Medicare funding shortfall hits hospital

The Ashland Community Hospital is feeling a financial impact from patients' inability to pay their medical bills and low federal reimbursement rates for treating the elderly. The nonprofit hospital provided $6.3 million in uncompensated care during the 2006-2007 fiscal year, according to Chief Executive Officer Mark Marchetti.

That figure jumped to $8.4 million in uncompensated care for the 2007-2008 fiscal year, which ended June 30, he said.The hospital is in the midst of a financial audit which will reveal whether it ended the 2007-2008 fiscal year in the black, at the break-even point or in the red. Marchetti is predicting a loss, but is hoping it will not top $100,000.

The hospital had total expenditures for the fiscal year of about $48 million, he said. Marchetti said hospitals across the nation are faced with the same problems.

"It's a trend for all hospitals. Ashland Community Hospital and the hospitals in Medford are struggling with the issues of declining federal reimbursement for Medicare, an increase in the number of people who lack insurance and increasing costs, especially wages," he said.

The hospital has gone from being profitable in the early 2000s to having a small surplus a few years ago to this last fiscal year's projected small loss, Marchetti said.

With its mild climate and range of medical centers, the Rogue Valley is a magnet for retirees. Many are drawn to Ashland because of its host of cultural amenities.

The federal government reimburses Ashland Community Hospital just 36 cents for every 50 cents the hospital pays to care for senior citizens on Medicare, Marchetti said.

Of the $8.4 million in uncompensated care the hospital provided last fiscal year, $4.9 million was from a shortfall in federal reimbursements to cover the care of patients on Medicare and Medicaid, he said.

"We lose 14 cents on every 50 cents of cost. When you look at the total volume of care to Medicare and Medicaid patients, it's almost $5 million short. That is a big problem of the Medicare program nation-wide," Marchetti said.

As Ashland's population continues to age and more retirees move to town, the hospital is feeling more of a pinch.

When he joined the hospital as its chief executive officer four years ago, Marchetti said about 42 percent of its revenue came from the Medicare program. Now that percentage is at about 48 percent. During some months last fiscal year, more than 50 percent of hospital revenue came from Medicare.

In addition to having to make up for the shortfall from federal Medicare reimbursement levels, the hospital provided $1 million in uncompensated care through its charity program that helps people who can't pay their bills. Patients must apply for relief and present their financial information to the hospital to qualify, Marchetti said.

The hospital also absorbed $2.5 million in bad debt from bills that people didn't pay, he said.

With very little influence over the revenue side of the picture, Marchetti said the hospital is looking to control costs in all areas, from contracted services to staffing to supplies.

He said the good news is that service volumes are going up for Ashland Community Hospital, unlike in some towns with declining populations.

Staff writer Vickie Aldous can be reached at 479-8199 or

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