amends
Hospital

 

Spring?eld Hospital
FY 2014 Budget Request
Narrative

A) Executive Summary

In FY 2014 Spring?eld Hospital plans to continue on the path that it has followed. for some time.
That is, quality will remain the ?face of the organization? and access to the appropriate care in the
appropriate setting for all residents of our service area is paramount in our planning and our day-
to-day operations. Given our dif?cult payer mix, challenging demographics, the comparatively
poor health status of our residents, and the ever increasing social challenges (poverty, drug use,
crime, etc.), this is no easy challenge. One could assert that our service area is the veritable
?poster child? or perfect analogy for the impact of the social determinants of health on a small,
rural health care delivery system. With an ever decreasing ability to impact our revenue streams
through rate approach that, over time we have avoided anyway??-we plan to
continue to improve both quality and access and will accomplish this through providing value;
that is, where quality and cost?effectiveness merge. -

Comparing the FY 2013 to the FY 2014 Budgets, there are no substantial changes in programs,
labor or operations. We do plan to grow a bit in perioperative services. This will not be
accomplished by expanding the clinical scope of what we do, but rather by retaining a greater
percentage of cases/services that we feel it is clinically appropriate to perform in the community
hospital setting and doing so in a high quality and cost-effective manner. The major components
of rebuilding surgical services include:

A second orthopaedic surgeon joins our existing practice in the fourth quarter of 
recruitment commitment that has been in place since and we will
experience the full-year impact of that surgical volume in FY 2014. Many of the new
cases will be cases that we keep as opposed to transfer from our ED due to inadequate
call situation substantially mitigated by the arrival of the second surgeon.

We also are con?dent that we will ?ll the void in access to Urological services in our
catchment area in time for the beginning of the new ?scal year or shortly thereafter. This
will be accomplished through an agreement with Mt. Ascutney Hospital and Dartmouth-
Hitchcock Medical Center for a shared positiOn. The provider will be on-site three days
per week at our facility.

Our Endoscopy program has been experiencing growth in the current ?scal year and we
are budgeting for that to continue into FY 2014. In response to unacceptable wait times
for procedures and with a goal of improving preventative health screening measures in
conjunction with our Federally Qualified Health Center (FQHC) network, we have
invested in staff, equipment, and, more importantly, our patients.

The FY 2014 Budget re?ects a decline in inpatient utilization, at least partially due to our work
on preventing readmissions, but is somewhat of a reversal of the trend line that we have
experienced in FY 2013. The 2014 Budget assumes that we will avoid at least 150 transfers of
patients that present in our Emergency Department that can and should be cared for in our

25 RIDGEWOOD ROAD, P. O. Box 2003, SPRINGFIELD, VT 05156-2003 PHONE (802)885?2151

facility, but are transferred due to inadequate inpatient nursing staf?ng. We are investing in
nursing FTEs to correct this situation. We are not expanding the scope of what we do or
venturing out of our Critical Access Hospital (CAH) role?--we are simply improving service to
our patients many of which have let us know that we are failing them when we transfer
community members for services that we can provide locally in a safe, high quality and cost-
effective manner. Spring?eld Hospital was recently the recipient of a 2013 Clinical Excellence
Award from the Voluntary Hospitals of America (VHA). The VHA has nearly 1,350 members
and Spring?eld was one of ten hospitals in the CAH and Community Hospital category nationally
to receive this recognition which is based on quality measures, readmission rates, the CMS Value
Based Purchasing standards and case mix adjusted charge per other words, value.
Therefore, we plan to extend that value to more patients that present for services that we can and.
should provide. On a micro basis this will bene?t our patients, better meet community needs and
expectations and also on a macro basis contribute more value to the broader continuum.

Lastly, our FY 2014 Budget-re?ects additional costs required to address the shortfall in the State
of Vermont for appropriate inpatient placements for Level 1 patients. Our Emergency
Department (ED) has been grappling with this situation for some time, but FY 2013 has seen a
signi?cant surge in the number of long?term patients that have basically become
?residents? of our ED due to the inability to ?nd. appropriate placements, and we do not see any
relief on the immediate horizon. These patients can receive appropriate care in an ED on a short-
terrn basis but the system as a whole is failing these individuals when they are housed in EDs
long?term where it is much more dif?cult to meet their clinical needs. Additionally, these
patients create an extremely unsafe environment for staff and other patients not to mention having
a horri?c effect on the patient experience of medical ED patients when there are nearly as many
sheriffs and security guards in the ED as clinicians!

