Senate bill would hurt small community hospitals

In a time when the state faces a $3.5 billion budget shortfall, innovation will be required to provide the vital services Oregonians have come to expect and appreciate. To that end, new and very innovative approaches to delivering and paying for health care are currently under development through Oregon's newly established Health Authority. Oregon's hospitals are at this table.

This innovation is juxtaposed against a sobering list of funding cuts proposed by Gov. John Kitzhaber that will have a very real impact on many Oregonians. The governor's primary operating principle when considering this cut list was that the cost-cutting burden must be shared equally across like-stakeholders around the state. His budget proposal does a fair job of distributing the pain.

Oregon's community hospitals have been asked to take their share of this burden, in part, through a 19 percent cut to Medicaid payments in the first year of the biennium. This is the largest reduction proposed in recent memory and will be a substantial blow to hospitals, physicians and the patients we serve.

Any cut of this magnitude would have a devastating impact on our state's small and rural hospitals. As such, the state has long recognized the unique aspects and challenges of operating a rural hospital. Because of these differences, in 1987 the state began to classify certain hospitals as "rural" based on a number of factors including licensed bed count and other geographic considerations. This classification allows the state to provide enhanced payments to these designated hospitals in light of their challenges and importance to the economic vitality of their communities.

On Wednesday, Senate Bill 239, comes before the Senate Health Care, Human Services and Rural Health Policy Committee, which Sen. Alan Bates (D-Ashland) serves on. This bill seeks to diminish payments to Oregon's rural hospitals for care provided under the Medicaid program. If passed, this bill will harm our state's small community hospital network.

At its core, SB 239 would allow the state to review and remove a hospital's rural status. This status is a financial lifeline for running small community hospitals. It allows us to provide high-quality patient care at the right time and the right place 24/7/365. Being classified as a rural hospital under the current definition is even more necessary, with record levels of uncompensated care and a shrinking commercial insurance market. In 2010, Ashland Community Hospital (ACH) provided more than $3.7 million in uncompensated care to the community.

As nonprofit entities, we do not have "profits," as the bill states. What we do have are razor-thin margins that we reinvest into the community to sustain job creation and the daily operations of our facilities.

Overall, the state's small and rural hospitals had an average operating margin of 2.8 percent in 2010. Thirty-eight percent of Oregon's rural hospitals were operating last year with a negative operating margin — which means these hospitals are losing money on operations. In other words, even with enhanced payments from the state and coupled with significant cost-cutting measures resulting from the recession, rural hospitals are still losing money on the services being provided to our communities.

Ashland Community Hospital has seen the percentage of its total revenue through the Medicaid program almost double in the last five years. For ACH, the highest Medicaid population is in the Birth Center. This bill, if passed, and applied to Ashland, will jeopardize the hospital's ability to continue to provide childbirth services, having a significant impact on access to our area's most vulnerable individuals. On an annual basis ACH treats almost 10,000 people in its emergency department and more than 57,000 outpatients. More than 3,500 surgeries are performed yearly at the hospital. It delivers the right care at the right time. If the state implemented these changes for Ashland, where would the hospital's patients turn?

We do not want to put health services and the living-wage jobs our community hospital provides in even more peril.

As the third largest employer in Ashland, with nearly 400 full-time and part-time employees, we are always concerned about layoffs and reductions as the effects reverberate throughout our community — at our banks, our shops, our schools and our restaurants. In a time of significant financial hardship, when the state is asking the health care community to transform itself to provide better care for fewer dollars, it doesn't make sense to redefine the rules the Legislature established in 1987 for hospitals such as the one in Ashland.

If we are to be a part of the solution in transforming ourselves to help meet the state's budget challenges, as well as those of our employers and other purchasers of health care, we must have the resources to invest in this change. SB 239 is the wrong bill at the wrong time for Ashland and Oregon's other rural communities.

Mark Marchetti is CEO of Ashland Community Hospital.

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