Wishard aims to even it up: Health system could break deficit string

About half the bills Wishard Health Services used to send out came back sans payment thanks to an error.

Now that happens only 4 percent of the time, a change that saves millions, according to Wishard number-crunchers.

Improvements such as these might spur a multimillion-dollar turnaround in Wishard’s ledger this year, said Matt Gutwein, the leader of Marion County’s safetynet hospital.

Wishard will attempt to break even by the end of 2005, a far cry from the $77 million deficit it registered in 2002. Analysts call the change remarkable, but Gutwein plans to keep the champagne on ice for now.

Federal aid cuts loom a couple of years down the road, and Gutwein said a possible year in the black “does not remotely mean we have smooth sailing ahead.”

Wi s h a r d Health Services, which encompasses Wishard Memorial Hospital, outpatient clinics, Midtown Community Mental Health Center and the Lockefield Village retirement home, ended 2002 $77 million in the red and on course to sink past $100 million, Gutwein said.

The cost of uncompensated care had jumped $20 million between 2001 and 2002. Wishard, like every other hospital, also felt the effect of double-digit health care cost increases.

Fast-forward a couple of years. Wishard probably will record a $7.5 million deficit for 2004, said Gutwein, president and CEO of Health and Hospital Corp. of Marion County, the public entity responsible for Wishard.

Auditors are still working on final numbers, but Gutwein said he has a “high degree of confidence” in that estimate.

This year, Wishard’s budget projects a $2.9 million deficit. However, Gutwein said the hospital has the potential to break even, although he made a point of avoiding any Joe Namath-type guarantees.

That represents an impressive shift in the world of hospitals, said Jeff Williams, a health care consultant for the Indianapolis office of PricewaterhouseCoopers LLP, a New York-based accounting firm.

“People just don’t do that,” he said. “They may cut a few million here and a few million there and be proud of themselves.

“To come back from a $77 million deficit is truly remarkable.”

He attached one caveat: Wishard receives significant government support, and unexpected windfalls from state or federal agencies can help it climb out of holes.

Wishard worked with Indiana and Medicaid officials to boost that revenue stream, Gutwein said. But he also said the health system’s big gains came from in-house measures to boost revenue and cut expenses.

As a safety-net hospital, Wishard’s patient population includes a high percentage of people who have no insurance or rely on Medicaid or Medicare, which provide lower reimbursement than private insurers.

Uncompensated care cost Wishard $167 million in 2002, but the health system has wrestled that figure back down to about $147 million this year, which matches the 2001 level.

Health Services management started several initiatives to save money. They encouraged the prescribing of lower-cost pharmaceuticals.

“We’ve been very aggressive in seeking out those free pharmaceutical programs, and we’ve gotten some help in that area,” Gutwein said.

They also cut labor, mostly through voluntary severance packages. Wishard reduced the number of full-time-equivalent positions from 3,650 in December 2002 to 3,072 this February, Gutwein said.

The health system made these trims without help from layoffs or “material cuts” in patient services, he added.

On the other side of the ledger, Wishard increased revenue by $35 million between 2002 and its 2005 budget. Health system employees worked to make sure they properly identified all procedures performed on a patient, so Wishard can receive every possible dollar in reimbursement.

This year, the hospital expects to bring in $5.1 million more due to better performance in this “charge capture” area, Gutwein said.

Wishard also cut the time it takes to receive payment on a bill from more than 100 days to about 63.

“The older a bill is, the less likely you will collect … 100 percent,” Gutwein said. “Bills that are paid faster have a higher net yield.”

The health system also added services that make money. Its bariatric surgery program-to which it added a procedure called laparoscopic sleeve gastrectomy for the super obese-attracts patients with commercial insurance and turns a profit, although Gutwein declined to get into specifics.

All this addition and subtraction doesn’t add up to blue skies and black ledgers forever. Gutwein expects cuts in Medicaid disproportionate share money starting in 2006. That refers to additional money Wishard receives to help cover the many patients without insurance that it treats.

Overall, President Bush and Congress have pitched multibillion-dollar Medicaid cuts over the next several years, said Lynne Fagnani, a senior vice president with the National Association of Public Hospitals and Health Systems, a not-for-profit, Washington, D.C.-based lobby group and trade association.

“There are significant Medicaid cuts on the table right now in Washington,” she said.

Aside from possible cuts, Gutwein also noted that Wishard has already captured most of the “big wins” or gains in efficiencies.

“Now it’s going to take a larger amount of effort to get a smaller amount of efficiency gain,” he said.

Wishard is by no means alone when it comes to an uncertain future.

Williams said he sees financial problems pop up every year at safety-net hospitals across the country. Wishard’s counterpart in Phoenix, for instance, has reported heavy losses the past few years.

Williams said hospitals are seeing selfpay populations and bad debt rise at the same time supplemental Medicare and Medicaid payments fall under the government microscope for possible reduction. That adds up to a financial situation that will get worse before it gets better.

“It’s a big, big community challenge we’re seeing literally everywhere we go across the country,” he said.