But costs are rising, like charitable care
The Lifespan hospital network netted $23.9 million in fiscal 2004, up 27 percent from the company’s $18.8-million net income in 2003, boosted by last year’s Blue Cross & Blue Shield of Rhode Island payout and unusually large Medicare and Medicaid settlements.
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The figures show Lifespan’s efforts to maximize revenues are paying off, said David Lantto, senior vice president and chief financial officer, but that doesn’t mean 2005 will be the same.
The Blue Cross payout alone was worth $4.1 million, Lantto noted, “and I don’t expect Blue Cross to repeat that.” And while in a normal year, Lifespan gets about $5 million from successful appeals to the federal government, last year it got $21.2 million.
“It takes a long time to appeal things,” Lantto said. “We’re seeing payments now that relate to the late ’90s.”
Lifespan is also “getting near the end” of a series of appeals to get the Medicare and Medicaid payments for which it qualifies, he said, so while the benefits will continue to show for years, there won’t be more big retroactive payments.
That means in the long run, daily operations could make or break the Lifespan hospitals. And that’s been the company’s priority, Lantto said: maximizing operating income.
“What we’ve really focused on is the revenue side, to make sure that not only do we negotiate a fair payment rate, but that we’re paid what we’re entitled to get paid,” Lantto said. Technology has been a major part of this, he said; the hospitals use it to price out billable services and, if reimbursements fall short, appeal right away. Lifespan is also using technology to minimize billing errors and reduce processing costs, he said.
Research funds are growing, too. Rhode Island Hospital pulled in nearly $39.5 million in fiscal 2004, up from $33.5 million in 2003. Bradley Hospital, whose national profile Lifespan is trying to boost, got $5.4 million for research, up from $4.2 million.
But costs are going up as well, especially charity care at Rhode Island Hospital and Newport Hospital. Lifespan expanded its eligibility requirements last March, so more people could qualify for free and discounted care, and usage shot right up: Rhode Island Hospital alone provided $9.25 million worth of charity care (calculated at cost), Lantto said, up from $5.5 million in 2003.
Charity care is part of the hospitals’ mission, Lantto noted, but Rhode Island’s status as one of only six states without a public hospital for the uninsured does create an extra burden. “We do the best we can in that regard,” he said. “It’s a continuing problem.”
Lifespan is also seeing the impact of declining health insurance coverage, Lantto said, with more and more “self-pay” patients and mounting levels of bad debt. “I think it’s a function of fewer businesses offering insurance, and others having much higher co-pays,” he said.
To offset such rising costs, along with the impact of rising labor costs and medical inflation, Lifespan has implemented some cost-saving measures, such as self-insuring for health benefits. But the key is really revenues, Lantto said, and that’s where his worries are, given the growing concern in Washington about the spiraling federal deficit.
Last time Congress balanced the budget, in 1997, hospitals took a big hit from lower Medicare reimbursements. A second balanced-budget plan could hurt just as much, Lantto said, and even the Medicare prescription benefit next year could shift money away from hospitals.
“It could well be something similar to what happened in 1997,” he said. “And hospitals would be the primary targets, because individuals vote – entities don’t. That just increases the challenges in the future.”
