The Bladen County Hospital Board of Trustees and members of the Medical Staff met in a joint workshop at White Lake on Tuesday to hear a presentation and discuss the possibility of changing the hospital's operation to that of a critical access facility.

The critical access designation was specifically designed by the United States Department of Health and Human Services and congressionally approved to help small rural hospitals survive in the era of the federal Balanced Budget Act. It was included as a part of the Balanced Budget Act legislation.

Because of constraints on spending mandated in the federal law, it has significantly reduced Medicare and Medicaid reimbursement to healthcare facilities and resulted in a change in how reimbursement is determined.

Allows payment of costs

The critical access designation allows reimbursement for services based on a cost basis, rather than on the fee schedule (called DRGs) used to reimburse most healthcare facilities. This, according to studies, has enabled small rural hospitals that depend heavily on Medicare and Medicaid revenue to improve their bottom line without significantly diluting services.

Presently there are 14 hospitals in North Carolina that have been designated as critical access facilities. The closest one to Bladen County is Pender County Hospital, a part of the New Hanover Regional Medical Center network.

Not presently qualified

In opening the workshop, Bladen County Hospital Chief Executive Officer Leo Petit pointed out that Bladen County Hospital did not meet the criteria for designation as a critical access facility based on last year's patient census statistics.

To be designated a critical care facility, a hospital must not exceed an average daily census (ADC) of 15 patients in acute care beds. Last year, BCH's ADC was 18.91, with a total of 234 days when the number of patients in acute care beds exceeded 15.

He added, however, that the ADC has been coming down for several years, and that the criteria could likely be met with some procedural adjustments.

Jim Bernstein, assistant secretary of the North Carolina Department of Health and Human Services, along with state Director of the Rural Health Association Surge Dihoff and Dr. Mike Rallis, Medical Staff director at Pender County Hospital, were guest speakers at the workshop.

Bernstein speaks

Bernstein explained the events that transpired leading up to the legislation allowing the critical access designation.

He pointed out that the small rural hospitals face a myriad of problems that are to a large degree beyond the control of the board of trustees and administration.

"The forces that are going to affect your decision (about seeking critical access designation) you have no control over," Bernstein said.

Financial pressures to force changes

He pointed out that financial pressures will continue to mount for healthcare facilities.

"Dollars are going to drive the system in a way we've never seen before," he said. "The pressure to save money is going to be immense."

He said that insurance programs are going to exert pressure on physicians and hospitals to keep down costs. Furthermore, he said, insurance companies are going to consolidate contracts, which would likely mean that smaller stand-alone hospitals could well be faced with the loss of a major insurer.

"You could not stand losing one of your major insurers," he said.

He added that smaller facilities would also find it difficult to find the capital to keep equipment and facilities current.

"Access to capital to keep current will be very limited," Bernstein said. "Lending institutions are going to be very reluctant to loan money to smaller hospitals unless they are partnered with larger, more profitable ones."

Will require alliances

He said these forces and others would ultimately force smaller hospitals to seek agreements with larger facilities in order to continue to operate, unless conditions changed in the industry.

"Under the umbrella of a larger facility, the smaller hospital would have access to the credit rating of the larger hospital," he explained.

Bernstein said, in explaining the advantages of critical care designation, said, "It takes you off the traditional ways hospitals are paid. Medicare says they are going to pay your costs. For small hospitals that rely heavily on Medicare or Medicaid, that can be a lifesaver.

He explained that the cost basis of payment would almost certainly increase the amount of revenue in relation to services rendered.

"When you run the numbers, you will almost certainly see an increase in revenue," Bernstein said.

"It's a great program for small hospitals, something larger hospitals would love to have-cost based financing.

Bernstein added that the hospital board should be cautious in selecting the new chief executive officer to replace Petit, who has announced that he will retire in August.

He pointed out that the board should not select someone who would resist alliances with other hospitals.

Director of Rural Health speaks

Dihoff said that becoming designated a critical care facility could be an "unbelievable opportunity" for the hospital.

"By virtue of you being a rural hospital, your physicians who are affiliated with the hospital could also become eligible for cost-based reimbursement if you were a designated critical care facility.

Dihoff explained that the change in designation would require little, if any, changes in services provided. He said none of the hospitals in the state that have the designation have had to eliminate any of their services as a result.

He also cautioned the board not to throw out the idea of possible mergers. A merger could prove to be in the best interest of the hospital in the long run, he said.

Transition at Pender explained

Dr. Rallis, who has been a physician in Burgaw for 20 years, began his presentation by stating that he had spent a "good part" of his career being jealous of Bladen County Hospital.

"You folks have done very well over here, winning all the awards when we (speaking of Pender Memorial Hospital) were struggling," Rallis said.

He cautioned, however, that changes in the industry could force BCH to look at other alternatives in order to remain viable.

Rallis said that changing to critical care hospital two years ago had had no negative effects on Pender Memorial. He said it had dramatically improved the hospital's bottom line and made it viable again. He pointed out that the hospital's alignment with the New Hanover system prior to applying for critical care designation had been very beneficial.

Pender Memorial is operated by New Hanover Regional Medical Center under a 20-year lease agreement. NHRMC began operating the hospital three years ago.

"Since then, we've become Joint Commission accredited, and we've improved in the public eye," Rallis said.

He said that it had given the hospital access to capital to update services, including the building of a modern emergency room, which was recently completed.

Rallis said that getting patient census down to the required number to qualify for critical care designation had not been as difficult as he had thought it would be. He said actual admissions to the hospital had increased since the designation; however, he added that the patients' average length of stay had been reduced.

He said that the designation had forced the physicians and the hospital to do a better job of determining which patients needed to stay in the hospital and which ones could be released.

Requires a team effort

He said operating under the critical care designation was team effort that required everyone working together with the discharge planner to ensure that patients were not kept any longer than necessary and that they were in the proper status, i.e. under observation, awaiting transport to another facility (such as a nursing facility), or under acute care.

The medical staff and board members were given the opportunity to ask questions about the critical care designation, as well as about other issues facing the industry, before the meeting adjourned.

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