A change in the status of Lincoln County Healthcare and the way the government pays Lincoln County Healthcare will ensure its sustainability, its CEO said.
Lincoln County Healthcare CEO and President Jim Donovan expects the pending change to a single-license critical access hospital status to inject about $5 million to $6.5 million per year in new revenue.
“The ultimate value to our communities, whether it’s Boothbay or Damariscotta, is sustainability,” Donovan said in a July 9 interview at his Damariscotta office.
Lincoln County Healthcare plans to announce a new name for the single-license hospital, which will encompass its Boothbay Harbor and Damariscotta campuses, before October.
MaineCare and Medicare currently reimburse Lincoln County Healthcare on a “prospective payment” basis for services at Miles Memorial Hospital in Damariscotta.
The hospital receives a flat rate for the care of a patient based on the patient’s diagnosis, “regardless of how long the patient stays in the hospital, regardless of the resources they utilize,” Donovan said.
For example, if one Medicare patient has a heart attack and stays at the hospital for three days and another stays for 10, the hospital receives the same flat rate for both.
The payments the hospital receives from Medicare average about $0.86 for every $1 it spends on care, or 86 percent of cost.
“What Medicare says are costs are not necessarily our real costs,” Donovan said. Instead, Medicare uses a formula to determine “allowable costs” for everything from major surgery to medications and supplies.
Medicare patients account for about 40 percent of all the hospital’s patients and more than 50 percent of its revenue. MaineCare, which pays less than Medicare, accounts for another 10 percent.
“Almost two-thirds of our business is in those two buckets,” Donovan said.
“We have to make [the loss] up with Aetna, Anthem, Cigna [and] people who don’t have insurance who can pay, and that drives our prices through the roof,” Donovan said. “It’s called cost-shifting.”
Now, Lincoln County Healthcare plans to change from a prospective payment status to a critical access status.
“Half the hospitals in the state, roughly, are prospective payment and half are critical access,” Donovan said.
In the late 1990s, a group of federal lawmakers from rural districts with concerns about the viability of their local hospitals introduced legislation to provide “enhanced Medicare and Medicaid reimbursement to these hospitals in order to maintain their level of service,” Donovan said.
“The hospitals are, by definition, small; by definition, rather limited in what they do; but also by definition, critically important to be where they are to provide the necessary access to people who need them, who need those services,” Donovan said.
MaineCare and Medicare pay critical access hospitals “on a more real-cost basis,” Donovan said. MaineCare pays 109 percent of cost and Medicare 101 percent.
“It’s a reimbursement methodology that more evenly matches our costs with what we’re paid for that two-thirds of our patients,” Donovan said.
The other hospital Lincoln County Healthcare operates, St. Andrews Hospital and Healthcare Center in Boothbay Harbor, is already a critical access hospital.
The facility will forfeit its hospital license in October, however, as the result of the decision by Lincoln County Healthcare and its parent company, MaineHealth, to convert the 24/7 emergency room at St. Andrews into a part-time urgent care center.
Medicare regulations require hospitals to maintain a 24/7 emergency room in order to hold a license.
A couple of months after the St. Andrews announcement, however, Lincoln County Healthcare Director of Reimbursement Cathy Rose was reviewing critical access hospital regulations when she made an important discovery, Donovan said.
The regulations, according to Rose, give Lincoln County Healthcare the opportunity to keep the critical access subsidy for St. Andrews and apply it “across all services of Lincoln County Healthcare – Miles and St. Andrews,” Donovan said.
The regulations call it a “relocation,” and Lincoln County Healthcare began the process to relocate the critical access status to Damariscotta, working with the Center for Medicare and Medicaid Services and the Maine Rural Health and Primary Care Program.
Now, Lincoln County Healthcare has “preliminary approval” for the change from the Center for Medicare and Medicaid Services office in Boston.
According to Lincoln County Healthcare spokesman Scott Shott, only “a few legal and procedural steps” remain before the Lincoln County Healthcare and MaineHealth boards of trustees review and vote on the final plans. The votes will take place by October.
If all goes well, Miles Memorial Hospital and St. Andrews Hospital and Healthcare Center will merge into a single hospital corporation.
Lincoln County Healthcare plans to use the multimillion-dollar increase in revenue to make the hospital more affordable to people who pay out of pocket and people with private insurance.
“It’s hard to compete on an economy of scale basis with the [large hospitals], whether it be Mid Coast or Maine Medical Center or Pen Bay,” Donovan said. “Miles and St. Andrews, for quite a long time … have suffered from having higher prices, whether it’s on lab tests or a broken leg or surgery, colonoscopy, whatever it might be.
“Our focus, from a price and affordability perspective, is to decrease our prices as a result of this creation of a single critical access hospital for both communities,” Donovan said.
The hospital will adjust prices on a case-by-case basis for various services, Donovan said, but hopes to cut prices by an average of about 15 percent.
The change would also bring new regulations. Miles Memorial Hospital currently holds a license for as many as 38 inpatient beds. The new license would reduce this number to 25.
The reduction in beds will not be a problem, Donovan said.
“Our average daily census has stayed pretty steady over the last several years at just about 20,” Donovan said, and current trends do not point to an increase in the foreseeable future.
A couple of months ago, hospital officials reviewed census numbers for the previous year. The census exceeded 25 on just 8 to 9 days, more than half in one month.
“We feel confident we can manage that so there will be very few times when we have to worry about transferring patients because of the capacity issue,” Donovan said. “It doesn’t happen now and we don’t feel it’s going to happen in the future.”
The critical access status also requires an average stay of four days or less. “We’re good with that now,” Donovan said. “That’s something we always manage.”
“I want people in the Damariscotta region to know the level of service available at Miles is not going to change,” Donovan said.
“I think the direct benefit is going to be seen by the community as we’re able to reduce prices and be more confident about sustainability in the long run,” he said.
The sustainability of primary care practices is especially important in rural health care.
“In a county like ours … our future depends on the strength of the primary care network and having enough primary care providers – physicians, nurse practitioners, physician’s assistants – to care for our community,” Donovan said.
Every patient needs someone “who has the broad perspective” about their care and wellness, not just the ability to treat the occasional illness or injury, Donovan said.
“The ability to sustain those primary care practices is the absolute key to our success in the future, and our ability to maintain services to the communities and this critical access subsidy will just help us do that better than we might do otherwise,” Donovan said.