To date, to address this situation, we have added a ?Fast Track? component to our existing ED
services. This includes increasing the amount of Physician Assistants and nursing staff to handle
patients that after triage can be treated quickly and somewhat isolated from the remainder of the
ED. This offers a better environment for the Fast Track patients and relieves pressure and
congestion on the ED proper. We are and will be investing in additional staff training regarding
dealing with Mental Health patients in our ED and are better utilizing the Mental Health
professionals that we employ in our FQHC network to perform assessments, round on Level 1
patients in the ED, and provide ongoing training and support. We are also budgeting to increase
the security presence order to ensure the safety of patients and our personnel.

B) Health Reform Investments

Spring?eld Medical Care Systems (SMCS) is an integrated community health system consisting
of the SMCS QHC Network and. Spring?eld Hospital. We are not seeking recognition of any
exceptional expenditures relating to health reform in the Spring?eld Hospital budget. Seeking to
positively impact the health status of our residents and. prepare for health reform are daily
activities within our system and the functions are imbedded in our operations and associated
budgets. Our health reform initiatives are predominantly housed within our FQHC network, all
locations have obtained advanced practice medical home certi?cation. The SMCS Community
Health Team (CHT) works seamlessly with Spring?eld Hospital and other service providers
within our community to manage and coordinate care, develop and implement systems of care
that support population health as opposed to episodic treatment of illness while still managing
individual cases and ensuring that access to appropriate services is unfettered. The CHT
coordinates with our ED to connect patients that present that have no identi?ed primary care

relationship with one of our PCPS and our medical home. The CHT is also integrally involved
with the discharge planning process at the Hospital to ensure appropriate follow up as needed and
successful transitions from the acute side of the continuum to community-based outpatient
services. This coordination has had a noticeable impact on our readmissions rates and was
critical to the receipt by Spring?eld Hospital of the aforementioned VHA recognition for Clinical
Excellence.

These efforts, which once again are spear headed by our primary care network, are certainly not
without cost. Over the last several years we have invested substantially in care coordinators
imbedded in our CHC practices and also our centrally located CHT. Unfortunately, many of the
associated costs are at best only partially reimbursed under current payment mechanisms. We
continue to invest and expand these capacities based upon philosophical commitment but are also
highly cognizant of the ?nancial strain placed on our delivery system over the last several years.
Given that many of the activities are actually counter intuitive under current reimbursement
systems we look forward eagerly to payment mechanisms that are aligned with health reform and
properly value and reimburse for these efforts.

C) Overall Budget to Budget Net Patient Revenue Increase

From FY 2013 to FY 2014 our budgeted Net Patient Service Revenue (NPSR) increase is
Despite a requested 6% across the board rate increase our GPSR will increase by only
2.2% in comparison to the 2013 Budget with a fairly signi?cant decline in Inpatient revenue
offsetting some growth in Outpatient and Physician services. These include the aforementioned
increases in surgical volume and associated revenues discussed in the Executive Summary and do
not include any major changes in services or operations. Simply stated the NPSR increase is
necessary to improve our ?nancial position, which has deteriorated in FY 2013 after a few years
of improved stability. We'continue to be extremely active in seeking to control our operating
expenses but revenue shortfalls in FY 2013' have been problematic. We are only seeking a 1%
Operating Margin prior to the addition of any increases in Medicaid reimbursement which will be
added to our budget by GMCB subsequent to submission. The Operating Margin is needed in
order to continue to provide quality services, fund capital acquisitions, and recruit and retain high
quality providers, clinicians and other professionals.

From budget to budget our Operating Expenses will only increase by only We have not
included any in?ationary factor in our budget. We are challenging our managers to hedge against
in?ationary pressures by pushing forward with savings that we have obtained through the ?Lean?
process and improved purchasing power through our relationship with the New England Alliance
for Health (NEAH).

Signi?cant changes from the FY 2013 Budget. As mentioned previously we have
not budgeted for any signi?cant operational changes in FY 2014. In comparison to
FY 2013 projected we are anticipating growth in surgical services due to the full?year
presence of the second Orthopod and the new Urologist. Additionally, increased
FTEs in inpatient nursing will allow us to prevent transferring patients that we can
and should care for at Spring?eld Hospital and as a result our average daily census
will increase in comparison to FY 2013 projected.

2) Cost Saving Initiatives. In FY 2014 we will continue with the Lean re-engineering
process to seek to eliminate waste from our system, will also enter our third year as a
NEAH member where we anticipate continuing to ?nd new savings or at the very
least hedge against in?ationary pressures and hope to do the same with outpatient

3)

drugs through the 340B discount pharmacy program. On a budget?to-budget basis

there are no huge savings on any particular line item; rather, consistent cost?

containment across our continuum.

