Care Act, has led to added emphasis for providers on finding efficiency and away from the long-used fee-for-service model, by which doctors and hospitals were paid for each service performed, no matter how many.

“Our consultants told us to expect over the next 10 years, which we’re now three years into, the reduction of 30 percent of our inpatient volume as a result of moving to population health management from a fee-for-service type of environment,” Vonderfecht said.

In the midst of coping with the myriad of changes stemming from the new health care law, Vonderfecht said health care providers in Tennessee and Virginia — and 19 other states — are now dealing with massive revenue cuts that he attributed to their governments’ reluctance to accept federal dollars to expand Medicaid coverage to millions of currently uninsured individuals.

With the denial the expected reimbursements from the expansion and the effects of the federal budget sequestration, Vonderfecht said Mountain States expects to lose $500 million over the next 10 years.

“That is going to mean fewer positions that we’ve had in the past across all health care providers,” he said. “I think between us and Wellmont, there are going to be a lot of jobs lost over the next 5 to 10 years.”

The CEO denounced the political posturing at both the state and federal level that he said jeopardizes thousands of jobs.

“I know some of the stuff people are putting out there is Obamacare is why they’re closing, and that’s not true, it’s the opposite as far as I’m concerned,” he said. “People aren’t accepting the fact that this is the law of the land at this point, and whether it was Obama who passed it, or whether it would have been Bush who passed it, we need to get beyond names and look at what we’re trying to do through these programs.

“This is basically to give access to health care for 32 million people who didn’t have that coverage, and when you look at it, the vast majority of those are the working poor. We’re not doing anything good for society, first of all, by not covering those people, but secondly, we’re killing the health care system too.”

Vonderfecht said the state legislators and governors hold the power to save the regional health systems by approving Medicaid expansion.

But for the time being, he said, Mountain State’s finances are relatively stable, including the outlook for its rural facilities.

“When be bring a new hospital into our organization, we make sure that they fit into our strategic plan and are viable facilities,” he said. “But we also know there’s an obligation for an investment standpoint to upgrade them in terms of their look and in terms of the equipment they need to be able to attract physicians to those communities.”

Some of the smaller hospitals may actually lose money, he said, but the patients sent to other hospitals owned by the company offset those losses.

“They’re not usually looked at in isolation, but as a part of the larger system,” he said. “Even if Johnson County loses money — which it does — it also generates volume for Johnson City Medical Center, so we take that into account. If by doing that we can take the whole picture in place and it’s still generating a positive bottom line, then there wouldn’t be any reason that we’d think about eliminating them.”

But Mountain States may not be able to continue subsidizing those unprofitable hospitals if the losses come faster than the company can make cuts, he said.

“Our ability to continue doing that depends on how fast these reimbursement cuts continue, how fast volume comes down and how fast we can reduce costs and take waste out of some of our processes,” he said. “We’ve had some good success in reducing costs, but the key is can we reduce those fast enough that we keep up with the reductions in reimbursement? Only time will tell.”

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