Fiscal year 2014 will be a tough one

Fiscal year 2014 will be a tough one

The fiscal year 2014 will be a tough year for planning due to so many unknowns. We are currently developing our budget for fiscal year 2014, which begins in October. The three overarching factors that are creating the difficulty in planning are:

  • The Patient Protection and Affordable Care Act
  • The North Carolina legislators’ decisions
  • Public response

The Patient Protection and Affordable Care Act, known as the Affordable Care Act (ACA), will hit full steam in 2014. Some of the demands include:

  • Value-based purchasing
  • Reduction in Medicare reimbursement
  • IT implementation and meaningful use
  • Population Health
  • Community Health Needs Assessment/Plan
  • Transparency – public reporting of quality and patient satisfaction scores
  • Health Insurance Exchange

Under the ACA, it is difficult to predict how the factors above will impact our revenue and expenses in the next year. To meet the demands of the ACA, we know that we must address primary care access and develop a model to go to a medical home paradigm, in which we follow the patient within the clinic setting and within the home setting to ensure compliance with medications and preventive health. It is also difficult to estimate our level of compliance with quality scores and HCAHPS scores that will be competitive with other hospitals. At this time, it is also difficult to determine how to best reduce cost while improving quality and HCAHPS scores along with implementation of a medical home methodology.

What the North Carolina legislators will decide is anybody’s guess. Currently, most hospitals are bracing for a worst-case scenario in which the following dynamics may occur:

  • Medicaid rates reduction
  • Sales tax required to be paid by all hospitals
  • Medicaid expansion may not be supported at the state level
  • The Medicaid Disproportionate Share Program may be in jeopardy
  • Management of the Medicaid population by a commercial agency
  • CON amendment is possible in the future

With the combination of the ACA and the decisions made by our State legislators, our hospital along with hospitals across our state will face significant reductions in reimbursement while at the same time continuing to experience rising bad debt and charity care, which would go away if everyone were covered by an insurance plan.

The public response is also a large unknown. At this time, it is anyone’s guess whether the citizens of our community who qualify for Medicaid will be covered if the state fails to do the Medicaid expansion. It is also difficult to predict how many citizens in our community will elect to be covered under an insurance exchange, or just pay the penalty. If many folks decide to pay the penalty and need hospital care, it is more likely than not we will be writing their care off as bad debt and charity care. It is also difficult to predict if small businesses in our community will pay the penalty or pay for insurance coverage for their employees.

If businesses decide to pay the penalty and their employees need hospital care, then again we will be writing this off as bad debt or charity care. It is also difficult to predict our volume for next year since many people may elect not to access care in the hospital setting due to the inability to pay. It is also difficult to predict the volume for our Emergency Department. For it is the mindset of some citizens in our community to use our Emergency Department as their 24-hour free walk-in care, which again we will write off as either bad debt or charity care if they do not pay for their services.

As you can see, FY 2014 is going to be a very tough year, and it is going to be very challenging to develop a budget for next year based on the dynamics mentioned above. I ask for everyone’s support as we face the dawn of a new era in healthcare.


Ed Piper, Ph.D.

Former President & Chief Executive Officer, 2000-2016

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