Almost two weeks ago, the newspaper and website carried a story that didn’t seem to get the attention or reaction that it should have.
The headline said it all: “Hospital cuts looming.”
The story said that service reductions are likely at Southwest Mississippi Regional Medical Center, which has reported nearly $29 million in operating losses over the past three years.
Hospital managers said they have not decided on what to cut, and there has been no announcement on the topic since the story ran on Dec. 20. Presumably we’ll know what’s going to happen sometime in the new year.
I understand the decision. What other choice does the hospital have when it’s lost that much money in a relatively short period of time?
But the public needs to be concerned about the message this is sending. One of the two or three biggest industries in Pike County; a public-owned facility that has, over five decades, grown more than anyone could have expected into a truly regional medical center; that is responsible for 1,200 direct jobs and plenty of others as well — is saying that economic forces are preventing it from breaking even.
And the thing is, the hospital’s problems do not include a decline in customers. Southwest Regional and its accompanying operations, like the cancer institute and the cardiovascular institute, have plenty of patients. This area’s residents have not suddenly gotten so healthy that they need less medical care.
The hospital, like all others in Mississippi, is up against some powerful forces. Such as:
• Public insurance programs like Medicare and Medicaid have for several years been reducing what they pay hospitals for patient treatment. This increases the amount of care Southwest provides but doesn’t get paid for.
• Private insurers have tightened their payments as well, according to Southwest officials. The most obvious example of this was the standoff between the University of Mississippi Medical Center and Blue Cross, which took about eight months to resolve.
• Mississippi has not expanded Medicaid under the Affordable Care Act, which would increase the number of people with public health insurance and therefore send more federal money to hospitals. This alone would not solve Southwest’s financial problem, but it would help.
• The covid-19 pandemic made a difficult situation worse. Southwest Regional received $34 million in extra federal money in 2020 and 2021 for covid, but it got nothing this year, which is when the financial problems became severe. Mallory Ginn, the hospital’s chief financial officer, says the problem is that covid has continued but assistance for it has not.
• Expenses have increased by about $10 million a year in each of the last two years. A lot of this is pay raises for nurses and other employees. It was either pay them or lose them, and without a skilled staff a hospital cannot operate.
What’s next? The first question is how much of that annual operating loss, about $9 million or $10 million a year, hospital managers will try to eliminate. I would guess a big chunk of it, if not the entire amount.
That means fewer medical services and almost certainly some layoffs. That’s a tough assignment. One of Southwest Regional’s biggest selling points is that it provides a lot of specialty medical care right here to keep patients from having to travel out of town. “Going further, so you don’t have to,” as their slogan says.
And now they have to start chopping into that. Using an income statement that has information for the two most recent fiscal years, the hospital has to cut about 5% to 8% of its expenses to get to break-even.
In the end, though, the public should be aware of some obvious problems with the finances of the medical world. The biggest one, in my view, is that hospital revenue has to catch up with costs.
This probably means higher taxes for Medicaid and Medicare. It probably means higher premiums for private insurance, with those who are insured paying more of their medical bills.
Researching this story over the past month, the one thing I know is that America’s medical-care system means nothing without hospitals. Southwest Regional is far from alone in its financial problems, but there are solutions. The fixes may not be popular, but it’s clear that something has to change.
