High percentage of Medicare & Medicaid patients weighing on LRGHealthcare's ability to stay in the black

LACONIA — When LRGHeathcare announced this week that it was shedding 58 full-time employees, Ken Merrifield, the mayor of Franklin, was quick, online, to place the blame on "Obamacare" and he was at once echoed by Congreressman Frank Guinta.

However, in seeking to score political points both apparently overlooked pressures at work across both the entire state and the Lakes Region that are weighing on hospitals in general and LRGHealthcare in particular.

In January, the New Hampshire Hospital Association reported that while the operating margins of hospitals nationwide rose to 5.7 percent in 2015 those of their not-for-profit counterparts in New Hampshire fell to less than half that at 1.9 percent. LRGHealthcare posted an even lower operating margin of 1.2 percent for its fiscal year 2014, the last reported.

The association pointed to two major factors bearing on the financial performance of hospitals: reduced Medicare and Medicaid reimbursements and lower reimbursement rates from private insurers.

Medicaid reimbursement rates in New Hampshire are the lowest among the 50 states. And while, nationwide, hospitals lose on average about 14 cents on the dollar treating Medicare patients, in New Hampshire the average loss more than doubles to 30 cents on the dollar. Moreover, since the population of the state is aging rapidly, the rising share of Medicare patients will add to the losses.

As private health insurers began offering plans that offset high premiums with high deductibles and co-pays, insurers seeking to enhance the competitiveness of their products and patients bearing a greater share of their health care expenses have begun exerting downward pressure on hospital charges. At the same time, when patients are unable to pay their high deductibles, hospitals are left with bad debt.

These pressures weigh particularly heavily on LRGHealthcare. In 2014, 11.4 percent of the population of the Winnipesaukee Public Health Region was living at or below the federal poverty level compared to 8.7 percent in the state as a whole. In the region 17.4 percent of the children younger than 17 were living in poverty compared to 11.1 percent in the state as a whole.

Among the patients served by LRGHealthcare 14.4 percent were enrolled in Medicaid and 18.4 in Medicare, compared to 10.7 percent and 15.2 percent in the state. For 2014, LRGHeathcare reported that the cost of caring for Medicaid and Medicare patients exceed reimbursement payments by $17.6 million and $14.7 million respectively. Meanwhile, the organization absorbed $1.4 million in uncollected debt and provide $1.8 million in charitable care.

Meanwhile, the population of Belknap County, which represents much area served by LRGHealthcare, is among the most rapidly aging in the state. with a median age of 45.5, the third highest among the 10 counties. Only two counties had a greater proportion of people aged 65 and older in 2010 and by 2030 that share is projected to top 37 percent, exceeded only by the 49 percent of seniors in Carroll County.

As the population ages, the demand for health care increases. But, at the same time, as people age and retire they drop their private health insurance and enroll in Medicare. As result, the hospitals are treating a growing volume of patients but receiving less reimbursement — between a third and two-thirds less according to the treatment and procedure — for doing so.

Not surprisingly the New Hampshire Hospital Association called the present moment "a precarious point in time for hospitals."