Increase in Net Patient Service Revenue by Payer Source. From a budget-to?.

budget perspective we are anticipating a decline in inpatient utilization that is only

partially offset by an increase in outpatient revenues which is derived from the
previously mentioned additions to specialty provider (Orthopaedic and Urology)
services. That being said, although still representing an improvement over the
current year projected, absent our rate increase, gross revenue would be declining in

comparison to the FY 2013 Budget. As it pertains to NPSR, our payments as a

percentage of our charges still continue to deteriorate as payment updates do not keep

pace with our rate increases. We are not anticipating any major swings in our payer

mix as a result of ACA provisions.

21) Revenue Assumptions: Medicare. The FY 2014 Budget assumes that we will

continue to be reimbursed at cost plus 1% by the Medicare program for inpatient

and outpatient services. Our inpatient per diems will rise as we invest in
additional nursing FTEs, but our outpatient ratio of cost to charges will go down
as revenue increases (based upon the rate increase) will outpace cost
increases. We anticipate claiming approximately in Medicare Meaningful

Use reimbursement in FY 2014. I

Revenue Assumptions: Medicaid. We were not provided a Medicaid payment

increase amount from DVHA and therefore have not included one in our budget.

The amount when determined will be added. to our budget by GMCB and will

improve our payment percentages and Operating Margin accordingly. We have

incorporated the DVHA provided amount for Disproportionate Share Hospital

(DSH) payments in our budget. Unfortunately, despite still having very high

Medicaid and uninsured utilization, our DSH payments will decline by nearly

20%. This is due to the fact that the payment methodology introduced by DVHA

in 2010 does not follow the intent of the DSH program which is to provide

supplemental funding and relief to providers that treat a disproportionate share of

Medicaid individuals; rather, it is a redistribution of Federal matching dollars to

proportionally reimburse Hospital?s for their Medicaid shortfalls. Not a terrible

concept, but it has the unintended consequence of penalizing efficiency. The

Medicaid shortfall has two components; payments and costs. The payments are

determined by DVHA and it is a level playing payments for the

same service rendered. Costs are determined at the individual provider level.

Therefore, all other things being equal a more ef?cient provider will have a

smaller Medicaid shertfall and therefore receive less DSH payments. This

payment mechanism de?es logic and is inconsistent with any elements of
payment reform. DSH payments, in accordance with the intent of the Federal
program, should be targeted to the providers serving a disproportionate share of

Medicaid and low income individuals and not be utilized as a redistribution of

the Federal matching dollars to equalize Medicaid shortfalls which, given that

each provider has its own unique cost structure, are not created equally.

c) Revenue Assumptions: Blue Cross and Commercial Payers. As more
payment mechanisms are moved to prospective methodologies which do not
recognize the full amount of our rate increase, our collection percentages will
continue to decline.

11)

D) Rate Request

We are requesting an across the board rate increase of Our budget process includes
developing a targeted operating margin. An operating margin is essential in order to maintain
quality, provide funding for capital and to recruit and maintain top quality providers and

professionals. Given our revenue constraints and despite our best efforts regarding cost
containment we were not able to obtain our preliminary target of a 2% Operating Margin. Rather,
with this submission we are at 1% before consideration of the yet to be supplied Medicaid
payment increase.

Given our payment mechanisms, our net to gross yield for each percent of rate increase is very
low. That is because we are paid on a cost basis by Medicare, prospectively by Medicaid and
some insurers and have an ever dwindling percentage of payments based upon our actual charges
and even those methodologies cap our allowable rate increases.

E) Capital Budget Investments

Our FY 2014 Capital Budget is very modest with no single item or projects in excess of 
A few items of note include:

for the acquisition of a 3D mammography unit. This unit provides enormous
improvements in image quality, reduces false positives and therefore exposure as a result
of not needing additional exams.

Tr to relocate our Ambulatory Care Unit (ACU) in order to allow for expansion of
our ED. Our ED volume has long exceeded. the capacity for which it was originally
designed and we hope to also create a isolation. area as part of the expansion.
This will improve privacy, safety, and the patient experience.

In conjunction with the above, to modify the 01d ACU area for better utilization
for emergency services and a isolation area.

We have no CONs in the works or in the pipeline. In FY 2015 we anticipate acquiring a new
nuclear camera at a cost of approximately $550k.

D) Technical Concerns

Apart from items already mentioned, we have no additional ?technical? concerns. Our concerns
are more global and systemic in nature and revolve around the ongoing challenges of striving to
meet community needs in an environment with so much uncertainty with the only certainty being
the seemingly unending need to do more for our patients with less resources; that is, maintaining
if not improving access, quality, and the patient experience.