Budgets get emergency surgery
Hospitals struggle to cover costs while government cuts funding

Carla K. Johnson
Staff writer

Click image to enlarge At a glance Interview with Skip Davis

The region's top hospital leaders predict continued tough times in 2003 as they deal with Medicare and Medicaid payments that lag behind the real cost of health care.

In addition, if more people lose health insurance -- due to layoffs and possible reductions in Washington state's Basic Health Plan -- that, too, will threaten hospitals' bottom lines. More uninsured people means more people using emergency rooms where patients can't be turned away for inability to pay.

The political climate in Washington, D.C., doesn't bode well for solving complex domestic problems, such as health-care funding.

"We've got a national economy in very difficult straits. We've got the specter of war. You can't have guns and butter. And we're the butter," warned Tom White, CEO of Empire Health Services.

"The federal government's a bit preoccupied," agreed Skip Davis, CEO of Providence Health Services.

Joe Morris, CEO of Kootenai Medical Center in Coeur d'Alene, summarized the multiple issues facing the hospital industry this way: "The unsustainable increase in the cost of health care, fueled by new technology and drugs, higher utilization, liability insurance crisis, labor shortages and the cost of caring for a growing number of uninsured.

"This increase in health-care costs will make it increasingly difficult for individuals and employers to afford the cost of health insurance," Morris said.

The Inland Northwest relies heavily on the health of its health-care sector. And the health of the health-care sector relies heavily on government insurance (Medicaid and Medicare), which comprises roughly 60 percent of hospital business here.

The top two private employers in Spokane County are the two hospital systems, Providence Services Eastern Washington (Sacred Heart Medical Center and Holy Family Hospital) and Empire Health Services (Deaconess Medical Center and Valley Hospital and Medical Center).

Kootenai Medical Center is among the top employers in Kootenai County.

Current multimillion-dollar construction projects at Spokane and Coeur d'Alene hospitals employ hundreds of workers. In addition, top technology and medical expertise, such as Deaconess' gamma knife and Sacred Heart's robotic surgery system, draw patients from hundreds of miles away.

So it was alarming in 2002 when Empire laid off more than 100 workers, including two top executives. Losses hit about $18 million before the year ended, shaking the nerves of lenders. Empire put on hold plans for its new heart hospital with new operating rooms and more patient beds.

That construction project may get back on track with lenders this year, White said.

As Empire looks for more ways to tighten its budget, it is considering contracting out some of its support departments such as food services. Empire has requested bids from four contractors. If outside contractors are hired, more layoffs might result, but workers could be rehired by the contractors.

Providence, meanwhile, is committed to finishing its construction projects on the Sacred Heart campus, but also is struggling with numbers that don't add up.

"As we speak today we are budgeting $6 million less for Medicare than our current budget shows," said CEO Davis. "We're in the process of, frankly, rebudgeting."

The segment of Providence's current service that is most in jeopardy, Davis said, is inpatient psychiatric care.

The psychiatric program runs about $1 million in the red annually, not including overhead costs. If state funding ends for psychiatric services in the next budget cycle, the hospital anticipates up to $2 million in annual losses for that program.

"We've been able to sustain that service, but if the state continues to ratchet down, I will tell you that we've got some deep concerns about the size and the stability of that program," Davis said.

Shrinking services, forming partnerships with for-profit companies and investing in cutting-edge technology will continue to be favored strategies for finding equilibrium during 2003.

A post-9/11 world has meant uncertain consumers who are delaying some health care. It has meant health-care workers more eager to join unions. It has meant federal demands for bioterrorism preparedness, such as smallpox inoculation for volunteer emergency workers.

It has meant putting off a much-needed debate on how Americans will pay for the health care they want.

"Someday in our country we're going to have to deal with getting the desires of the public for health care in concert with what the public is willing to pay for health care. And that equation is going to have to be balanced," Davis said.

When that conversation happens, it must include everyone, unlike during the Clinton administration's failed attempt at health-care reform, Empire's White said.

"We can't have Hillary (Clinton) taking 400 people to Jackson Hole (Wyo.) and locking the door and saying, `We're the smart people. Here's what we're going to do,' " White said.

"We have to have something everybody has a chance to weigh in on, people from every highway and byway. Until that happens, we're not going to get through where we are right now."

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