‘This may hurt’: Billing, payment changes lead to cuts at Silverton Health

By Kristine Thomas

Silverton Health President/CEO Rick Cagen is aware of the rumors that Silverton Health is on life support.

He understands that with the recent layoffs, the required furlough for managers, cutbacks of services and other changes since April 2012, people are making assumptions and attempting to read Silverton Health’s vital signs.

But Cagen compares the changes to making a health-related lifestyle adjustment rather than a medical emergency. He said the changes prepare the organization for healthcare reform.

“We are not on life support and we are not on the operating table. We are making changes to stay viable and stay in the community,” he said. “We are looking at ways to be more efficient and continue to provide great care.”

According to Cagen there are three basic reasons for Silverton Health’s financial challenges: increased costs in healthcare, reduced amounts in health care reimbursements from third party payers, and an increase in patients unable to pay for services.

Installation of a new billing system also contributed to creating a temporary cash flow problem, Cagen said, adding when the system changed there were unforeseen delays in issuing bills which lead to corresponding delays in payments.

“It has taken two to three months to correct the problems and convert to the new system,” Cagen said.

Meanwhile, like nonprofit hospitals throughout the United States, Cagen said, Silverton Health is taking steps to prepare for healthcare reform and anticipating less reimbursement from insurance companies and federal programs.

In the United States, 18 cents of every dollar or 18 percent of the country’s gross domestic earning is spent on healthcare. Every other developed country spends on average about 13 percent, he said.

“We spend way too much on healthcare,” he said.

Then there are those who can not pay for the care they seek. Whenever a patient comes to the hospital’s emergency department, Cagen said, it is both the hospital’s mission and a legal requirement to treat the patient.

Unfortunately, with the economic downturn many people can no longer afford health insurance, he said, and turn to the emergency room as a last resort.

During the last fiscal year, from Oct. 1, 2011 to Sept. 20, 2012, the average number of patient visits to the emergency department was 1,903 per month.

For the current fiscal year – from Oct. 1, 2012 to Jan. 30, 2013, – the average number of patient visits to the emergency department visits has grown to 1,935 per month.

According to Silverton Health’s own figures, in its previous fiscal year the organization lost 53 percent of emergency charges to “deductions” – charges not reimbursed to hospitals by insurance companies or other payers.

For this fiscal year, 65 percent of Silverton Health emergency department charges are going unpaid due to deductions.

For the 2011-12 fiscal year, total deductions averaged $8.5 million a month. In the current fiscal year from October to January, deductions are averaging $9.7 million a month.

This increase of $1.2 million a month in unpaid charges, Cagen said,  projects out to an estimated increase of $14.4 million in unpaid charges for the current fiscal year.

“We are receiving less reimbursement,” Cagen said. “The only way to recoup that loss is to make cuts to reduce expenses and to increase our patient volume.”

To manage the financial challenge, Cagen said he plans to reduce expenses, identify core services provided by Silverton Health, eliminate waste, become more efficient and increase paying patient volume.

Defining what core services Silverton Health should provide as a post-secondary hospital prompted several changes.

Silverton Health operates clinics in Woodburn, Mount Angel and Silverton. Cagen said optimally a patient should be 10 minutes driving distance from his primary care provider and 15 to 20 minutes from a primary/secondary hospital.

In reviewing core services, the decision was made to close sleep lab last April and the heart catheterization lab last month.

“There are some things that we have tried like the sleep lab that are not our core business,” Cagen said. “We are a community hospital that provides primary care and also provides general surgery and Ob/Gyn and limited number of specialties.”

Changes are also under way at the former Wellspring facility, which once contained a spa, retail outlet and restaurant in addition to medical services. It has been remodeled to become a health hub, Woodburn Health Center, bringing together the Silverton Health-affiliated services that operate in Woodburn. The goal is to provide a one-stop center for healthcare to the Woodburn community.

To increase volume, Silverton Health plans to open a medical clinic in Keizer to serve Keizer and North Salem residents, many of whom already travel to either Woodburn or Silverton for services.

In February, 12 positions were eliminated from various departments throughout the organization.

“However, that is not the number of employees who have been laid off,” Silverton Health spokeswoman Rita Kester said. “Some of the affected employees have been able to transfer to other departments. The affected nurses, who are members of a union, as well all other affected employees, will be given the opportunity to seek jobs in other departments and will become priority candidates for open positions throughout the organization.”

What Cagen does not want to happen is for Silverton Health employees to worry about their jobs. His goal continues to be to find ways to reduce expenses without eliminating jobs. He said there is a 10 to 12 percent turnover each year in our workforce. With 700 employees, that means about 70 leave to retire or go to different jobs.

“One way we can manage costs is to not fill those positions,” Cagen said, adding he wants to reassure his employees and the community that Silverton Health is addressing its short-term cash flow challenges.

“Overall, we have very little debt, we serve fabulous communities and we have a great staff and employees,” he said. The goal is to keep Silverton Health successful and meaningful in “our community so we can continue to provide safe, quality care to our residents. We are going to continue to provide care to all those that come to our doors.”