Yesterday I wrote about all of the construction activity that has taken place at MCDH over the past 6 years. All of the construction projects have been necessary for the continued operation of MCDH. There have been other factors that have affected our hospital during the past 2 + years that have also had a dramatic effect on financial performance.
As the economy has worsened in recent years, the effect has been felt not only at the local level but also in our Nation in Washington, D.C. and our State. In 2009 a new program was created at the Federal level called the Recovery Audit Contractor (RAC) program. The RAC program is designed to allow Federally designated (RAC) contractors to have open access to Medicare hospital admissions from prior years. The RACs are looking for overpayments made by Medicare to hospitals and, in the early years, they were permitted to keep a percentage of every dollar that they recovered for the government. The program sounds reasonable.
However the problem soon became that RAC auditors began to second guess decisions made by doctors 5 to 6 years ago. We had several instances where we had admitted Medicare patients to our hospital because of the patient’s severe acutely ill condition, only to have a RAC contractor made a determination that the patient never should have been admitted in the first place! In June of 2009 we received a bill from Medicare for $415,000 to be repaid in 30 days or less. We successfully negotiated that bill down to $118,000. But every year we are hit with more and more audits and requirements for repayments of dollars paid to MCDH in years past. Last year in 2011, MCDH was hit with over $1 million in repayments back to the government for money that had been received in prior years. This environment of audits and takebacks of funds has become increasingly difficult on hospitals both large and small.
Another trend that has become a reality in our community in recent years is a dramatic shift in the availability of medical doctors in our community. When I arrived in Fort Bragg 6 years ago we had 11 private doctors offices. Today there are 2 large clinics and only 5 private doctors offices. The biggest reason has been doctors closing their offices due to the pressures of keeping a private practice open. 7 doctors have closed their offices and joined either Mendocino Coast Clinic or North Coast Family Health Center. For our hospital, the biggest change has been that now most of the doctors that support our hospital have become independent contractors at our hospital. This is the model of the future. Doctors and hospitals working together. However it has put pressure on our hospital, as now hospitals need to become smarter and skilled at running doctors office practices and billing and collecting for the doctors services. These are skills that most hospitals have, historically, not done well in.
So many changes have taken place in the past 6 years. The ones that I have mentioned so far (construction projects, Medicare and Medi-Cal audits and repayments and aging of the medical staff) are the biggest ones. But, there has been one more factor that has been major for the Mendocino Coast and our Nation. That is the economy. Unemployment and homelessness have hit high levels that most of us have never seen in our lifetime. Every City, County, State and even our Country, have been hit hard. Our hospital is no different. The bottom line is that our business is shrinking. We cannot afford to continue adding expense to our operations when our patient activity is shrinking.
Tomorrow I will continue my series on “what has happened at MCDH” with a look at the planned change for our Home Health Department.