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HomeMy WebLinkAbout1999-03-15 Special Meeting NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 27 MINUTES OF SPECIAL MEETING WITH NEW HANOVERPAGE 135 REGIONAL MEDICAL CENTER, MARCH 15, 1999 ASSEMBLY The New Hanover County Board of Commissioners held a Special Meeting on Monday, March 15, 1999, at 7:00 a.m. in the tenth floor classroom of New Hanover Regional Medical Center, 2131 South Seventeenth Street, Wilmington, North Carolina. Members present were Commissioner Buzz Birzenieks; Commissioner Charles R. Howell; Vice-Chairman Robert G. Greer; Chairman William A. Caster; County Manager, Allen O’Neal; County Attorney, Wanda M. Copley; and Deputy Clerk to the Board, Teresa P. Elmore. Commissioner Ted Davis, Jr. was absent. Chairman Caster called the meeting to order and reported the purpose of the meeting was to hear a status report on the activities of New Hanover Regional Medical Center. Dr. Bill Atkinson, President and CEO, welcomed the Commissioners and stated that the presentations would give the Commissioners an update on the Medical Center’s construction projects and financial standing. The issues to gauge the standing of the hospital are the quality of services, access to health care for everyone, and the rising costs of health care. The hospital will continue to serve as a public hospital and to provide quality health care to anyone who needs it. More indigent care, $19 million, has been given in the past year than at any other time. The expense for indigent care does not include Medicaid or Medicare patients. The Medical Center has been successful for the past two years in reducing the actual costs to consumers and may be the only hospital in the State that voluntarily reduced charges instead of staying with the marketplace. Dr. Atkinson reported on the consolidation efforts between NHRMC and Cape Fear Hospital, which began six months ago. Outpatient rehabilitation services of both facilities are now consolidated at the Oleander Drive site. The old space at the Medical Mall is being used for other type clinics. The sleep labs at Cape Fear Hospital have been moved to the Canterbury Annex and the consolidated service has caught up on a backlog of patients. Obstetric services were kept at NHRMC because the pediatric and neonatal intensive care units at the Medical Center are new will adequately fulfill long-term needs.. The neonatal intensive care unit is the only unit of its type in this part of the State. It is not known how much it will cost to upgrade the obstetrics on the second floor, but it is felt that a first rate operation should be provided. Initially, it may not be efficient to invest a lot of money in the Cape Fear program until a future plan for services is decided upon. Orthopedic services will be available at both facilities. Someone in a serious accident with major orthopedic injuries will be sent to NHRMC since a trauma center is located there. If no complications are anticipated, someone with a sports related injury will have surgery at Cape Fear, while more complicated surgeries will be at NHRMC. The concept of having an orthopedic center of excellence will mean that all aspects of the services, from pre-hospital EMS to the rehabilitation facilities, will be coordinated through a clinical director working with physicians and groups regarding the patient’s care. The orthopedic physicians have agreed to the plan. The Board of Trustees voted to merge the numbers of Medicare patients of both hospitals to become one legal entity. The name of Cape Fear Hospital will remain and the public will continue to have two choices of operations. However, there will be one director of pharmacy, one director of radiology, and etc. The medical staffs of both hospitals are working to merge into one affiliation. Dr. John Pace is leading the effort to create a single set of bylaws from the best of both institutions, which should be presented to the Board of Trustees by the beginning of summer. Dr. Atkinson explained that the challenges associated with consolidating the hospitals will include personnel changes. In some cases, directors will be appointed over multiple facilities eliminating the need for some vice-president positions at the senior level. More responsibility and accountability will be given to those who remain. Donna Bost, an employee with a long track record of top performance, has been assigned a vice president position as Site Administrator at the Cape Fear facility. Some of the services at Cape Fear may not answer directly to Ms. Bost, but will be coordinated through her. