Poor and aging patients putting pressure on NH's rural hospitals

Lakes Region's margin of 5.8% half that of some facilities, but much higher than others

The graying of New Hampshire has been a boon for the big hospitals in the southern tier, but it puts ever increasing stress on the rural facilities in the northern half of the state. Most of them barely broke even in 2005, according to a recent study by the New Hampshire Center for Public Policy Studies, which worked from audited financial statements. Much of the region is losing its young people, and it has a high percentage of uninsured and Medicaid patients. They’re a money hemorrhage for all hospitals, which survive or even thrive by shifting the burden to their patients who have private insurance.

Parkland Medical Center in Derry with an 11.3-percent operating margin and Portsmouth Regional with 10.4-percent ranked first and second in fiscal performance among the 26 acute care hospitals. In contrast, Cottage Hospital in Woodsville had a margin of .2-percent, Franklin Regional .2-percent, Huggins in Wolfeboro 1-percent, Weeks Memorial in Lancaster 1.4-percent, and Androscoggin Valley in Berlin 2.7-percent.

These and eight other small, rural hospitals vital to their communities combined for a zero operating margin in 1999, -2-percent in 2000 and -4-percent in 2001, rebounding to plus 2-percent overall in 2005. Their bottom lines would have been worse, but Medicare changed its policy in 1997, paying them for their actual costs plus a small markup.

Lakes Region General Hospital earned an operating margin of 5.8-percent in 2005 under tougher Medicare rules. The Laconia provider gets paid in relation to the average cost and length of stay for a given diagnosis related group (DRG). Hospitals covered under that formula lose an average of 17-percent on Medicare patients, who make up some 40-percent of the caseload. They also lose 35-cents on the dollar for Medicaid patients. Littleton Hospital earned a 6.8-percent margin under the same Medicare scheme, according to the Policy Center, and Memorial Hospital in North Conway 8.7-percent.

They make up their shortfalls from government insurance and the uninsured by forcing HMOs to pay them well.

The entire industry lost $157-million on Medicare in 2005, $63-million on Medicaid, and $124-million on bad debts and charity care. Privately insured patients paid $461-million more than cost, to wipe out those losses and finance a continuing explosion of capital projects. Unless the system changes, this shifting of fiscal burden will likely grow as more and more Medicare patients need care. The amount of cost transfer was only $179-million in 2001.

Lakes Region got paid by its HMOs almost 160-percent of actual costs, offsetting a loss of 18-percent on Medicare. Franklin exactly broke even on Medicare but got the HMOs to pay 139-percent of costs. Androscoggin lost 3-percent on Medicare, but charged its HMOs 142-percent of cost. Littleton lost 11 percent on Medicare and charged its private insurance carriers 138-percent of costs.

Jim Squires heads the state’s Endowment for Health, a grant-making foundation, and co-chairs the Citizens Healthcare Initiative. It’s looking for ways to cut healthcare costs and get more people insured. Revenue for hospitals has increased 80-percent in the last several years.

“The hospital system is under relentless financial pressure,” Squires said. “It’s paying for a capital investment of $750-million in the last six years.”

Huggins Hospital just got state approval for a $52-million renovation and expansion, Memorial for $18-million and Cottage for $4-million. That construction is in addition to the total Squires mentioned.

Huggins is razing and rebuilding one of its four buildings and renovating the others because the physical plant is 50 years old. The provider cost-shifted $4.4-million onto its insured patients in 2005, which created a $335,000 margin. Roughly 52-percent of the patients had Medicare and only 34-percent had private insurance. The latter paid 162-percent of the actual cost for their care.

What’s the public policy to contain these costs, if any? Experts agree there is no silver bullet.

“That’s the $10 question, and I only have a 10-cent answer,” said Rep. Jim Pilliod (R-Belmont) a semi retired pediatrician who practiced in Laconia. “Malpractice insurance has gone up rapidly, and hospitals are hiring their own doctors, so they absorb these added premiums. They can be $20,000 to $40,000 a year for a neurosurgeon.”

Rep. Fran Wendelboe (R-New Hampton) has served on the House Health and Human Services Committee and said better informed consumers may eventually create strong price competition among hospitals and force down the cost for procedures. Under a recent state law the Department of Insurance is compiling this kind of data and posting it on line. The price information is getting more robust and user friendly by the month.

“It’s amazing how much the costs vary,” Wendelboe said.

The site is at the web address http://www.nhhealthcost.org.

It asks a viewer for their insurance company, type of coverage, deductible and co-insurance. The software says what that subscriber would pay at just facilities or anywhere in the state.

A hypothetical Harvard Pilgrim HMO patient with a $250 deductible and 20 percent co-payment would owe nothing for an outpatient chest X-ray at Sceva Speare Hospital in Plymouth. The insurance would pay the hospital $187. The same person would pay nothing at Lakes Region General, but Harvard would pay $219. The insurance would pay $253 at Huggins, and the patient $16. Insurance would pay $262 at Franklin and the patient $49. Harvard would pay $277 at Memorial and the patient would pay $110.

Pilliod and Wendelboe were both glad Lakes Region merged with Franklin Hospital, a move that may have saved the smaller facility from closing.

“We in Laconia thought we should do something to help them,” Pilliod said. “Now Franklin is coming around, and it has probably reduced the costs for Laconia too.”