HJAR Mar/Apr 2024

DIALOGUE 12 MAR / APR 2024 I  HEALTHCARE JOURNAL OF ARKANSAS — gas stations are the only places to eat in the community. That may not be the healthi- est option for patients, yet that's the only place they have to go. So, trying to see what changes we can make to that environment and/or how we can educate that individual so they can make changes is the hard thing. But if you can change the environment, that makes it easier to make those types of decisions. If you also educate the individ- ual, then they have more determination to make those types of changes. But nobody can be perfect; and nobody, even if they were perfect, would be healthy their whole life, so then you have to make sure that peo- ple have easy access to primary care and to some of the main specialties that you know are going to affect your population. We have a very elderly population in the area. We have a population that is not necessarily flush with money. So, we need to make sure that we're serving the needs, whether it's cancer, whether it's heart, whether it's orthopedic. Looking at that, I believe Mountain Home is 27% age 65 and older. The national average is about 17 or 18%, so we're definitely above the national average in the elderly population. We're a retirement community, so we need to make sure that we have the services to meet those needs in that elderly population. Editor How does that payer mix affect your financial stability? Peterson That makes it extremely challenging. It was probably 10 years ago when Moody's ranked us the fifth most Medicare-dependent hospital in America. The top four were all in Florida. We have a very high portion of Medicare patients. Then, as you've probably heard from other hospital administrators, the state of Arkansas is at the bottom in physician payments and hospital payments on the Medicare side; and Baxter Regional is basically at the bottom of the state for Medicare reimbursement. Our base rate is in the lowest 1% of the Medicare rural hospitals. I believe the spread between all hospitals, between the lowest paid hospital and the highest Medicare-reimbursed hospital, is up to 180% now. All the drugs and implants, we get the same cost — if not a little higher — because we don't have the same volume as some of the larger hospitals in larger cities. So, we probably pay more for it. Our labor costs are definitely very competitive to a lot of larger cities around us. So, it makes it very challenging. When you're a hospital like us, we're about 80-85% what I'll say government funded — either Medicare, Medicaid, or the VA because we have a lot of veterans here. We're very proud and happy to serve that veteran population. We're excited about that, but that makes us almost 85% govern- ment dependent on reimbursement. When your Medicare rates are the lowest in the country and your Medicaid basically follows that, and you're 85% reimbursed that way, it makes it extremely challeng- ing to keep something financially afloat in a rural area in Arkansas. Editor The CMS wage index affects your ability to compete. Help us understand that. Peterson It does, there's no question. There are several factors that go into that Medicare formula, but the biggest factor is probably the wage index. The wage index forArkansas is extremely low, so that does play a huge factor in our Medicare reimbursement. And, yes, it makes it extremely difficult for us to compete. Somebody from Chicago who decides to retire, if they have that total hip replaced up there, that hospital's probably going to get $35,000-40,000. When you come down here, we're going to get $15,000-20,000 for that same procedure, same patient. Their social security check didn't change just because they moved down here. But the government's payment to the hospital sure changed, which is kind of amazing to me. Editor Yeah. It's upside down, almost. Peterson It is, and it probably started off okay. Because of the way the formula works and the way the lower paid hospitals, I'll use this word loosely, are “penalized,” and the higher paid hospitals are “rewarded,” over the years, that spread keeps getting further and further between the highest paid and lowest paid. So, the higher paid hospitals, the rich, kind of keep getting richer, and the lowest paid hospitals, the poor, keep getting poorer. At some point, it's going to become a breaking point for all hospitals in the state of Arkansas and almost the whole southeastern part of the United States between Arkansas, Mississippi, Alabama... It makes it very difficult to keep going. Editor Do you think the government's incentive with that is to get rid of rural hospitals? Peterson It's so complex, I don't think they understand. I also believe that larger states and larger healthcare systems have better lobbying. The challenge is the government always wants to do something with a balanced budget. I think it was about four or five years ago, now, but CMS proposed to basically give a little bit of a haircut to the top paid hospitals and give it to the lowest paid hospitals. The higher paid hospitals sued CMS, and they actually won. We thought we were going to get a nice increase; we did not. Prior to COVID, it was a struggle to keep ahead. Then, we've had this large increase in our cost structure since COVID, and reimbursement just has not kept up. The example I use is that when the price of a hamburger goes up for McDonald's, the Big Mac costs more the very next day. Well, [if] the price of labor, the price of drugs, the price of implants goes up in a rural hospital, and 85% of your business is government, it probably won't ever catch up. It takes at least three or four years, if anything, to catch up. You saw inflation at 9% the last two or