CUTBACKS IN MEDICARE HIT HOSPITALS

Fewer jobs, reduced services and higher fees are not in the immediate future for three regional hospitals.

However, hospital officials in Dexter and Cape Girardeau said the changes may be inevitable if narrowing financial margins resulting from the Balanced Budget Act of 1997 continue their downward spiral.

Lawmakers approved the 1997 legislation to extend the life of the Medicare Trust Fund. Cutbacks in fund payments for health-care services to the elderly and disabled were expected to save some $115 billion over a five-year period, thus keeping Medicare solvent for at least 10 additional years.

The changes directly affected the bottom lines of hospitals and other providers who receive Medicare reimbursements for their services. Some health-care officials said while the cause was noble, the effects of the changes could be devastating to the health-care industry in the future.

"I'm sure they were trying to do the right thing, but it's becoming increasingly difficult, especially for rural hospitals, to be able to operate efficiently," said Randall Tennison, chief executive officer of Dexter Memorial Hospital.

The Balanced Budget Act of 1997 was a major factor in the decision to change Dexter Memorial Hospital from a community, not-for-profit hospital to part of a larger, privately held corporation, said Tennison.

"A great deal of the reasoning behind that was the decreasing reimbursement from Medicare and from private insurance as well," he said.

St. Francis Medical Center and Southeast Missouri Hospital, both in Cape Girardeau, also have been hard hit by Medicare cutbacks. Officials said the 60 percent reimbursement currently paid by Medicare will force hospitals to redesign the way they provide services.

"We're always looking for ways to reduce costs," said Jerry Sanders, assistant administrator at Southeast. "At the moment we're holding our own, although like most hospitals, we're seeing our margins decline."

Sanders said his hospital lost $1.8 million in reduced Medicare payments in 1998. The hospital expects to lose $2.5 million in payments this year and $3 million in 2000.

Tony Balsano, controller at St. Francis, said his hospital lost about $2.5 million in 1998 and will probably lose a similar amount this year. Like Southeast, the hospital expects to lose $3 million in fiscal year 2000.

"Some hospitals are cutting services to improve their margins," said Balsano. "We have been looking at some of our processes to eliminate some redundancies."

Balsano and Sanders said neither hospital is considering reducing personnel. They acknowledged that if margins continue their downward spiral, downsizing could be a possibility.

Tennison said the Dexter hospital has seen "significant reductions" in revenue since the Balanced Budget Act was established. There have been some reductions in home health-care personnel as a direct result of the limitations established by the legislation.

"So far it hasn't meant service reductions; it's just meant it's a lot more difficult to cover our costs at the same level of care," Tennison said. "A significant number of for-profit home health-care facilities have closed down since the cutbacks in reimbursements."

Hospital officials said they hope lawmakers will seriously consider recently introduced legislation that improves the Medicare reimbursement schedule. The American Hospital Association and other health-care organizations are lobbying furiously to improve the schedule, which could determine the future existence of health care especially in poor and rural communities.

"The rural hospitals are going to have a more difficult time as this goes on," said Balsano. "In the long-term, that could mean more reduced access in rural areas, which could mean the existence of emergency centers instead of the full-service facilities that might be in place.

"I don't think that you'll see that in Cape Girardeau over the long haul," he said. "You may see changes in our services in the future, but I don't think you'll see that scope."