The Closing of Atlanta Medical Center Part 3: Not for Profits, Cash Reserves, and Haves vs Have Nots.

Well, it has come to my attention that there is much speculation as to who I actually am.  I will continue to hold myself unidentified, however I do want to make the point clear that I am not nor have I ever been employed by a hospital, healthcare system, healthcare advocacy group or any other entity charged with delivering healthcare or advocating thereof. 

There are some tenets or truths that I do believe in as it relates to healthcare and healthcare delivery in our state and the country as a whole.  I do believe that everyone should have access to healthcare near where they are.  A study done by the Georgia State Office of Rural Health several years ago identified that there were over 550 access points to healthcare in Georgia. I think we have that first point covered, albeit not with full capabilities at each of these sites.  These were considered as points of entry to the system where a patient could at least be stabilized before being moved to a tertiary facility with greater capabilities.  In rural Georgia, are these access points as close to citizens as we all wish they could be, absolutely not and we have work to do.

Lack of healthcare in a rural area disables that community’s chance to compete for economic development.  I believe that with every ounce of my being and can carry you around our state and show you proof.  When Telfair Regional Hospital closed its doors in 2008, the area’s largest employer, Husqvarna Outdoor Products, made it known that the next time they rationalized their worldwide facilities, their facility in McRae would be at the top of the list for closure.  The two facilities literally sit directly across the road from each other.  In 2019 when the facility closed, 1,000 jobs were gone.  I’m sure the closure of Telfair Regional was probably not the only reason for the closing of Husqvarna in McRae, but the company made it known in 2008 it certainly would be a consideration.

I believe there are enough dollars in the healthcare system in Georgia to hold every hospital, large or small, harmless in providing healthcare for indigent patients in our state.  About 5 years ago I wanted to see how many hospitals reported a loss for that operating year and how much it was.  In all, if my memory serves me correctly, there were about 50 +/- hospitals that finished that year in the red including Grady.  The accumulated total was around $265 million with Grady being about $95 million of that leaving $170 million among the remainder.  Understand, I am talking about hospitals that lost from $1 to multi-millions were included on this list.  Why is this important?  Because in that particular year, taking Grady out of the mix, it only took the surplus from TWO facilities in Metro Atlanta to make everyone else whole with money left over.

Now, I have not run the numbers on the above exercise in a couple years and I am sure the numbers have changed some back and forth. However, keep in mind that WellStar as a system banked almost $695 million in 2021.  I would be willing to bet a cold RC Cola and a Moon Pie that $695 million would have been more than enough to cover any and all losses at all Georgia hospitals last year.

I have waited until this point of this post to mention WellStar for a reason.  We have small town Not-For-Profit (NFP) hospital systems all over our state doing incredible jobs taking care of their communities and doing so on shoestring budgets day in and day out – taking all that show up at their doors no matter their ability to pay.  While a NFP system like WellStar is closing facilities in areas of high need and worsening healthcare outcomes in what appears to be a sole focus on their bottom line without regard to their charge as a NFP health system.  If I were an administrator of one of these small NFP’s I would be pissed if I had time to be, but I am likely too busy trying to figure out how to cover the payroll for this coming week to worry about much else.

Something is wrong with this picture.

Probably about now you are thinking The Grumpy Old Man is starting to go down the road sounding like a socialist or something the like.  Well, I’m not and I am about as conservative as it comes especially around free enterprise, private property rights and the list goes on.  I am just asking you to stay with me for a little bit here.

WellStar, like many other NFP healthcare systems (but not all) operate under the umbrella of local hospital authorities.  This is all perfectly legitimate and public facing but not very transparent.  Most of these large systems set up operating corporations that remove the authorities one step away from the operations of the facilities.  With WellStar you will find that there are several hospital authorities that they have these agreements with.  The authority is a handy little tool as it is a mechanism for bond issues, it technically owns the facility, and maintains the tax-exempt status on the property.  My point is this, if you are in one of these communities, you as a citizen of that community actually own the hospital.

