After spending weeks listening to the misinformation that has been circulated by those opposing the Cedar County Memorial Hospital (CCMH) tax levy increase that will appear on the June 2 ballot, we find it necessary to dispel inaccuracies and provide facts. We respect that all individuals are entitled to vote as they wish; however, that decision should be based on facts.
Remember that CCMH is a Critical Access Hospital (CAH). The CAH program was created in 1997 as part of the Balanced Budget Act to assure that residents in rural and impoverished areas retain vital access to healthcare services. In many cases, CAHs serve as safety nets for individuals without the means to travel for healthcare access. This is very much the case in Cedar County where approximately 22.9 percent of the population is over the age of 65; and 22.6 percent of the population lives below the poverty level.
A recent video that appeared on Facebook criticized CCMH’s financial operations. The narrator of the video demonstrated a fairly good understanding of the general business environment; unfortunately, Critical Access Hospitals (CAHs), or the American healthcare system in general does not operate like a general business. Most people, especially those who are not involved in hospital finances, have difficulty understanding hospital finances given the unique environment in which they operate. In general business, a business provides goods or services to a customer; and in turn, that customer is expected to pay the price charged to them by the business. Every customer who buys such goods or services pays 100 percent of the cost of the goods or service, plus a markup, for a profit to the business. If the business chooses to increase their prices, then their revenue will also increase if their expenses have remained constant. If the business expenses increase, then prices must be increased in order to maintain their profits. Typically, there are not exceptions to this unless the business chooses to discount the price of the goods or services to the customer.
Financial operations are much different in CAHs such as CCMH. For example, patients cannot legally be turned away for their inability to pay for services; whereas, a general business is not legally obligated to provide goods or services for free. General business owners are not forced to agree to payments that are below costs for goods and services provided; whereas, government payers (such as Medicare and Medicaid) reimburse at an amount less than the cost of providing the service. In hospital operations, hospitals are reimbursed for their services by numerous payers and at various methods and rates. CCMH’s largest categories of payers include Medicare (50%), Medicaid (20%), commercial insurances (20%) and uninsured patients (10%). This is known as “payer mix”; and due to the rural nature and location of our community, CCMH’s payer mix has a detrimental effect on its finances as described below.
Over 80 percent (shown above in the payer mix) of CCMH’s volume is from governmental programs or self-pay individuals. As a CAH, CCMH receives reimbursement from Medicare, our largest payer, for a portion of the costs incurred. For fiscal year 2020 (Feb. 1, 2019-Jan. 30, 2020), Medicare reimbursed CCMH at 99 percent of the allowable costs (meaning not all costs are even considered for reimbursement by Medicare) incurred by CCMH to provide services to Medicare patients, an automatic loss of 1 percent on allowable costs on the largest portion of our business. Medicaid also reimburses CCMH at less than the cost to provide services, on average 10 to 15 percent less than cost; and the uninsured (self-pay) typically pay only a fraction of the costs incurred for services provided to them, if anything at all. The remaining payers under commercial insurance have various contracts that CCMH negotiates reimbursement rates for with the intent to cover the cost of serving those patients; however, given the demographics of our community we have very little negotiating power with commercial payers. This all adds up to being reimbursed by most payer sources at less than the cost of providing services, and thus the critical need for passing of the tax levy increase on June 2.
Turning to the expense side of operations, in general business if costs are reduced, one would anticipate an increase in revenue if prices remain unchanged. This is not the case with Medicare reimbursement, which is cost-based in a CAH. If CCMH decreases its costs, Medicare payments decrease proportionately. In addition, the regulatory nature of the hospital environment is continuously growing and dramatically impacts hospital expenses. More regulations and requirements mean increased expenses to achieve compliance. Also, as most everyone knows, there is a shortage of healthcare professionals throughout the country, including nurses, physicians and many other positions. This means there is greater competition among employers to recruit and retain quality staff and a continual rise in the cost of staffing. As a hospital, CCMH must meet requirements around such things as minimum staffing, necessary supplies and equipment and facility standards so that we can effectively serve our patients when the need arises.
