BAMC Eplains Need for Increased Charges

The medical staff and administration of Baldwin Area Medical Center are committed not only to providing the highest quality health care possibleto areas residents, but also to maintain the financial health of BAMC.

In an effort to maintain the financial health of the organization, BAMC monitors the need for rate adjustments and periodically implements changes. A notice of rate increases was published in last week's paper that will go into effect November 1.

In an effort to explain the reasons for rate increases, BAMC's administration has prepared a fact sheet in a question and answer format. The rate increase that will go into effect November 1 "will increase gross patient revenues 10% on an annualized basis," the fact sheet explains. "When annualized, the Medical Center's current increases equals a 3.3% increase per year since the last increase, which occurred in December 2004."

According to the fact sheet, "a rate increase is necessary at this time to offset continued shortfalls in payments from government health programs (Medicare and Medicaid). Rates paid for Medicare and Medicaid patients are prescribed by the Federal and State governments. When measured as a percentage, Medicare accounts for 37% and Medicaid, in combination with Medicaid Managed Care, accounts for an additional 7% of the Medical Center's gross revenues. While Medical Center's classification as a Critical Access Hospital in 2004 has resulted in improved Medicare and Medicaid reimbursement, the fact remains that the Medical Center has no control over payment rates for services associated with 44% of its gross revenues.

According to the Wisconsin Hospital Association "Wisconsin hospital patient care (operating) margins dropped to 3.1% in 2006, the lowest in eight years, and a decrease of 39% from 2005. By comparison, Baldwin Area Medical Center's operating margin was 2.0% in 2006, a drop of 66% from its 5.8% operating margin in 2005."

The Wisconsin Hospital Association also reported that charity care rose by 27% from 2005 to 2006, while Baldwin Area Medical Center's charity care rose 30% in the same time frame.

Although "the total charges generated by the Medical Center from inpatients and outpatients for services provided" will increase by 10%, the fact sheet points out that "there are multiple payers, including Medicare, Medicaid and a number of commercial payers, for which the rate increase will result in no additional revenue to the Medical Center. By way of illustration, for every $1 of additional inpatient revenue generated by the rate increase, the Medical Center estimates that it will collect approximately 21¢ prior to adjustments for bad debt."

The effect of the rate increase on patients "depends on the health insurance coverage the patient has, if any, and the specific services used by the patient."

Before the present increase, the last increase in rates at BAMC was in 2004 when an annualized increase of 7% was instituted. If the rate increases are "annualized over the 10-year period, Baldwin Area Medical Center's average annual increase has been 3.63% (unadjusted for cumulative impact)."

The fact sheet includes published rate increases for other hospitals in this region.

Hospital Administrator Greg Burns noted that the rate increase is the first major departure from what had been the norm since he has been in Baldwin. He also noted that Baldwin Area Medical Center is the last remaining independent facility in the region.