The Math Doesn’t Add Up on WellStar’s Decision to Close Atlanta Medical Center

Not only am I grumpy, but I’m also pretty impatient sometimes… well, most of the time.  I was told that I wasn’t grumpy enough in the last article, so I will try harder this time.

I left you with a couple items of homework when I last was here.  Just like any good teacher, there are homework items that get checked back on and others that they go over in class.  Now, I’m not trying to say we are having class here, but I do hope you are learning something and thinking about a few things.

Now back to our subject at hand, Atlanta Medical Center (AMC) and WellStar.

One of your homework items was to look at a report that was attached to my last post from our friends at the National Academy for State Health Policy that takes a deep dive into the finances of AMC and its owner, WellStar.  Looking a little further than this report as it relates to COVID dollar distribution within WellStar shows something curious.

AMC received Public Health Emergency funding in the amount of $20,501,856 in 2020 and $22,960,860 in 2021.  At the same time WellStar’s flagship facility Kennestone brought in $50,476,838 in 2020 and $38,347,096 in 2021 for an overall total for each of $43,462,716 for AMC and $88,823,934 at Kennestone.  So what you may ask?  While I do not know what the payor mix is for each facility (systems usually hold that pretty close to the vest) common sense tells us that AMC likely has a MUCH higher Medicaid, self-pay (non-insured) and indigent (no-pay) than Kennestone which serves a much more affluent area where individuals are covered with third party payors (insurance) and Medicare.

A quick explainer.  Medicaid vs Medicare, what is the difference?  Medicaid is the state administered program for the non-abled bodied, infirm and qualified indigent.  Medicaid pays the provider roughly 86% of the cost of providing the care in a 70/30 fed/state pay mix.  Medicare is the federally controlled program for individuals typically at least 62 years old or older, it also covers some permanently disabled that are below 62.  Medicare usually pays at what is considered 100% of cost and entirely by the feds.  So, as you can see, with a payor mix heavy in Medicaid and even Medicare, you are going to need a bigger truck to buy those hammers at $3 and sell them for $2 – business will be SO good.

True self-pay is usually a rate negotiated that is above 100% of cost, yet usually considerably less than the contracted rated that third party insurance pays.  Third party insurance will typically be 120-150% of cost (roughly 120-150% of Medicare rate).  This is how they stay in business and is necessary to have a return on investment to update facilities and equipment. 

Now, back to our regular programing.  As I said, common sense tells us that AMC would have a much higher rate of Medicaid, self-pay and indigent than Kennestone and thus would have logically gotten more of the COVID distribution. 

But it didn’t.

Accompanying the closure announcement, it was said by WellStar officials that AMC had a really tough go of it the last couple years and had lost $107 million in the last year.  Well, their own reporting does not even come close to backing that claim.  In fact, according to their own Medicare Cost Reports (a federal report that is signed as being true by a hospital official – think perjury) AMC did lose $9,950,664 in 2020 but did post a gain of $851,375 in 2021.  While $9.9 million is a bunch of money, it is a long way from $107 million and not even in the year claimed.

AMC was always going to be on the bubble of making or losing money by the nature of its location and abilities as a Level 1 Trauma Center.  However, WellStar has 8 other facilities to help offset any losses in any particular year which should be looked at as a blessing.  What a blessing the other 8 have been too!  You see, those Medicare Cost Reports I mentioned above, well, they show WellStar as a system of having a gain in assets and reserves of $598,863,916 in 2020 and another gain of $694,740,978 in 2021.  Oh, and remember that 2021 was the year they said they lost $107 million at AMC.  As a system, they closed their books on the previous year with a staggering $2.7 billion in assets and reserves – you read that correctly $2,700,000,000.00. Even if we give WellStar the benefit of the doubt, which just might be a stretch, $107 million is less than 4% of WellStar’s cash reserves.

So, with the closing of the ER at their South Atlanta facility earlier this year and now the complete closing of AMC as of November 1, I have to ask this question;  Why is a healthcare system that is allowed to operate as a Not-For-Profit closing services and walking away from facilities that are at the heart of the reason they are allowed that Not-For-Profit designation? Especially when they have the resources necessary to keep it open.

Let’s circle back to that payor mix I mentioned earlier.  It would appear that WellStar is leaving facilities, communities and patients behind in areas where the payor mix is not to their advantage.  Those places and people with high indigent, self-pay and Medicaid populations are being left to fend for themselves and tossed further into an overburdened safety net system.  What about this is right, moral or ethical?

Governor Kemp, leaders of Fulton and DeKalb Counties, Grady and others have stepped forward to stand the gap being left by WellStar’s leaving everyone high and dry.  The good that comes from this is that the new beds being stood up are modern and fully up to date.  The number of beds coming online will be 100% available and more than cover the number of actual serviceable beds that remained at AMC at its closing. 

This still leaves us short our second Level 1 Trauma Center for Atlanta, however Grady remains in its status as a Level 1 and is surrounded throughout the Metro region with numerous Level 2 centers.  For what it’s worth, I would be very comfortable being taken to a Level 2 in an emergency.  I will note here though, Atlanta has not always had 2 Level 1 Trauma hospitals, AMC did not gain this designation until 2011.

However, with the loss of AMC, God forbid we have another flood at Grady’s ER.

I leave you with these questions for now as a little self-reflection homework.  I ask again, why should a Not-For-Profit (NFP) hospital system be allowed to close facilities that are not consistently profitable and walking away from those whom they are supposed to serve as part of the agreement for being allowed to skip paying many taxes?  Why should they remain a NFP or more importantly be allowed to operate as a NFP and enjoy the tax-exempt benefits?

Maybe sometime soon, I will have a chance to visit with you again and we can talk about the fallacy that is Certificate of Need and the incredible amounts that some NFP healthcare system executives get paid.