I am all for making money, the more the better actually.  Let the free-market dog eat all day long as long as no one is being injured or harmed.  I have no problem at all with a for profit hospital system or healthcare entity making money.  As they make money, they pay taxes on profits as well as the property they own unlike the NFP’s.  They make money for their shareholders and provide care in the markets they serve.  If they do not do a good job, the customers go elsewhere and they close OR they figure out how to do a better job and stay in business making a ROI on the risk they have taken.  There, see, I am a Capitalist!

Remember from a previous article I mentioned payor mixes.  Payor mix is the bane of any hospital CEO worth their salt as you have to constantly chase it.  Any payor, commercial or government, is only as good as your back-office’s ability to code billing correctly and accurately.  Then 30/60/90/120 days down the road to make sure you actually got paid and the claim did not get declined on a technicality.  Then, if it did get declined, follow up on it and hopefully get paid no more than 180 days after the service was delivered.  In that mix, it is not unusual at all that over 50% of the revenue comes from some sort of public funds (i.e. your taxpayer dollars) whether it is Medicaid, Medicare, or public employee health insurance programs.  As those dollars are banked then, we have to realize that at some point they came out of our pockets in taxes.  As systems suffer, we are often then asked to pay again from our pockets to help gird up failing or struggling public owned healthcare systems while other public owned systems stack cash away.  Maybe it is time that the General Assembly consider ways to spread the wealth of these arguably “double” public funds?

Don’t get me wrong, reserves are good.  I like reserves and find comfort in them.  The State of Georgia now has a healthy reserve (that some want to spend like a dose of salts through a widow woman) and while it is large, it is still shy of what most business schools recommend for any business.  Most of our large NFP hospitals have healthy reserves too and that is understandable, but we have to ask ourselves when is it enough?  Should these larger systems continue to put cash back and hold for a rainy day while smaller hospitals in communities all over our state are struggling to keep their doors open and provide care?  What will it take for the highly compensated (I promise to touch on compensation soon) leaders of these systems to realize, if all of these safety net hospitals close, these patients are coming to their doorstep next?  When these patients show up several days later than they would have had their local hospital still been open, the acuity of their ailment will be much worse and much more expensive to treat.

I’m not a rocket scientist, but I have enough sense to know a dollar spent early on in an illness usually saves tens of hundreds just a few days later if treatment is delayed.  To people outside of the Metro, 25 miles to a hospital just as well be 100 miles if you can’t get there.  When you take away that 25 mile option and it becomes making a trip in to the Metro, it often becomes life or death.

Well Grumpy, what do you suggest?  Start seeking out these struggling facilities if you are a successful and strong NFP system in our state.  Not all of these strong systems are in the Atlanta Metro area, just look to the deep southwest corner for an example.

The AJC has made quite a big deal about the reserves of Children’s Healthcare of Atlanta (CHOA) over the last year or so.  They are strong and in the $6-7 billion range and I am thankful they are.  Most of us know at least one child that has been treated at some point at CHOA and we know the miracles that happen there every day.  I want them to have strong reserves, I want them to have enough money to buy whatever piece of equipment is needed to save a child no matter the cost – and guess what, that is exactly what they are doing.  They have a large surplus and they are spending it to keep up and plan for the future.  They chose to build a new modern multibillion-dollar facility for the future when they realized their current facilities were becoming outdated with emerging technology and systems (while WellStar is shuttering an obsolete facility and walking away from those it served).  CHOA is also aggressively going out into the rural parts of the state seeking meaningful partnerships with smaller hospitals needing help to adequately treat children in their communities.  I admit, I am a huge fan of CHOA.  They aren’t perfect, but neither am I.

As a side note, I am disappointed in the AJC for their focus on CHOA while seemingly giving WellStar and its closure of AMC pretty much a pass.  They have seen the numbers I have presented in previous articles, yet continue to try and ring that tired old bell of “Medicaid expansion will fix it all”.

P.S. I promise I am coming back to discuss executive compensation and CON and the fallacy that surrounds it.  In the meantime, go look at a ruling from the Georgia Court of Appeals this past week concerning a CON appeal – look toward the back for the Presiding Judge’s opinion…

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