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 27 MINUTES OF SPECIAL MEETING WITH NEW HANOVERPAGE 136 REGIONAL MEDICAL CENTER, MARCH 15, 1999 Dr. Atkinson reported on the primary service area for the hospital that includes New Hanover, Brunswick, and Pender counties. He said that the market share will continue to grow in Bladen, Columbus, and Sampson counties and even some patients are coming from South Carolina. He spoke of the increase in patients at the hospital in recent months. In the last five to six weeks, the hospital census has been at full capacity. Last week the census was 522 patients, but patients were having to stay in recovery areas for over 24 hours. Although the hospital is licensed for 600 patient beds, it actually has 505. Cape Fear usually carries a census of 40 patients, but has carried as many as 65 while helping NHRMC accommodate the over flow. He further explained that theoretically the bed availability at Cape Fear is 141, but only 80 beds are operational. As a rule, the count of licensed beds is greater than the actual number of beds available because of the number is based on the usable square footage of the hospital. Not all of the floor space is used for hospital beds. Other spaces are used for administrative space, ambulatory surgery units, and recovery areas. Dr. Atkinson spoke of ongoing plans to establish relationships with other hospitals in the region. Pender Memorial has struggled for many years to provide good primary services, but is not being fully utilized. A majority of the patients from Pender County are not referred from Pender Memorial, but come directly to the Medical Center. The objective will be to stabilize the existing base to make sure Pender Memorial maintains good basic services. The emergency department should be staffed with a strong physician group for 24 hours a day, seven days a week in order to provide consistent coverage. Good basic surgical care will give stability to their census which is averaging around eleven patients per day. NHRMC has proposed to lease the facility at Pender Memorial for a 20 year period as a subsidiary of NHRMC. An advisory board consisting of the chief of staff and community representatives would be responsible for the day-to-day activities of the hospital, while budgeting and operational capital items would go through a network board. An affiliation agreement with Bladen Community Hospital has been formed. Currently, a senior staff person from NHRMC is working at the Community Hospital to help them prepare for the Joint Commission on Hospital Accreditation. Dr. Atkinson reported the Coastal Carolina Health Alliance, a group formed by the hospitals in Southeastern North Carolina, has recently hired a new Director, Bill Shepley, to keep in touch with the activities in the region. As a large number of patients come from Brunswick County, NHRMC will continue to be interested in Brunswick County Hospital and its marketplace. As a tertiary hospital, the Medical Center must be knowledgeable of patient services in the area and have assurance that these services are dependable. NHRMC wants to ensure that Brunswick Hospital maintains stable and strong services; however, no formal agreement between the two has been reached. A tremendous amount of activity has occurred in the Little River, South Carolina area, which has the potential to affect hospitals in Southeastern North Carolina. The growth in southern Brunswick and Columbus Counties will be drawn to health care providers in South Carolina because of their efforts to get these patients. It is imperative that NHRMC remains aware of what is happening in the area because of the eventual effect on New Hanover County. Dr. Atkinson reported that Steve Purvis, formerly at NHRMC who now works in a private health care system in Columbia, South Carolina, will be visiting in a few weeks to demonstrate air patient transport in South Carolina. He stated that clinical relationships with other providers are important to help each other in areas of expertise. Eventually, some hospitals in South Carolina will draw patients from North Carolina. Vince Cicchino, Director of Facilities Services, spoke on making an assessment of the facilities since his employment with the hospital eight months ago. He reviewed the current construction projects of MSSP II A, which includes the south building, emergency room expansion, EP lab, concourse, and kitchen. The second phase of the master plan calls for an expansion of surgery, radiology, and a few other small areas of the hospital. He stated that he had received 122 requests for construction projects totaling around $244 million. However, the hospital cannot afford taking NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 27 MINUTES OF SPECIAL MEETING WITH NEW HANOVERPAGE 137 REGIONAL MEDICAL CENTER, MARCH 15, 1999 on all of those construction projects. In evaluating the condition of the network building, he reported that there were some life safety code