We understand that one of the greatest obstacles we face in the passing of the levy increase on June 2 is misinformation. We also understand that hospital operations and healthcare finances in general are not easily understood because they are unlike any other business operations. We are hopeful the information above provides some clarity to CCMH’s financial operations, and we would now like to address another issue recently promoted by those that oppose increasing the CCMH property tax levy.
Regarding recent criticism of the Board’s decision to provide the Hospital C.E.O. with a pay increase, facts surrounding that decision are important. The Board last approved a pay increase for the C.E.O. in January 2018, at which time three-quarters of the hospital’s pay scales were increased. This action was based on pay scale adjustments made in an effort to assure the competitiveness of hospital-wide salaries to retain and recruit staff. (Please note that information shared by the opposition to the levy on May 4 originally stated the C.E.O.’s most recent pay increase was in April 2020. This was erroneous and has since been corrected.) CCMH has a process in place for salary reviews which includes participation in an annual salary survey with other Missouri CAHs. Typically, around 20 of Missouri’s 35 CAHs participate in this survey. This allows an “apples to apples” comparison of wages—all are CAHs with similar rural Missouri locations, similar size, face similar operating and reimbursement issues, and operate under the same regulations.
Those pay scales adjusted in 2018 were increased because they were found to be low in comparison with the annual compensation survey results, including the pay scale of the C.E.O. At that time, the C.E.O.’s salary was raised to the 25th percentile base rate for Missouri CAH C.E.O.s (meaning that her salary is in the bottom 25 percent of all MO CAH CEOs in the survey). Prior to that, her salary was significantly below the bottom of the Missouri CAH C.E.O. pay scale. Of note, despite accepting the C.E.O. position in 2010 at a lower than average rate of pay, the C.E.O. has never asked the Board for a pay increase. However, the IRS requires that C.E.O. compensation be substantiated through appropriate comparability data, which is one of the reasons CCMH uses the pay scale information from the Missouri CAH compensation survey. We would be remiss not to mention the fact that the CCMH C.E.O. also serves as the Administrator of the Cedar County Health Department for which she receives no additional compensation. Her salary only reflects her CAH C.E.O. job duties.
In their commentary on this subject, the levy opposition has questioned the C.E.O’s qualifications, which include graduating Magna Cum Laude from Southwest Missouri State University with a Bachelor of Science Degree majoring in Public Administration and minoring in Healthcare Management and Political Science, a Master’s Degree in Business Administration from Southwest Baptist University and twenty five years of experience in the healthcare field. She has been employed by CCMH since 2007 where she was first employed as the Administrative Project Coordinator, providing direct support to the C.E.O.
It has also been suggested by the levy opposition that the C.E.O. should not have been given a pay increase by the Board of Directors in 2018 since the hospital was operating at a loss. While the Board acknowledges the operating loss, we believe that at a time when the majority of Missouri CAHs are operating at a loss in an environment of diminishing reimbursement, responsibility for an operating loss cannot fall solely on the shoulders of a single individual. Rural hospitals are in a crisis nationwide; those such as CCMH that rely heavily on governmental programs are particularly struggling due to reimbursement shortfalls.
In closing, we sincerely hope that we have been able to address some of the questions that abound and clear up some of the misinformation that has been put out to the public as fact by the opposition. Cedar County Memorial Hospital needs your support in the June 2 election by voting YES for the property levy increase. Cedar County Memorial Hospital is both a community and public health asset. In light of the current nationwide crisis, it should be clear now more than ever that having these assets in our community is a positive, not a negative. We humbly ask for your support.
The Cedar County Memorial Hospital Board of Directors
Judy Renn, President, Carla Griffin, Vice-President, Brent Bland, Secretary/Treasurer, Marvin Manring, Director and Julia Phillips, Director