THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, June 1, 1996 TAG: 9606010210
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY DEBRA GORDON, STAFF WRITER
LENGTH: 143 lines
The $1 million-plus that Children's Hospital of The King's Daughters expects to raise during this weekend's telethon will be put to good use, such as community education and immunization programs.
This year, as the hospital faces a financial crunch, the money is crucial:
The hospital's revenues are running $6 million below budget, at $98.6 million.
Its operating margin has been shaved paper thin to 1.3 percent, less than half of the 4 percent national average for children's hospitals.
Since April 1995, the hospital has eliminated 46 positions, laying off 34 people and leaving a staff of 1,534.
The hospital's financial scrimping is driven by a national upheaval in the health-care industry, which has shifted patients from traditional insurance plans to managed care. Managed care aims to reduce medical costs by emphasizing prevention, limiting patient access to expensive specialists and - most challenging for hospitals - reducing the time patients stay in hospital beds.
In January, 52 percent of the hospital's patients, previously covered under the state's Medicaid program, became members of managed care plans.
Suddenly, CHKD's reimbursements dropped. Emergency room visits fell by half. Daily admissions dwindled.
``We've had to do things differently,'' said senior vice president and chief financial officer Richard D. Knox Jr.
CHKD treats more Medicaid patients than any other hospital in Virginia. That's because Medicaid, the government insurance program for the poor, primarily covers women and children. When those children get sick, they go to the region's only children's hospital, which boasts most of the area's pediatric specialists.
But under the Medicaid HMOs, Knox said, reimbursements don't even match the hospital's cost of providing services. Those are actual costs, he emphasized, not what the hospital charges.
Knox and other hospital officials are quick to note that CHKD is still in strong financial shape. Next year's budget predicts an operating margin of 2.1 percent, closer to its goal of 2.5 percent. The hospital has retained its A-1 bond rating.
But as census figures drop - average daily occupancy is running about 76 percent compared with the 90-to-100 percent occupancy rates that were common just a year ago - donations generated by the telethon are even more important to providing services.
For instance, telethon funding pays for research, equipment and education in the emergency room and as part of a high-risk pregnancy program. It also buys specific equipment, such as ventilators and microscopes.
Without telethon funding, some of these programs and equipment might not be available. The hospital has also had to change the way it does business. Reining in the hospital's operating costs has become a top priority.
That means:
Beefing up outpatient programs. CHKD opened a pediatric clinic in Norfolk's Little Creek area to treat patients who used to come through the emergency room. It is reducing the need for more expensive, inpatient admissions by expanding its home health services so patients can leave the hospital earlier, and keeping more patients on outpatient observation wards. Restructuring nursing units and cross-training staff for more efficiency. Previously, patients were grouped according to age or diagnosis, which meant some sections of the hospital could be fully staffed but have empty beds. Now, patients are grouped according to how sick they are. The staff is trained to work in different sections of the hospital, depending on where they're most needed.
Avoiding service duplication. For instance, the hospital has contracted with Sentara to obtain certain laboratory services at a cheaper rate than CHKD could do it.
Working more closely with its doctors to reduce costs. For instance, the hospital and its doctors are designing treatment plans for various illnesses. The goal is to improve children's overall health and reduce hospital admissions.
Eventually, Knox said, the hospital's closer relationships with its doctors will enable it to enter into new kinds of contracts with insurance companies.
For instance, the insurance company might pay CHKD a lump-sum payment each year, and the hospital would provide all necessary care for that amount. If the hospital could bring the cost of providing that care below the payment - either through better preventive health measures or stronger cost controls - it would keep any surplus.
``We have a mission to the children in this region,'' said senior vice president for clinical services James D. Dahling. ``We have not deviated from that mission. . . . The bottom line is we have fewer dollars to support that mission.''
As more and more states require that their Medicaid populations join managed care plans, children's hospitals across the country have experienced some painful new realities, said Lawrence A. McAndrews, president of the National Association of Children's' Hospitals and Related Institutions in Washington.
The growth of commercial managed care is incremental, so hospitals have time to become more efficient as admissions and reimbursements drop. But a Medicaid managed care plan flips huge numbers of patients into an HMO all at once.
And managed care companies, used to dealing with adult hospitals, often don't understand the special needs of caring for sick children.
Thirty percent of the care in most children's hospitals is tertiary, meaning it's provided to the sickest patients. It is also the most expensive care to provide. Most hospitals that treat mainly adults have 12 percent tertiary care rates. CHKD's rate is 54 percent.
In addition, children's hospitals have higher nurse-patient ratios, because very young patients can't speak for themselves and need more attention.
And children's hospitals often need more technology because they must be outfitted for every age, from the tiny premature infant to a nearly adult 16-year-old.
Funding for those special services will increasingly come not from insurance reimbursements, but from private donors, CHKD officials say.
``If we had to dip into our operating funds to fund these programs, it would be very difficult in today's world,'' said A.C. ``Gus'' Miller, board chairman of Children's Health System.
Miller said the board has no plans to use telethon money to pay for general operating expenses, such as salaries and supplies.
Despite the past year's tumult, fund raising has remained strong, said Beth M. Duke, senior vice president for development and community relations.
``I feel that our community knows and understands that we need to change and that we must change. Many of our donors are corporate donors as well as individuals, and they know themselves what's happening in their own industry.''
And she's optimistic about the telethon, which begins tonight.
``Now, more than ever, we're going to be pressing forward and taking our message out to the community.'' MEMO: One year ago, 5-year-old Edwin Ward, of Camden, N.C., suffered a
stroke - a rare occurrence for a child. His mother, Linda Ward, says
Children's Hospital for The King's Daughters saved his life. This
weekend, Edwin and his mother will appear on the CHKD telethon to help
raise money for a hospital that faces a severe financial crunch, yet
still is committed to the best care for its young patients/See story on
B5 ILLUSTRATION: When lives are turned upside down: Relying on
excellent hospital care
DREW C. WILSON
The Virginian-Pilot
Hanging from a sliding board, Edwin Ward shows no signs of the
stroke he suffered. An ambulance brought him from North Carolina to
Children's Hospital of The King's Daughters.
Statement of revenues and expenses
CHILDREN'S HOSPITAL OF THE KINGS DAUGHTERS
GRAPHIC
KEN WRIGHT
The Virginian-Pilot
SOURCE: CHKD by CNB