deficiencies. The Joint Commission on Hospital Accreditation (JCOHA) requires a hospital to evaluate its condition periodically and implement an action plan to repair any deficiency. In 1996, NHRMC performed a Statement of Condition and found $12 million of life safety code deficiencies. Recently, the hospital staff re-evaluated the facilities and found $58.8 million of deficiencies as follows: Patient Tower - $40.3 million ($23.3 million plus $17 million aesthetic repairs) Pancake building - $18.5 million He stated the patient tower is 35 years old with an occupancy rate of 90% to 98%. In the last several months, no rooms were available and patients were displaced. Performing necessary repairs will require both horizontal and vertical access to basic facilities and equipment. The proposed construction projects will take about five years to complete. However, a new building may be an alternative since the current facility remains full most of the time. An ideal location for another tower would be beside the existing building. Afterwards the old tower could be converted into medical and surgical areas and office and physician space. A new tower will cost approximately $40-60 million to construct. Another option is to demolish the old OB unit at Cape Fear and construct a 200-bed tower at Cape Fear. If the Coastal Rehab Center at NHRMC is moved to the Oleander Rehab Center, another option would be to convert the space to 100 - 175 in-patient beds. Before the JCOHA reviews the action plan addressing the code deficiencies in May, the Board of Trustees will need to decide whether to upgrade the tower over a period of five years at a cost of $50 million or to build a new tower at a cost of $60 million. An assessment team of architects and hospital staff is evaluating the options to determine the best cost savings plan to combine the two hospitals. Consolidating the OB units at the Medical Center and moving minor surgery and orthopedics procedures to Cape Fear are ways to provide better services at a more cost effective way. Commissioner Birzenieks asked if the existing tower will need $50 million to renovate if a new building or a combination of buildings is constructed. Mr. Cicchino responded if a new tower or new patient-bed structure is built, patients will move to the new structure before renovations would start in the old tower. If the tower is vacant during construction, renovations can be done more efficiently without interrupting patient services. Dr. Atkinson explained that the biggest problem in renovating the Pediatric Unit was moving patients around to make basic installations, such as new toilets and electrical wiring. Even the construction project on the tenth floor was delayed because of waiting to access floor areas to install plumbing and other basic utility items. Unless two or three floors are empty at a time, construction projects can run into delays. A major concern has been meeting the standards of high-rise buildings, especially fire code issues, which are more stringent for hospitals than for other tall buildings. An in- house survey of available space is being conducted to see if current usages of space can be improved by moving some services to off campus sites. Kathleen Gormley, Senior Vice President and Chief Finance Officer, displayed charts showing an increase in in-patient and out-patient volumes in fiscal year 1999 to be about 8% over last year. Revenue sources for 1998 were from the following categories: Medicare 48%Medicaid 15% Other third party payers5% Blue Cross/Commercial 11% HMO-PPO17%Self Pay 4% Two-thirds of the payers were fixed-government reimbursements, which were not negotiable. Write-offs include 49 cents from every Medicare dollar, 58 cents from every Medicaid dollar, and roughly 56 cents from managed care contracts. The average net revenue was 50 cents on the dollar. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 27 MINUTES OF SPECIAL MEETING WITH NEW HANOVERPAGE 138 REGIONAL MEDICAL CENTER, MARCH 15, 1999 A chart with annual rate changes for the last seven years showed increases for the first five years and decreases for the last two years. The hospital has made strides in getting the rates more in the middle than in the upper end of hospital charges. For each dollar generated in patient revenues, 37.2 cents is written off for deduction in Medicare and Medicaid, 3.5 cents is written off for indigent care (or 19 cents annualized), 57.4 cents is written off for expenses, and 2.7 cents is written off for gross margins. As the Medicaid and Medicare deductions increase, expenses or gross margins will be further reduced. Ms. Gormley reported that the operating statement for 1998 showed an increase in patient revenue at $47 million. The hospital wrote off an additional $34 million in deductions