Montrose Memorial Hospital officials, pointing to a razor-thin operating margin, are planning to start community conversations about revenue distribution and what it means in the long term.
The hospital had a 2.7% operating margin in 2018 (following a $4.5 million operating loss in 2017 and a 0.13% operating margin in 2016). Hospitals need a 4- to 5-percent margin in order to keep their doors open long-term.
In 2018 (as the 2019 report is still being processed), MMH had a profit margin of approximately $3 million, which officials characterized as “barely covering our expenses and a substantial loss in 2017.”
MMH Chief Financial Officer Yvonne Wigington explained how the hospital distributes the money it receives in terms of where one dollar goes. Fifty-nine percent does not go to the hospital at all and instead goes to contractual adjustments, while 17 percent goes toward employee salaries/wages and benefits. Another 17 percent goes toward medical supplies and other operating expenses, and 5 percent goes toward depreciation and amortization, bad debt written off and charity care.
That leaves the hospital with approximately 2.7 percent operating income, and because MMH is not-for-profit, those funds are invested back into the organization.
“What we charge is not what we get paid,” said Wigington. “Some of the things we use [the operating income] for is we ensure that we’re paying our employees at market … and also in our infrastructure, our building, our equipment.”
MMH leadership said that many community members are concerned that hospitals are “price-gouging” patients; they emphasized that the organization is not-for-profit and trying to keep health care accessible while keeping the hospital’s doors open.
“We don’t make a huge profit,” MMH Chief Marketing Officer Leann Tobin said. “We do everything we can to keep the cost reasonable, to reinvest in our employees and our infrastructure. … We want educated consumers, we want our community to be aware that we’re doing everything we can.”
The current hospital facility was originally built in 1949, and there is a cost of maintaining the older structures. Health care organizations also require regular updates to machinery and equipment to ensure quality.
“Given the economics of healthcare, one of our highest priorities is to provide quality care to our patients,” Wigington said. “It’s a really fine balance for us to make sure that we invest that two cents on every dollar appropriately to maintain the highest level of quality for our patients possible.”
In addition, MMH said it must balance costs in order to provide care for all patients regardless of their ability to pay — including sliding fee scales and charity care.
“As a not-for-profit hospital, we choose to care for anyone who walks in our doors,” said Tobin. “Our patients are at the center of everything we do.”
MMH explained that many rural hospitals around the nation are facing financial hardship: according to Becker’s Hospital Review and the Cecil G. Sheps Center for Health Services Research, “more than 120 rural hospitals have closed since 2010,” with more than 600 more rural hospitals vulnerable to closure.
“The Public Option bill being proposed, along with other government and payor initiatives, are encouraging that certain care be directed out of rural communities and to larger urban cities,” MMH CEO James Kiser said. The larger hospitals are labeled as “centers of excellence” due to the high volume of procedures.
However, Kiser countered that “the awards Montrose Hospital has received due to the excellent and compassionate care that our staff and medical staff provide is what determines excellence.”
Among other awards, Montrose Memorial Hospital has received a 5-star status from the Centers for Medicare/Medicaid Services, which only 9 percent of hospitals nationally achieve.
While the thin operating margin does not mean imminent closure for MMH, Kiser said he hopes it will start a conversation about the cost of receiving and providing health care, as well as how to find a solution between providers and insurance companies that can help make healthcare more affordable for patients.
“All we’re trying to achieve is educating our community and our legislators,” said Kiser. “Sixty-eight percent [of rural hospitals] are vulnerable or at risk of closing. We’re strong today and we’ll be here tomorrow for our community, but we need to understand it. … What we can expect is a conversation, a dialogue and an understanding.”
MMH plans to have community forums and public meetings in order to take questions from the community and stimulate discussion. The hospital encourages community members to bring any questions and to participate in the conversation.