ON SEPTEMBER 5, 2016 WE PUBLISHED AN ARTICLE ABOUT HOW ON AUGUST 16, 2016 INDIAN RIVER MEDICAL CENTER (IRMC) CFO GREG GARDNER SPOKE BEFORE THE INDIAN RIVER COUNTY HOSPITAL DISTRICT (IRCHD) TRUSTEES AND PROJECTED A BREAKEVEN OPERATION FOR THE FISCAL YEAR ENDING 09/30/16.
When asked by IRCHD Trustee Dr. Val Zudans why the Sebastian River Medical Center (SRMC), “with the same demographics, makes money and we don’t,” Mr. Gardner said it was due to the “egregious” disparity in private payer rates between what IRMC, SRMC and Lawnwood Regional Medical Center (LRMC) are paid for the same services.
According to Mr. Gardner, with Blue Cross, for example, SRMC is paid twice what IRMC is paid and LRMC is paid three times as much for the same services. This speaks to different contracts between the hospitals and the private payers. Mr. Gardner said if IRMC was paid the same rates by Blue Cross as SRMC, it would bring $50 million to IRMC’s bottom line.
Then at the October 20 IRCHD Chairman’s meeting the Treasurer of the IRMC’s Board of Directors, Mr. Jack Weisbaum, essentially warned against achieving such financial soundness by raising the level of insurance reimbursement from private insurers, because they would raise their insurance premiums to others, and that the employers hardest-hit by this sequence of events would be the governmental entities of our county, because they self-insure.
Mr. Jack Weisbaum
In response to this claim about how Mr. Weisbaum implied that negotiating better insurance reimbursement rates from private payers would affect the governmental entities of our county, we received this letter from Dr. Joseph Saul, Candidate, IRCHD No. Six.
“October 27, 2016
An Open Letter to the Residents of Indian River County
From: Dr. Joseph Saul, Candidate, Indian River Hospital District #6
Many of you have become aware of the ongoing duel of open letters between Dr. Val Zudans and Ms. Karen Deigl, the two candidates for Indian River County Hospital District Seat 5, over negotiating higher reimbursement rates from private payers. I have been following their letters closely, as I am a candidate for Hospital District Seat 6.
To sum it up, Dr. Zudans has challenged Indian River Medical Center, Inc., the private company that leases the hospital on 37th Street in Vero Beach from the Hospital District, to perform better financially by negotiating better rates.
Dr. Zudans is of the opinion, and I agree with him, that a more financially sound hospital is beneficial to the people of Indian River County.
At an October 20th monthly televised monthly Indian River County Hospital District Chairman’s meeting, the Treasurer of Indian River Medical Center’s Board of Directors, Mr. Jack Weisbaum, put forth a disingenuous proposition and warned against achieving such financial soundness by raising the level of insurance reimbursement from private insurers, because the private insurers would then raise their insurance premiums, which would negatively impact the governmental entities of our county, such as the School District of Indian River County, because they self-insure.
Ms. Deigl has echoed Mr. Weisbaum’s position.
The manner in which insurance companies set premium rates for policies is quite complex, as I learned as an attorney practicing insurance law with a major firm in Manhattan. Before any rate is effective, it must be approved by a State Insurance Department.
For health insurance purposes, Indian River County is part of one of eleven Community Rating regions across the State of Florida. Each area encompasses approximately 1.8 million people. Indian River Medical Center services a community of approximately 70- to 80,000 people. It is extremely difficult to believe that an increase in reimbursement rates at Indian River Medical Center, which would affect about 25-30% of the patients seen at that facility, would affect the insurance rating over so large a Community Rating area.
Should Indian River Medical Center, Inc. successfully negotiate the reimbursement rate increases it deserves, let us take a rational look at the effect that would have on the finances of our county.
Yes, self-insurance would be more expensive as Ms. Deigl suggests. That cost increase may conceivably amount to as much as $3 to $4 million per year, as a worst-case scenario high estimate. The county entities affected, being the county itself, the school system, and the sheriff’s department, have the option of exploring purchasing insurance, which may become a less costly alternative to self-insuring.
Otherwise, the county will need to raise taxes by $3 to $4 million per year.
At the same time, however, Indian River Medical Center, Inc. will have become a profitable enterprise. There will be no need for taxpayer support for its duty to care for the county’s indigent population (this duty actually falls on the Hospital District and is passed to Indian River Medical Center, Inc. under its Lease of the hospital facility and grounds and the Indigent Care Agreement by and between the Hospital District and Indian River Medical Center, Inc.).
The resulting savings to taxpayers will be approximately $6 million per year. This more than offsets the increased cost of $3 to $4 million per year, leaving the taxpayers with a net gain of $2 to $3 million annually. Ms. Deigl portrays this annual net savings to taxpayers as “shortsighted.” In truth, she, and Mr. Weisbaum, never factored in the savings to the Hospital District that would come from de-funding a profitable not-for-profit hospital.
In sum, I agree with Dr. Zudans that the goal of Indian River Medical Center, Inc. should be to increase its revenues. It is unfortunate that current hospital management has let the situation get so far out of hand. A cold, sober, and full understanding of the situation is necessary at every level, including Hospital District.
Dr. Joseph Saul”