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Olean General Hospital


Hospitals will begin to feel the impact of sequestration April 1

Posted on: 03/29/2013

As the clock ticks toward April 1, hospitals in the region and across the country are preparing to see dramatic cutbacks in Medicare reimbursement - the fallout that will result from sequestration - and what some hospital administrators see as a failure on the part of Congress to effectively deal with the budget deficit.

For Upper Allegheny Health System hospitals, Olean General Hospital and Bradford Regional Medical Center, the “hit” is estimated to be nearly $1.6 million annually due to an across the board two percent Medicare cut.

“On the surface, two percent may not seem like a huge number, but given the razor thin operating margins of hospitals throughout New York State and Pennsylvania, it may very well mean the difference between a positive bottom line or slipping into the red,” said Timothy J. Finan, president and CEO Olean General Hospital, Bradford Regional Medical Center and Upper Allegheny Health System.

For Olean General Hospital and Bradford Regional Medical Center, the Medicare annual cuts from sequestration amount to $950,000 and $625,000 respectively.

“We have worked very hard since the formation of UAHS to realize operating profitability for both of our member hospitals even in the face of continued reimbursement cuts,” Finan said. “But this is a new ballgame now. Our hospitals are expected to do more with less, improve quality and adjust to all the changes brought on by national health reform. Even as sequestration is approaching, some hospitals are already in deep trouble, some closing down services and laying people off.”

“Hospitals that subscribe to ‘business as usual’ will run the risk of going out of business. It’s as simple as that,” Finan said. “Our first obligation is to keep our facilities running and take care of our communities, so as we move through the year we will be examining every single aspect of our operations including services and staffing.”

“These reductions will make for tough sledding,” Finan said. “The continuation of ongoing hospital reimbursement cuts, year after year, reaches a point where something has to give. Fortunately the collaboration of OGH and BRMC has resulted in significant annual savings that offset some of the cuts. Additionally, a comprehensive ‘lean’ process that has been in place in our hospitals for almost two years is starting to make a difference but we worry if all of these efforts will be enough.

Finan said just looking at the press stories from the different regions of New York State and Pennsylvania indicates that many hospitals are already making some very difficult decisions, including the closure of services and layoffs in order to stay financially solvent.

“While we are confident we have done many of the right things for our patients including the investment in significant facility improvements, the introduction of new technology and the recruitment of new doctors and services to our community, we know that they do not make us immune from the problems posed by these reimbursement cutbacks,” he said. “Given the present reimbursement environment and that which we will face in the future, these types of investments in programs and facilities will be increasingly more difficult to make.”

Finan said that it is frustrating because the needs of hospitals to re-engineer health care in the future to address national health care reform priorities and mandates are being compromised by the inability of Washington to pass a credible deficit reduction plan.

“Congress approved a national health care plan, which begins to address the uninsured and usher in needed healthcare delivery reform but then turned around and failed to deal with the deficit which, in turn, resulted in sequestration…or automatic across the board cuts in all sorts of programs, including Medicare. As a result, the needed resources to transform the healthcare system and take it to a better place are now not there,” he said. “It is unfair to hospitals, and especially to the communities they serve.”

“We know that some of our federal representatives understand our situation and the plight of hospitals in rural communities. It is unfortunate that their advocacy on our behalf has been unable to punch through to the key decision makers in Washington to the point that Congress moves from rhetoric to action,” Finan said.

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