ASHEVILLE — When Kelly first appeared in the Mission emergency department homeless, sick and struggling, she had lived for seven years in a tent on Haywood Road. Plagued by suicidal thoughts, she often found herself coming back – for anxiety, seizures or injuries she sustained surviving without shelter, let alone a “home.”
Through it all, Mission supported her with high-quality, compassionate care ensuring that she never felt, as Kelly would say, “less than.” Today, Kelly is back on her feet, in safe housing being treated for her illnesses.
Kelly’s story embodies the essential reason that not-for-profit hospitals are recognized as tax-exempt by the IRS. In exchange, we must provide tangible benefit to our communities, most important “charity care” or treating those unable to pay. In fiscal 2011, Mission delivered nearly $50 million in uncompensated care. But it’s not about our IRS standing: We cherish our role and feel privileged to provide care to all.
Recently, some have questioned hospital systems’ tax status and leveled harsh criticism about “enormous cash reserves.” That argument lacks even a basic understanding of the realities of running a safety-net health system. Mission’s ability to serve our communities depends critically on our financial sustainability. So let’s address some misconceptions.
• Stable health systems do have significant cash – thankfully. But cash is only one part of the story. Nobody looks just at his savings account and thinks “I’m rich!” because we all know that we must also consider our debt.
Mission’s “savings account” held $690 million in total nondesignated cash reserves on Feb. 28. However, Mission is also obligated to repay $632 million of debt, so the difference is only $58 million. It costs Mission $3 million per day just to keep our doors open, so $58 million would last about three weeks.
• It is also critical that Mission borrow at low interest rates for necessary investments. Strong cash reserves ensure better credit ratings from independent rating agencies like Moody’s and Standard & Poors. Without excellent ratings, Mission would be penalized with significantly higher interest rates, which in turn would raise costs and prices.
• Third, we’re operating in an extremely challenging environment. The Affordable Care Act was intended to expand insurance coverage for almost everybody. Correspondingly, health reform also dramatically reduced the funding provided to hospitals to help offset costs of seeing uninsured patients beginning in 2014.
But that’s not the end of the story. Many uninsured patients were supposed to access Medicaid, but North Carolina chose not to expand it. Mission now faces a no-win situation: a continued high rate of uninsured patients combined with slashed federal assistance amounting to more than $310 million in direct payment cuts over the next 10 years.
Even before those cuts, reimbursement levels for Medicare/Medicaid already failed to pay the actual costs of caring for those patients. What is particularly distressing is that a Medicare/Medicaid cut has the most harmful impact on those who already serve the most vulnerable in the most significant way.
For example, 72 percent of Mission’s patients are covered by Medicare/Medicaid, so a 10 percent reduction in these programs produces a 7.2 percent overall cut. For a comparable system with a “normal” 50 percent Medicare/Medicaid mix, the same 10 percent reduction results in only a 5 percent cut. The harm to a true safety-net system like Mission is 44 percent greater.
Hospitals are also frequently the largest employers in their communities. Mission Health is the largest North Carolina employer west of Charlotte and one of the 25 largest employers in the state, generating more than $1 billion of economic activity that so many others depend upon for their own livelihood.
We are outraged at stories of excess in health care, but we understand what those inflammatory stories don’t tell you. Serving everyone regardless of their ability to pay imposes burdens on not-for-profit hospitals that for-profit hospitals, physician offices and stand-alone surgery centers simply don’t face.
I invite lawmakers to come to Asheville to see the real challenges we face. They will be changed.
Regardless, Mission will remain a source of healing for the communities where we operate, making sure that every “Kelly” is treated with dignity and respect and never made to feel “less than.”
Ronald A. Paulus, M.D., is president and CEO of Mission Health in Asheville.