or 22% more than in 1997. The net revenue of $13 million did not cover increases in expenses of $30 million. She stated the goal is to streamline expenses and tighten up the operation. Expenses of the hospital were as follows: Salaries and Benefits 54%Supplies19.5% Purchased Services7.7%Bad Debt3.6% Indigent Care 3.8%Depreciation and amortization7.5% Ms. Gormley stated that prior to the acquisition of Cape Fear, an independent efficiency study performed by McGladry and Pullen pointed out that $65 million would be realized over a five year period for an operational and capital cost savings. Another savings of $31,291,265 in capital project expenses will be realized by consolidating construction plans. Consolidating services and using excess capacity at Cape Fear will save another $33,915,924. Ms. Gormley gave the cash reserves for the past five years as follows: 1995$46.2 million (92 days cash on hand) 1996 $62.7 million 1997$90.1 million (166 days cash on hand 1998$76.4 million 1999$68.2 million In comparing the cash reserves to other facilities in the State, NHRMC’s reserves are less because of the difference between a not-for-profit hospital and a private hospital where investment income can support public missions. In essence, NHRMC does not have funds dedicated to support public missions. It is taken from the hospital’s operating margin. The hospital is unable to go back to the bond market until cash reserves have been built back up. Cash reserves can be increased by collecting more patient charges or reducing expenses. Other state hospitals’ cash reserves were reported as follows: First Health$161 millionUNC$303 million Novant$504 millionMission/St. Joe’s$222 million Duke$394 millionPitt Memorial$203 million Rex Hospital$ 63 million Dr. Atkinson noted that the Medical Center has moved forward from a community hospital to a regional provider. Fifty percent of the hospital’s patients come from outside New Hanover County and the hospital wants to take advantage of that opportunity. He spoke on the expected growth of the Medical Center and the importance of handling patients in an efficient and appropriate manner for the hospital to continue to grow. The patient population is continuing to age in the marketplace, and most of the pediatric services will become out-patient rather than in-patient. Dr. Atkinson spoke on the importance of building the cash reserves so that the hospital will not have to depend on the bond market. Projections show that the hospital will need to be more self- supporting in order to continue to grow. The focuses will be on a more efficient operation and on lowering costs. Hospitals are having to deal with State and Federal cutbacks in Medicaid and Medicare reimbursements. What happens in Raleigh and Washington does have an impact on hospitals’ revenues. The Medical Center has seen a reduction of $8 million for the same number of NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 27 MINUTES OF SPECIAL MEETING WITH NEW HANOVERPAGE 139 REGIONAL MEDICAL CENTER, MARCH 15, 1999 Medicare patients as last year and anticipates another $6 million reduction for this year. Although NHRMC is supporting other public services, like EMS and Hospice, it will be more difficult to fund the operational costs of these services that do not have a positive bottom line. Upgrading EMS services will cost an extra $1 million. While the hospital is pleased to offer the service, it is just another example of the expenses that have drawn money from the reserves. In response to Commissioner Birzenieks’s request for the bond rating of the hospital, Ms. Gormley replied that the hospital has a rating of A1 and A+ by Standards and Poors. In response to questions about Hospice and EMS, Dr. Atkinson said he felt that they probably would never be self-supporting. Although NHRMC realizes that their functions are essential public service needs, other funding sources will be necessary in the future. He gave an example of the City of Charlotte which recently gave $17 million to Charlotte Memorial Hospital in support of the EMS operations. Dr. Atkinson explained that Hospice is still an independent 501.3-C organization and raises its own funding as well as receiving funding from the Medical Center. The extra funding has helped Hospice to stabilize its operation and it is much stronger this year than last. He stated that the service is very important to the community although it will never produce enough revenues to be self- supporting. Although Hospice is responsible for its day-to-day operations, NHRMC appoints 80% of its board members and would be responsible for 80% of its operation if it were to default Ms. Gormley responded that originally the hospital was to provide assistance to Hospice for 18 months; however, it is still operating in