GVH says it’s weathering dip into the red

Record revenues in July cut hospital’s former deficit in half

For Randy Phelps and other administrators at Gunnison Valley Hospital (GVH), maintaining a county-owned healthcare facility can be tricky business.

As the head of a county entity, Phelps has to make sure the services entrusted to him are in place when needed. As chief executive at GVH, he is charged with making ends meet and balancing the operations of a 24-bed hospital.
So when part of the hospital’s finances began to fall into deficit in the first half of this year, money was found to cover the shortcomings and preparations were made to account for the variable nature of the business.
“Members of the management are continually meeting with the [chief financial officer] and myself to keep up with expenditures. Expenses are being cut on anything that is not connected to patient care so the quality of care isn’t affected by this [financial situation],” says Phelps.
Then the hard times gave way to the mishaps of summer, which is good news for a hospital. July was a record-setting month for GVH, with more than $3 million in revenue generated through patient visits.
That revenue was enough to offset nearly $379,000, or slightly less than 50 percent, of the deficit from previous months.
The deficit, which grew to more than $700,000, was the result of insurance companies holding out on payments, uninsured patients who weren’t able to keep up on their bills and the inflation across the board that is being felt by everyone else.
“Nobody has cash. People are trying to heat their houses and keep groceries on the table,” says chief financial officer Tim Cashman.
“Healthcare bills just fall to the bottom of the list of priorities,” Cashman says, adding that the dip into the red is the first time the hospital has had a deficit in his 12 years on the job.
“There is a certain degree of unpredictability. We live in a community that draws heavily on tourism and that is one of the reasons July was so good: people come to this community to recreate in summer,” he says, pointing out that the older population here in the summer is, on average, three times as likely to use healthcare facilities.
But the revenue doesn’t always translate into actual payments to put in the hospital’s accounts. Instead the revenue is what the hospital has billed for its services and the payments come from individuals, insurance companies and the federal government.
“We have a formula that… tells us how much to estimate the collection from a given patient might be, so we know that if a patient is covered by Medicare, we may have a certain charge and there is a way we have of factoring the discount Medicare gets,” says Phelps.
Medicare pays the hospital what they calculate to be the allowable cost for the care, with an additional 1 percent, regardless of the actual costs. Phelps says the Medicare payment is usually around 80 percent of the actual costs of the care.
Although payments from private insurance companies are generally more, there is again some bargaining between the hospital and the company that eventually lowers the payment. According to Cashman, even when payments are settled upon, the hospital can sometimes wait on average 90-120 days to see it.
Then there are uninsured residents and visitors who cannot pay or pay only a nominal amount on what is sometimes a significant bill.
“The data I have is a year old, but this analysis indicates that 25 percent of the county’s residents don’t have insurance,” says county Department of Health and Human Services director Renee Brown. She adds that for some of those who do have insurance, the coverage is only for catastrophic events, with deductibles of $2,000 to $5,000.
“For them, and most people, the insurance is still unaffordable even though they are technically covered,” she says.
Regardless of whether or not a person is insured, however, the hospital does not deny anyone care in an emergency and sometimes provides care for people who intend to pay but prove unable to. When that happens, the cost is passed on to those with insurance, which pushes premiums up and makes coverage inaccessible to more people.
That is because there is no outside source of revenue going to GVH, like tax dollars or other support, and the hospital has to recover the costs of treatment, so those costs are passed on to those with insurance or the means to pay out of pocket.
“At some point in time the system will go into a death spiral,” says Phelps. “As more and more people don’t pay, health care companies make it difficult for people to pay. As they drop out, at some point you will have a meltdown of the financial infrastructure surrounding health care.”
Phelps recently has seen statistics that suggest as much as 30 percent of an average health insurance premium is going to subsidize the payments of those who do not have coverage.
The Department of Health and Human Services has a Light Program, which all doctors and practitioners in the valley participate in, and which provides vouchers to the uninsured so they have some access to healthcare.
Renee Brown sees an increase in the demand for county-backed voucher program that pays for primary care for qualified families. In all of last year, her department gave out 107 vouchers. In the first two months of the program this year, they have given out 35.
For those without vouchers or insurance, paying a bill to the hospital can be unrealistic. That leads the hospital, which operates as a financially self-sufficient county entity, into a situation where they seek payment from those who may or may not be able to pay—sometimes forcefully.
“If we reach a determination that a person has assets and gainful employment, then we will take them to court to collect. But largely speaking, that effort really is just not productive because they don’t have any money,” says Phelps.
If a person has minimal means to pay off the debt, the hospital finds out what a realistic payment would be and then holds the person to that, without charging interest on the outstanding balance.
It is that balance Phelps and the hospital are trying to find, between staying afloat to provide medical services to the county and hurting some of the same people with overly aggressive collection practices.
“From an ethical and moral point of view, we don’t want to go after people’s income and have that action result in them having another health-related issue,” Phelps says. “Our function and focus is to improve the health of the community, so even in our collection policy we have to keep that in mind.”