Health Care and Insurance and Economy and Government

Wishard bounces back, projects $23M surplus: Improved billing, debt collection dry up red ink

March 6, 2006

Wishard Health Services made it back into the black in 2005, three years after posting a staggering loss of $77 million.

The not-for-profit, public hospital system expects to record a $23 million surplus on $362 million in revenue when budget totals are final in a few months.

Its leaders expect to wind up with another surplus in 2006. Such performance is a noteworthy achievement in the public health universe, said Lynne Fagnani, senior vice president for the Washington, D.C.-based National Association of Public Hospitals and Health Systems.

"Anytime most of your funding is from government payers, you'd be lucky if you're breaking even," she said.

Wishard Health Services includes the Indianapolis safety-net hospital Wishard Memorial, several outpatient clinics, Midtown Community Mental Health Center and the Lockefield Village retirement home.

The system escaped red ink last year thanks mainly to better billing processes, collections of old debts, and a one-time $10 million Medicaid payment for long-term care, said Matt Gutwein, CEO of Health and Hospital Corporation of Marion County, the public entity that runs Wishard.

It had to fight through several built-in disadvantages to get there.

As a safety-net hospital system, most of Wishard's patients have no insurance or rely on government programs like Medicaid or Medicare that provide lower reimbursement than private insurance.

Last year, for instance, it spent $147 million on uncompensated care as it dealt with increases in outpatient visits and inpatient admissions. Wishard recorded just under 1.2 million outpatient visits and more than 18,000 inpatient admissions last year.

Wishard takes a "very significant burden" off Marion County's other hospitals by handling so much indigent care, said Edmund Abel, director of health care services for the Indianapolis-based consulting firm Blue & Co.

The hospital system receives some help handling that burden. Health and Hospital Corp. collected $92 million in taxes last year, with roughly half of that going to Wishard, Gutwein said. Wishard also receives some extra Medicaid money to help with its indigent patient load.

But that extra public money never outweighs the disadvantages public hospitals face, said Georges Benjamin, executive director of the Washington, D.C.-based American Public Health Association.

The hospital had to use several tools to reach last year's surplus.

It continued a push to clean up billing procedures and make sure it collected every dollar possible for the care it performed.

"People can give great care, but if they don't realize the proper code to punch into the computer, it doesn't get translated," said Gutwein, who came to Wishard in late 2002. "We were literally losing millions of dollars a year by not being as accurate and precise and comprehensive in our billing procedures."

Wishard also aggressively pursued unpaid bills, including settlements from private insurers to cover car accident injuries.

The hospital system raked in $16 million more in revenue than it budgeted, primarily because of the debt collection, said Gutwein, who also credited strong senior management with prodding the turnaround.

While the hospital cut its losses, plenty of financial challenges remain.

Wishard will feed the $23 million surplus to its reserves, which it spent dry in 2003. That money goes toward new equipment and capital improvements. The hospital added 29 beds last year-pushing its total to around 300-to handle growing patient volume.

It also started a $10 million renovation of operating rooms, but Gutwein figures the hospital has an additional $400 million in capital projects it should be working on. Wishard Hospital's oldest building for patient care dates to 1916.

"When you're in buildings that old, they constantly need capital renovation to ensure they meet modern medical standards," he said.

Public hospitals always have to control their expenses tightly, said David Woodrum, chairman of Chicago-based ReSurge Hospitals.

When the economy turns sour, most see their patient volume rise while revenue decreases, as more people lose insurance coverage, Benjamin noted.

Public hospitals generally don't attract the investment or fund-raising opportunities their private counterparts see.

Safety-net hospitals receive almost threefourths of their revenue from government sources, Fagnani said. They're always sensitive to any changes in government reimbursement that affect their funding structure.

Gutwein understands all these variables

"It's going to be a continued challenge for us," he said. "Just because we're doing better now, we're not going to be popping out the champagne."
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