Charlevoix Area Hospital Foundation Executive Director Chelsea Townsend recently addressed the Boyne Valley Lions Club, answering member questions and discussing the future of the hospital.
Major developments include a potential closer working relationship with Munson Healthcare and local improvements like a chemotherapy and infusion center and some renovations inside Charlevoix Area Hospital.
Townsend was asked if the hospital is a 501(c)(3) non-profit entity.
“Yes, both the hospital and the foundation are 501(c)(3)s—separate entities but legally tied together, meaning that the foundation can only raise funds for the hospital,” she said. “So, we can’t raise funds for other community efforts or anything like that. All the money we raise has to go to hospital programs and so forth.”
CAH budget status
Townsend was also asked to address the hospital’s budget.
“The hospital budget, in terms of revenue, they are bringing in about $65 million a year in gross revenue,” she said. “As the annual report points out, in terms of net revenue, we’re closer to about $40 million to $45 million and our expenses are almost neck in neck with net revenue.”
Townsend added, “For this fiscal year we’re projecting a modest return—if everything goes well—of about $350,000. That’s about all we’d be hoping to make this year, and again, that’s if everything we’ve projected actually plays out.”
In 2013, Charlevoix Area Hospital took nearly a half-a-million-dollar loss.
“The majority of that was due to physician subsidies,” said Townsend. “We were hoping the Boyne Area Medical Center here in Boyne City is up for rural health clinic status. That gives us an increase reimbursement, once it reaches that status. We expected that to happen last year and were delayed about a year.”
She added, “That was a lot of projected revenue that we missed out on last fiscal year.”
Townsend the majority of the difference between gross revenue and net revenue is due to contractual allowances but that another big piece of that is the hospital’s charity care and bad debt.
“Any hospital that is a 501(c)(3) is going to carry both of those things,” she said. “Last year we had—actually for about the last three years—we’ve written off about $2 million a year in bad debt and charity care.”
Charity care is the term for write-offs the hospital does for people who have an inability to pay.
“As a 501(c)(3) hospital we are required to treat any emergency care patients that walk in our door regardless of their inability to pay,” she said. “So, we write off about half-a-million dollars a year for people who just aren’t able to pay their bills. The other one-and-a-half-million-dollars are people who technically have an ability to pay per our policies but don’t. So, we decide to write those off based on another policy but pretty much the longer people wait to pay the more we expect that they won’t pay at all.”
Other challenges Charlevoix Area Hospital faces come from various sources.
“Sequestration hurt all hospitals,” Townsend said. “We went from making about a penny on every dollar from Medicare patients to losing a penny for every dollar of our cost. Medicaid patients we lose about .65 cents for every dollar.”
She added, “We try to offset that with the commercial payers—Blue Cross/Blue Shield—those of you who have used commercial insurance are ‘What the heck? I’m paying all these high bills. How can the hospital not be making any money?’ But when you’re up against those kind of reimbursement structures it’s quite a challenge.”
According to Townsend, hospitals like Munson Healthcare have an entire team dedicated to solving the issue of figuring out the payer mix to make everything work.
Working with Munson
Townsend also discussed Charlevoix Area Hospital’s new closer affiliation with Munson
“Recently we announced that we are pursuing a closer affiliation with Munson,” she said. “To date we have had an existing relationship that has just been what we consider a loose affiliation. We are one of eight partner hospitals that make up Munson Health Care.”
Townsend said the hospitals share resources with each other and contract with some of their staff, including marketing, communications and financial personnel.
“We’ve been able to see a significant cost savings from that relationship,” she said. “In addition, we have been able to bring specialists to Charlevoix. For example, we’ve brought cardiologists from Munson. Traverse Heart & Vascular can now see patients in Charlevoix for your initial visits, for your follow-up visits. You can do a lot of your cardiology diagnostic testing in Charlevoix, you rehab—we’re not going to do open heart surgery, we’re never going to but we’re trying to bring as much of the care as close to as possible and as appropriate.”
Charlevoix Area Hospital has also brought oncologists up from Munson for initial and follow-up visits.
“It’s been a really beneficial relationship for us and I think for the whole healthcare system,” Townsend said. “So, now, we’re pursuing a closer affiliation. We don’t know what it’s going to look like yet. The board has authorized our CEO and our negotiating team to talk about it.”
She added, “What we’re hoping is that form can follow function and that the board can say, ‘Here are our guiding principles. Here is what’s important to us as a local, small hospital in Northern Michigan.’ And then they’ll kind of see, based on what our wants and needs are, what does that equal, in terms of an affiliation structure.”
Townsend said the affiliation could encompass a wide variety of possibilities, from a closer affiliation to minority interest of ownership to a complete sale of the hospital.
“We realize that in, especially in a changing healthcare front, to stand alone is looking less and less likely,” she said. “And, to be able to be there for our community, we feel this is a necessary step.”
Charlevoix Area Hospital hopes to recover from national and local changes to reimbursement, how medical records are handled and an aging infrastructure but partnering with a larger hospital group like Munson Healthcare could help them remain solvent.
“We’re going to have some serious capital needs at some point,” said Townsend. “And it’s just easier to do that with a big brother with lots of capital.”
She added, “Another benefit from more of a medical perspective is we would be able to be involved with accountable care organizations, we’d be fully and clinically integrated, so that helps with quality outcomes and sharing of best practices.”