Friday, June 5–AGH Coping With Economic Pinch Like Private Industry

OCEAN CITY – Like just about every other sector, healthcare in general and hospitals specifically are feeling the pinch of the ongoing recession, Atlantic General Hospital (AGH) Chief Executive Officer Michael Franklin told a group of Ocean City business leaders on Wednesday, and just like they are, the hospital is adjusting and adapting its programs in an effort to ride out the storm.

Franklin addressed the Ocean City Economic Development Committee (EDC) on Wednesday to brief them on how AGH is coping, and even succeeding somewhat, in the face of a staggering economy. He told the assembled business leaders the hospital faces economic challenges, precipitating the need to rethink how the facility can improve efficiency and maintain healthy revenue-to-expenditure margins.

Like any other business, a hospital’s economic health is often measured in statistics, and Franklin’s presentation to the EDC on Wednesday was full of numbers. Most were positive and some were alarming, but the one figure that stood out was just how much families and individuals are spending on healthcare and in most cases, that carries over to the employers who provide coverage for their workers.

“In 2009, an average family of four will pay $15,000 per year on health care,” he said. “As business owners, you are paying a high percentage of that for your employees.”

Franklin said the current economic crunch has forced many individuals and families to forego needed healthcare at the expense of other necessities and the numbers from a recent survey bear that out. For example, according to the statistics, 42 percent of those surveyed said they are delaying or avoiding getting routine treatment while another 33 percent are putting off healthcare altogether. Another 29 percent said they did not fill prescriptions after seeing a doctor and 27 percent did not follow up with the recommended treatment.

“It becomes a situation of ‘pay me now or pay me later’,” he said. “People with chronic problems are putting off their treatment, while those who should see a healthcare provider are avoiding it, largely because of economic concerns, but sooner or later, it can’t be avoided and their situations might be worse.”

Franklin said hospitals in general have seen a decline of around 43 percent in patient revenue, while many rural hospitals have reported declines in patient revenue as high as 60 percent. Most hospitals, including AGH, rely heavily on non-operating revenue, or those funds derived from endowments, grants, donations and fundraising, but that sector of revenue has taken a hit as well.

At AGH, just like any other business, walking the fragile line between revenue and expenses has become a challenge, but Franklin said the hospital has tip-toed on the positive side of the margin despite the grim numbers and the current economic climate.

“Even though this has been a difficult year, we’ve managed to maintain a positive margin,” he said. “It looks like we’ll be on the positive side by about $2.3 million and that’s largely because of revenue coming in from donations, grants, gifts and endowments. All of our special events broke records this year despite the economy.”

However, maintaining the positive margin will continue to be a challenge in the near future. Maryland is the only state in the country to regulate the prices hospitals can charge for services and the figures are usually moving targets. Franklin predicted the state would likely upgrade the prices hospitals charge for services this year by as much as 1.5 percent. However, with inflation, the cost of providing the services and the supplies will likely increase by about 6 percent.

“As you can see, we’ll have a tough time covering our margin,” he said. “We have to improve our efficiency to keep up with the gap in the percentages.”

Franklin said AGH infuses about $70 million into the local economy directly and indirectly including around $32 million in payroll alone. For the facility to maintain its total community benefit, it has to rethink the way it is doing certain things to increase efficiency. Franklin laid out a variety of ways the hospital and the network of associated healthcare offices throughout the community can accomplish that.

Some of the initiatives answer a need for the hospital and the associated facilities to embrace technology faster including electronic prescription filling and electronic check-in stations for patients. Already, AGH has improved its efficiency by participating with other rural hospitals in the area on collaborative intensive care unit monitoring program called Md. E-Care.

Another option being explored is expanding on the concept of retail medical clinics or walk-up facilities that allow patients to get treatment for non-traumatic injuries or illnesses without going straight to the hospital. The program is having success in other areas around Maryland and is working already in Worcester County with facilities such as the Atlantic Immedicare clinic on 10th Street in Ocean City.

“That’s something important to our region,” he said. “Being a rural community, people have to travel a long way for healthcare and might not go because of that.”

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