Susquehanna Health's 2013 budget includes a $12 million annual reduction in patient care costs as a result of state and federal budget changes.
More than $1 million in management positions will be eliminated, including 13 supervisor, manager and director positions. Eight of the 13 are nursing positions, but not nurses who provide care at the patients' bedsides, said Tracie L. Witter, director of corporate communications.
To make up for the lost positions, employees will take on more tasks.
"At a time when all health care professionals are taking on cross-functional roles, Susquehanna Health will be asking current management to absorb additional duties to improve future cost efficiency," Witter said.
Nursing created five full-time and one part-time positions, and one remaining position is under development, which will be posted within the next few weeks. Susquehanna Health also will re-engineer its nursing education staff to better support the inpatient units, she said.
"This re-engineering will allow for growth and education on the nursing units based on specialties," Witter said. "Nurse educators will now be closer to the patient bedside. They will assess processes and remove waste by coaching nurses on the units. These educators will help to innovate and enhance change processes. The end result of this re-engineering will be to enhance the quality of the patient experience in the inpatient world."
Construction of the $28 million Health Innovation Center at Williamsport Regional Medical Center will be delayed. The center was to be connected to the existing Susquehanna Tower.
Services within the center were to include family medicine residency practice, the Commonwealth Medical College, heart and vascular institute, joint and spine center, OB-GYN practices, general surgical practices, retail pharmacy and durable medical equipment.
Construction was projected to begin in August, with occupancy in August 2013.
Susquehanna Health is pursuing alternative funding sources, such as new market tax credits and donations to reduce the amount of conventional financing for the project.
The use of new "locum tenens support," which refers to temporary physician support for certain areas or specialties, will be suspended.
"This is a practice that is used across the country in hospitals," Witter said. "Going forward, Susquehanna Health is limiting the use of locum tenens support."
Using temporary physicians costs $1.5 million a year because of their higher salaries with flexibility and travel required throughout the country.
The new emergency room at Muncy Valley Hospital, a $5 million project, will be delayed.
"Susquehanna Health is in the early planning stages of an addition to the emergency department at Muncy Valley Hospital," Witter said.
The current square footage would increase from 3,500 square feet to 9,500 square feet.
"A new emergency department is being considered to improve the care provided to our patients in the eastern portion of the county," she said.
The patient care area would transition from five pulled curtains to between 14 and 16 private patient treatment rooms, consistent with the design of the emergency department in the Susquehanna Tower.
Loss of funds
These and other actions are expected to make up for $12 million lost through reimbursement from government programs, such as Medicare and Medicaid.
The state budget changes result in a $1.4 million decrease in funding.
Gov. Tom Corbett's proposed budget includes reductions in Medicaid rates that would result in nearly $1 million in annual payment reductions for services provided to Medicaid recipients at Muncy Valley Hospital, long-term care and obstetric patients at the Williamsport Regional Medical Center.
The Department of Public Welfare is proposing to eliminate payment for normal newborns. It only will pay for labor and delivery and routine care provided to mothers.
For the Williamsport Regional Medical Center, the impact would result in no payments for more than 400 births and a revenue reduction of about $400,000, Witter said.
More than 40 percent of all babies born at the medical center are covered by government assistance.
The federal budget changes make up a $10.3 million reduction in funding. The largest part comes from the 2012 annual federal payment cuts of $6.3 million. Potential federal reductions for next year are $4 million.
The federal government already has eliminated supplemental wage index funding of $3.5 million a year that helped equalize Susquehanna Health's Medicare payments to local competitors.
Wage index is a major Medicare funding inequity that has resulted from Williamsport Regional Medical Center being placed in a different Medicare payment category than Evangelical Community Hospital and Geisinger Medical Center. Both Geisinger and Evangelical are geographically closer to Williamsport than Harrisburg, but their hospital reimbursements from Medicare are linked to the wage index of Harrisburg, Witter said.
"Susquehanna Health is in a different wage index classification and, as a result, receives $3.5 million less a year for providing similar services," she said.
The operating margin, which relates to the hospital's profit to operate the business, is a positive 0.8 percent, year to date. The budgeted operating margin was 3.3 percent.
"While the operating margin is in the black, it is well below our budgeted operating margin," Witter said. "Our lagging financial performance corresponds to government budget reductions that started being implemented in the last quarter."
In addition to the cuts and the lower-than-expected profit, changes in health plans also hurt the hospital.
"Many employers have higher deductibles for their employees," she said. "As a result, health systems have to collect these payments from individuals. We are already seeing our bad debts increasing. This year, bad debts have increased by 12 percent and this equates to over $20 million."