Anyone who expected directors of the Ellsworth County Medical Center to make a final decision at their Feb. 7 special meeting on whether to participate in the proposed Ellsworth American Legion community center project came away disappointed.

Instead, Andrew Bair, chief executive officer, recommended making the project a part of the hospital’s strategic planning and budgeting process.

“I feel like we’re rushed,” he said. “I don’t want to be off putting to our community. This is something I want for us. I really want it. But with what I have here, I think it’s a gamble — and I don’t recommend we gamble.”

Bair said ECMC is too important to the community.

He noted, however, the community center would be a tremendous benefit.

“I would never want to do anything to halt progress for this community,” Bair said.“But losing this hospital is not progress.”

Bair also noted the Logan-based Dane G. Hansen Foundation has yet to commit to providing a major share of the cost, as was indicated in past discussions. Project supporters haven’t even applied to the foundation for money.

“I’d like to slow down,” Bair said. “I’d like an opportunity to talk with the Hansen Foundation and see what our time line is, and start working more methodically.”

The hour-long special meeting focused on the estimated financial effect the project would have on the hospital.

Bair said an anonymous donor has given $250,000 to ECMC and the Ellsworth American Legion for the project. The funds are being held at Citizen’s State Bank and Trust Co.

“Forty percent of that would be $100,000 for us and $150,000 for them (the Legion) to get started,” Bair said.

Ellsworth County Commissioner Kermit Rush, who attended the meeting with fellow commissioner Steve Dlabal, asked what the hospital’s cost would be if it were to take part in the project.

Bair said the total project is estimated to be $1.2 million on the low side and $1.8 million on the high side.

“If we got the 50 percent paid (from the Hansen Foundation) that almost brings the hospital’s portion down to $240,000 — just for the build,” he added.

Bair said these figures do not include the costs associated with an architect.

“We haven’t been talking regularly with the architect,” he added.“That’s before we know the actual costs.”

Nonetheless, Bair thought it was a good deal for a piece of property.

“It might give us some push for building some business,” he said.

The Lynchpin

Steve Berkhouse, chief financial officer, said ECMC gets paid by Medicare based on cost.

"This is something I want for us ... But with what I have here, I think it’s a gamble — and I don’t recommend we gamble."
Andrew Bair
Ellsworth County Medical Center

“Critical access hospitals get 101 percent of your ‘allowable cost,’” he said.“There is a big cost report that we file. There would be so many assumptions built into making an estimate on that, I’m not sure it would be useful information for the decision making. So we haven’t analyzed the cost report impact.”

Bair said the cost report ECMC has to deal with — which governs utilization — is complex.

“Sometimes the rules we play by, particularly in critical access hospitals, don’t make a lot of sense,” he said.“But those are the rules we’re given. I think we have to go through the exercise of finding out if we’re penalized at all for moving those (physical therapy, occupational therapy and speech therapy) off campus and bringing in these types of services (in-house mammography, a new physician’s assistant and a new physician).”

Bair said when it comes to the community center, the hospital is still in the process of discovery.

“My recommendation at our last board meeting was to have some kind of strategic planning in March,” Bair said.“That would give us time to figure out the cost of that report stuff and have a better model here for you.”

Healthcare Economics 101

Bair said as ECMC moves forward, he is not sure how reimbursement is going to go.

“We think it might be reduced rather than increased,” he said. “Inflation, salaries, wages and benefits and other supply costs are increasing.”

Bair said the hospital’s 340B prescription drug program is critical to its bottom line.

“There has been discussion at the federal level about doing away with that program,” he said.

Bair said there are also a large number of hospitals closing throughout the United States.

“Since 2010, an average of one critical access hospital per month nationwide has closed,” he said. “And it is because of the tough financial environment. We have small margins, we’re Medicare dependant, and we’re dependant upon non-operating income revenue such as the 340B program. And that might be at risk.”

Making Assumptions

Berkhouse presented several assumptions regarding the hospital’s financial condition if it were to be a part of the building project.

“We really would not have any significantly additional business, so there would be no new revenue involved,” he said.

Berkhouse estimated the annual operating cost to the hospital, including heating, air conditioning, ventilation and information technology, would be $100,000.

To backfill the spaces in the hospital that would be vacated by physical therapy, occupational therapy and speech therapy, Berkhouse said an in-house 3D mammography machine could be purchased for $350,000. That would replace the mobile outdoor machine currently used, but be available eight hours a day, five days a week, instead of just two days a week.

“This could possibly be a project our (Ellsworth County Health Care) Foundation might be interested in joining in and helping with the funding,” Berkhouse said.

He said ECMC is getting an 80 percent market share on mammography patients who live in Ellsworth County.

Another consideration to backfill the spaces would be to add a physician’s assistant and a family practice physician.

“We estimate it would take a little bit of time to build those practices up,” Berkhouse said.

He said if the hospital were to move the three departments into the community building and purchase the new mammography machine for the hospital, it would be a breakeven proposition. Adding a physician’s assistant and the costs associated with that would mean a $107,000 loss for ECMC in the first year, while adding a family practice physician with the associated costs would mean a $25,000 loss.

“We are very conservative in our estimates and our assumptions,” Berkhouse said.“So I believe there is probably a better probability that we would have better results than this.”

He said if the hospital participates in the community center, its margin, excluding depreciation, would drop from 6.5 percent to 2.7 percent. The hospital’s days cash on hand would also drop. Berkhouse, noted, however, the hospital’s net days in accounts receivable would not be effected.

Berkhouse said adding stress to the hospital’s financial decisions would make ECMC much more dependant upon non-operating revenue, such as the 340B program, and tax dollars. He noted the hospital receives nearly $1 million annually from the 340B program and $228,000 in tax dollars.

“Both the county funding and the 340B have already been decreased and could be eliminated,” he said.

Berkhouse said before physical therapy, occupational therapy and speech therapy were moved off site, the Centers for Medicare and Medicaid (CMS), the governmental body which administers those two programs, must approve.

“Because moving those off-site would have some impact on how we’re allowed to bill it,” he said. “I don’t think it would have a significant impact.”

Talking square footage

Danette Heinze, director of operations, said the hospital and rural health clinic would gain a total of 3,169 square feet, if the three therapy programs were moved into the community building.

Board thoughts

Board member Kenny Schepmann asked if there were any time considerations for building the community center.

“I have always assumed that the longer we take, the more risky it is,” Bair said.

“I think you’re right,” said Allan Grothusen of the Ellsworth Sons of the American Legion.“I think we need to get hold of Betty Johnson from the Dane G. Hansen Foundation and visit with her. We haven’t seen her for several months.”

“I don’t think we’re balking,” Bair said.“I think we’re just trying to understand. My apologies to the Legion. Like I said, I don’t think there’s anybody in this room that doesn’t want to see it happen. But the stakes are high here. And so we’ve got to be cautious and we’ve got to do a good job,”

Board member Karen Pauley said there was concern raised at the last board meeting to make sure the services the hospital might provide if it joins the community center project would not compete with local businesses.

“Have we done an analysis to make sure that is not going to happen?” she asked.

Bair said the hospital’s services will complement what local businesses are doing.

“That would be my intention,” he said.“It’s my intention that it be a wellness center, not a full out fitness center.”

Pauley said the hospital should make the building project part of its strategic planning and budgeting process.

“I’ve got to find out what the timeline is here with the folks who are going to help us,” Bair said. “My impression was you have to strike while the iron is hot. That just feels like a bad way to do it.”