the red. In discussion of the EMS operation, Dr. Atkinson reported that the hospital is studying ways to improve the quality of service, as it is a desire to have an ambulance on the scene in under four minutes. The expense to improve the quality and outcome of the service will not be recaptured by the charges of the ambulance service, but it is still important to make the improvements. Increases in volume will continue because of the growth in population in general, particularly in the aging population. Dr. Atkinson introduced Sharon Timmons, the new Chief Operating Officer, who will oversee the day-to-day operations of the hospital, specifically the operating rooms, to insure the most efficient flow of patients. As a tertiary hospital, NHRMC must provide services seven days a week, 365 days a year. It is important to have adequate staff and physicians at the hospital to meet these needs. As an example, routine cardiac catheterizations can be performed on Saturday and Sunday and not just on week days. An agreement has been reached with the trauma surgeons, who are board certified intensive care medical specialists, to provide services for seven days a week on a twenty-four hour basis. At Cape Fear, “hospitalists,” are the newest board certifications of physicians who work in-house at a hospital as opposed to an office outside of the hospital setting. “Ambulists” are doctors who work only in an office environment and do not attend to patients in the hospital setting. Additional sleeping quarters will be needed for the residents, anesthetists, and trauma doctors who will work the 24 hour days. Commissioner Birzenieks asked about the effect on hospitals as inpatient services are reduced and more outpatient services are provided. Dr. Atkinson replied that in many parts of the United States some hospitals are shutting down because occupancy rates have declined. In looking at specific markets, such as the East Coast from Norfolk to Florida and California, where large senior age populations retire, this is not true. The Wilmington area has not seen occupancy rates drop because of the number of retired people coming to live in the area. Geriatric and senior citizen populations have a definite impact in the use of hospitals across the country. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 27 MINUTES OF SPECIAL MEETING WITH NEW HANOVERPAGE 140 REGIONAL MEDICAL CENTER, MARCH 15, 1999 Deputy County Manager Andy Atkinson asked how the hospital will continue to give quality care when the hospital is wanting to cut expenses by $50,000 per day. Dr. Atkinson replied that the hospital will examine the efficiencies in operations, such as the flow of patients through the operating rooms and emergency rooms. Admitting and discharging patients at appropriate times could be more cost efficient. For example, NHRMC has admitted patients on a Saturday or Sunday who were waiting for a test to be performed on Monday. The hospital did not get full reimbursement for the time that the patient was in the hospital waiting for the test. Commissioner Birzenieks asked when the hospital will correct the life safety issues. Dr. Atkinson stated the Medical Center will be meeting with the JCOHA to discuss the improvements that need to be made and the timetable for the improvements. It will be difficult to deal with some of the issues because there is no empty space to send patients during the construction phase. Additionally, the hospital cannot afford to lose revenues from a reduction in the number of patients. Chairman Caster asked whether EMS services have been mentioned during discussions with Pender County. Dr. Atkinson replied no extensive discussions have occurred. He explained that Pender County has both paid and volunteer EMS providers that are divided into districts similar to the fire districts of New Hanover County. Brunswick County and many rural counties in North Carolina have similar arrangements with a volunteer force and small full-time paid team. Commissioner Birzenieks referred to a TV news item about the 911 Center having problems in determining the boundary line of recently annexed areas. He said there was some confusion as to whether certain streets were located in the city or county jurisdiction. Dr. Atkinson replied that no problems have been reported since EMS responds to all areas. Currently, calls from the annexed areas are being supported by both city and county fire departments. Dr. Atkinson invited the Commissioners to tour the new pediatric and ICU departments and the construction project in the emergency room of the Medical Center. Chairman Caster expressed appreciation to Dr. Atkinson and staff for the informative presentation. He adjourned the meeting at 9:00 a.m. Respectfully submitted, Teresa P. Elmore Deputy Clerk to the Board