SHERIDAN — In recent years, Sheridan Memorial Hospital has experienced steady growth, from expansions made to its campus to an increased flow of patients.
In just about any other industry, that would be good news. But health care is increasingly fraught with uncertainty, and SMH’s growth has been accompanied by shifting local and nationwide financial trends.
Without careful management, treating more patients could actually negatively impact the hospital and slowly eat away at its bottom line, according to SMH CEO Mike McCafferty.
The financial challenges with which the hospital is wrestling are shaping nearly every aspect of its development. McCafferty said the organization is working to make that clear to its patients as its services continue to evolve. Patients, understandably, aren’t always sympathetic to the hospital’s financial difficulties.
Health care is extremely expensive everywhere, and while the prices at SMH are generally below the national average, the overall cost of care is still daunting for the average patient.
Despite the price tags, the payments SMH collects for the treatments it delivers often amount to a net operating loss, McCafferty said.
In recent years, SMH has seen an increase in patients covered by Medicare and a drop in patients covered by commercial insurance, while patients covered by Medicaid or who self-pay have remained relatively stable.
Because different insurances reimburse the hospital at different rates, that trend is resulting in an overall decrease in the payments SMH collects.
According to the report, SMH collects between $.75 and $.78 from commercial insurances per dollar billed. The hospital collects between $.48 and $.60 per inpatient dollar billed and $.25 per outpatient dollar billed from Medicare. SMH recovers $.25 per dollar billed from Medicaid and between $.07 and $.12 per dollar billed from patients who self-pay.
That reality is not unique to Sheridan, but it represents an ongoing financial challenge for SMH.
“We might continue to have more and more people who are insured, but the amount the insurance companies are paying is going down,” McCafferty said.
That issue is compounded by the fact that Wyoming — and Sheridan in particular — sees smaller payments from services like Medicare.
On average, Medicare pays $9,761 to nationwide hospitals per each Medicare beneficiary treated, according to the Centers for Medicare and Medicaid Services. In Wyoming, that average drops to $7,839 per Medicare patient, and Sheridan County receives some of the smallest Medicare payments in the country. CMMS lists the average Medicare payment to Sheridan County at $6,338 per beneficiary; only 47 counties in the entire country collect smaller medicare reimbursements.
That is unlikely to change anytime soon, and the rising population of patients insured by Medicare shows no signs of slowing down.
But SMH can’t turn patients away, so it has had to find ways to adjust to a market where treating patients sometimes hurts the bottom line.
SMH has had success, though, McCafferty said, streamlining its operations and creating efficiencies as a way of saving costs without disrupting the services it delivers.
Chief Medical Officer Dr. John Addlesperger explained that hospital staff have employed lean management techniques in assessing SMH operations as a way of both finding savings and improving SMH services.
Addlesperger said lean management amounts to a meticulous, systematic analysis of different hospital operations. For instance, SMH patients found patients were having to endure longer waits ahead of appointments with SMH physicians.
To address the issue, hospital staff compiled exhaustive data on appointment bookings, and combed through it to find areas for improvement. Since then, the hospital has analyzed patient access data weekly to gauge whether the issue is improving and make further tweaks if necessary.
“It’s a very scientific way of dealing with problems,” Addlesperger said.
In order to contend with the financial trends threatening SMH’s profits, McCafferty said the hospital will have to continue digging through data and optimizing its processes.
“To run a hospital like this, at the margins we’re running it at while meeting the needs of the community, it takes all of this work to really stay on top of this stuff,” McCafferty said.