Changing the Way We Operate

Decreasing government reimbursements mean we must do more with less

Whether or not you’re following this year’s presidential election, you surely know that health care is a major focus of government. Our elected officials face enormous challenges in attempts to balance the nation’s budget. That means, quite simply, government programs like Medicare will be paying us less—not more—for the care we provide now and in the future.

We receive Medicare reimbursement for our inpatient care in three major categories—acute inpatient, observation and overnight ambulatory. We get paid the most for acute inpatient cases; we get paid far less for observation and overnight ambulatory stays. Just two years ago, nearly 100 percent of our inpatient cases were considered acute inpatient. Now, due to changing Medicare rules, 80 percent are acute inpatient; the other 20 percent are either observation or overnight ambulatory.

How does this affect us? It affects our net margin (revenue minus expenses), the amount we use to reinvest in facilities, programs, services and technology. These investments are necessary for us to fulfill our mission—to heal, comfort and care for our friends and neighbors.

Through the end of January, Lehigh Valley Hospital and Health Network was $18.1 million short of our budgeted net margin. Even though we are busier than ever—and we’re currently caring for 10 percent more patients than we did at this time last year—we’re getting paid less for our care. We are doing a spectacular job of caring for our community, but we’re falling short of our financial goals.

These reimbursement changes are permanent. According to a January 2008 report by Moody’s Investor Services, “The single largest risk factor for not-for-profit hospitals is tightening of reimbursement levels by payers, both commercial and government.” As you can see, these reimbursement changes affect not just us, but every hospital nationwide. Fortunately, we are a strong and growing organization. To continue that strength and growth, we’ll need to adjust to the changing times.

How will we change? We need to reduce expenses and become more efficient network-wide while we strive to enhance the quality of care we deliver. We’re already taking steps to accomplish this. Managers from throughout our entire network gave the senior leadership team hundreds of suggestions on ways to reduce expenses and increase revenue. We’re currently evaluating each one and putting into immediate action those that will have the biggest impact. We also are taking a closer look at all our programs and comparing our staffing ratios with other networks that are similar to us in size and scope.

Every decision we make will be the result of careful thought and planning and guided by our mission. Reorganizations will become more common in our lives at Lehigh Valley Hospital and Health Network.

Be assured that we will follow our longstanding policy of allowing affected colleagues the opportunity to transfer to vacant positions in our network. We can’t guarantee we’ll always be able to find a match, but we will try to do so whenever possible. If we do not find a match, we will provide severance based on our current policy.

We’ve weathered challenges before, and we are confident we will overcome this one too. Your insight and creativity helps us find new and better ways to care for our patients every day. That kind of innovation will keep us on the leading edge for years to come.

Elliot J. Sussman, M.D.
President and Chief
Executive Officer

Stuart Paxton
Chief Operating Officer

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