The MED May Close Emergency Services in Early 2010
Just days before Halloween, the Regional Medical Center at Memphis (The MED) Board of Directors voted 7 to 1 to send a proposal to the Shelby County Commission to close its Emergency Department if it cannot get $32 million in additional funds by Feb. 1. The move was no trick that patients requiring emergency care may not be treated.
"The decision to move in the direction of service reduction has not been made lightly," insisted Claude Watts, CEO of The MED. "The Board and The MED leadership team have worked on this plan since last November. Several alternatives have been considered. The MED continues to stay focused on providing high quality patient care to patients who come to us from throughout the Mid-South."
The MED serves as a regional healthcare resource providing access to the only Level 1 trauma center and other safety net services in a tri-state region.
The reduction in services could include closing MEDPlex, ambulatory services and Emergency Department doors. Proposed service reductions do not affect the Trauma Center, Burn Center, Neonatal Intensive Care Unit, or Women's Services.
The Board's decision was based largely on a 5-year funding request (2010-14) white paper that highlighted The MED's long-term financial problems.
"The MED is facing a clear and present danger of its ability to remain a regional resource," according to the abstract. "To help ensure that The MED continues to operate at the current level of services, $32 million in additional subsidies, plus consideration to upgrade the physical plant, is required."
The MED has been under-funded and under-capitalized for more than 15 years, Watts pointed out, with subsidies from Shelby County and the State of Tennessee not keeping pace with inflation. He also noted that financial support has been nominal from Mississippi and Arkansas—states with significant representation in The MED's Emergency Department patient mix.
The MED's ability to serve as the regional safety-net facility has been compromised, based on myriad challenges—a growing uninsured population, an antiquated physical plant, a payor mix that provides significantly less money than costs, a flat county subsidy, and unpredictable financial support from all three states—compounded by years of shortfalls in operational funding and few capital investments.
The Mississippi Factor
Jim Craig, director of health protection for the Mississippi State Department of Health, said The MED serves as a designated Level I Trauma Care Center in the Mississippi Trauma Care System, and the hospital also acts as a regional tertiary care facility at the hub of the Delta Trauma Care Region, with the responsibility of providing leadership in education, trauma prevention and research as well as system planning.
"Mississippi Trauma Care Trust Funds have been distributed in past years to designated trauma care centers—such as the MED—as well as to eligible physicians for uncompensated care of qualified trauma care patients," said Craig. "Available funds are allocated based on the hospital Diagnosis Related Groups (DRG) Relative Weights related to traumatic injuries for those qualified Mississippi trauma patients submitted."
The distribution reports for the last few years, published by Horne CPA Group, shows that The MED received $674,779 in fiscal year (FY) 2006, while surgeons and anesthesiologists received a total of $90,980. In FY 2007, the hospital received $695,957, while surgeons and anesthesiologists received a total of $236,502. In FY 2008, the hospital received $2.16 million, while surgeons and anesthesiologists received a total of $605,141.
"This fiscal year, a new distribution formula will be used," Craig explained. "Compared to previous years where 70 percent of the distribution amount went to designated trauma care centers and the remaining 30 to eligible physicians, this year's funding will be distributed based on participation level of the hospital (Level I, Level II, or Level III) as well as the number and severity of qualified trauma patients. Thirty-five percent of the total distribution amount will be distributed to hospitals based on participation level, 50 percent based on number and severity of patients, and 15 percent to emergency medical services. Also new this year, at minimum 30 percent of the total individual hospital payment will be earmarked for physician-specific resources."
Earlier this year, The MED entered into a cooperative agreement with the Mississippi State Department of Health for receipt of funds, not to exceed the Medicare allowable rate, from the Mississippi Burn Care Fund.
"This is in addition to trauma care funds," said Craig. "Available burn care funds are allocated based on the hospital Diagnosis Related Groups (DRG) Relative Weights, related to burn injury for those qualified Mississippi burn patients submitted."
DeSoto County Impact
Gene Holcomb, chairman of The MED Board, acknowledged that closing emergency services in early 2010 would be "a damaging blow" to local healthcare providers who would absorb the brunt of the closure, adding that "we either have to get more money or we have to cut something."
For the fiscal year that ended June 30, The MED reported more than 55,000 visits to its Emergency Department and reported a net income loss of $20.9 million.
The $32 million in additional funds is very specific—the difference between the total operating subsidy of $95 million and the current average annual operating subsidy of $63 million—to allow The MED to meet cash flow needs.
The news comes at a time when economists are predicting a double-dip recession, controversy over healthcare reform has divided the nation, and Memphis healthcare providers are digging deeper to care for the poor, the uninsured and the underinsured—not only in pockets of poverty like North Memphis, South Memphis and neighborhoods like Frayser and Orange Mound, but also in unlikely places such as Hickory Hills, where half the patients coming through the doors of Christ Community Health Services' new 15,000-square-foot clinic that opened in April are uninsured.
"That's more than we anticipated," admitted Burt Waller, executive director of Christ Community Health Services (CHS). "The trend there may better reflect the needs of the uninsured's access to care."
Michael Garriga, administrator for DeSoto County, said that residents north of Highway 82 requiring emergency care are generally taken to The MED. "Our county leaders would certainly advocate taking a leadership position to continue support of and funding for The MED," he said.
Earlier this year, The MED cut more than 200 jobs—roughly 11 percent of its workforce—in a move that was not linked to the sagging economy or to possible future cuts to government subsidies, according to Christine Pappas, COO of The MED. Instead, the decision resulted from following recommendations from hospital consultant FTI Cambio, hired in 2008 to help sustain the financially troubled hospital.
Direct funding from the American Recovery and Reinvestment Act (ARRA) would have helped, but The MED did not receive those monies.
"The most direct impact to The MED from the stimulus bill was avoidance of cuts in payments for essential access funds, Medicaid rates and other supplemental payments," explained Angie Herron, spokesperson for The MED.
Because states received stimulus funds for their Medicaid programs, these additional funds are non-recurring, and therefore, the potential threat of the future of The MED remains omnipresent, Herron added.
Watts had said earlier in the year he did not anticipate that the funds would address the hospital's projected capital needs totaling roughly $300 million.