Congressional Record, Volume 148 Issue 90 (Monday, July 8, 2002)

[Congressional Record Volume 148, Number 90 (Monday, July 8, 2002)]
[Senate]
[Pages S6347-S6351]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

LOW MEDICARE REIMBURSEMENTS

Mr. SPECTER. Mr. President, for a considerable period of time, there
have been a number of counties in Pennsylvania that have been suffering
from low Medicare reimbursements, which have caused them great
disadvantage because their nurses, their medical personnel, are moving
to surrounding areas. I refer specifically to Luzerne County,
Lackawanna County, Wyoming County, Lycoming County, Mercer County, and
Columbia County in northeastern Pennsylvania. Those counties are
surrounded by MSAs--metropolitan statistical areas--in Newport, New
York, to the north; in Allentown to the southeast; and to the
Harrisburg MSA to the southwest.
When these counties are so surrounded by--and a similar situation
exists in Mercer County, which has higher rates in immediately adjacent
areas--there has been a flight of very necessary medical personnel.
Last year, in the conference on the appropriations bill covering the
Departments of Labor, Health and Human Services, and Education, the
conferees were in agreement that there should be relief for these areas
in Pennsylvania that were surrounded by areas that had higher MSA
ratings. At the last minute, word came from the chairman of the
Appropriations Committee that there would be an objection to including
language in our conference report because it was not included in either
bill--in the House or in the Senate. That does make it subject to a
point of order, so we had a discussion. I went to the office of the
chairman of the Appropriations Committee, Senator Byrd, and did my best
to persuade him to make an exception in this case because of the
extraordinary hardship. Senator Byrd, understandably, declined.
We then talked about bringing the matter forward in the supplemental
appropriations bill. I thought it highly likely that, given the
immediate history, we could accomplish this accommodation, this
correction, in this appropriations bill. The House of Representatives
came forward, and the House leadership on the Ways and Means Committee
and the House leadership generally agreed with Congressman Sherwood,
who represents these counties in northeastern Pennsylvania in the House
of Representatives, and also Congressman Phil English, who represents
Mercer County, that these were indeed meritorious--not that there were
not other counties that had similar problems, but these counties were
meritorious and should have a change in the MSA.
When the matter reached the Senate floor and I filed an amendment to
have a similar result, there was resistance because, after all, it was
in the House bill and it could be taken up in conference. It is custom
on a matter that a colloquy was entered into between Senator Byrd and
myself, and Senator Byrd said he would give every consideration to it
in the conference.
It is true that there are other places in the United States that have
problems, but I believe none is so pressing as what is occurring in
these counties in Pennsylvania, as is evidenced by the fact that the
leadership in the House of Representatives--as I say, the Ways and
Means Committee chairman and the leadership of the House--agreed to
these changes.
A week ago today, on July 1, I visited in Wilkes-Barre, PA, at the
Gossinger Clinic, with representatives of the hospitals and went over
with them the situation that had occurred and asked that they submit
memoranda, which showed the extreme plight, which I could then share
with my colleagues in the Senate, which I am now doing, and it will be
in the Congressional Record for everyone to see.
A memorandum prepared by Bernard C. Rudegeair of the Greater Hazleton
Health Alliance pointed out the following:

With competing institutions located within a 30- to 60-
minute drive from our front

[[Page S6348]]

doors--and able to pay up to $4 per hour more to attract
staff--the Greater Hazleton Health Alliance has experienced
an outmigration of clinical staff to those areas.
In the last 18 months, 52 employees--including registered
nurses, licensed practical nurses, pharmacists, radiology
technologists and physical therapists--have resigned.

Then he goes on to say:

Nearly three-quarters of our inpatient population are
Medicare recipients. It is often difficult for them to find
reliable transportation to out-of-town healthcare facilities.

So they are serviced at Greater Hazleton causing these hardships and
losses.
The senior vice president of operations at Geisinger Wyoming Valley
Medical Center, Conrad W. Schintz, wrote on July 3 as follows:

There are 10 vacancies in the support departments, such as
laboratory and radiology. A significant factor in these
vacancies is the higher wages and benefits that are paid in
the Philadelphia and New York metropolitan areas that are
within a 2.5 hour drive from our hospital.

Similar concerns were noted by the Community Medical Health Care
System of Scranton, PA, where Dr. C. Richard Hartman, president and
CEO, wrote a detailed memorandum, a part of which is as follows:

Community Medical Center Healthcare System's exit
interviews with employees indicate greater opportunities
outside the MSA.

The hospital currently has 67 openings, 45 full-time-equivalent
positions, and further noted the problems with retaining nurses there.
Similar concerns were expressed in a memorandum from Mr. William Roe,
vice president of finance for the Moses Taylor Health Care System,
pointing out that ``while 30 percent of all hospitals in Pennsylvania
had negative total margins for the 3-year period between 1999 to 2001,
nine (9) of the thirteen (13) hospitals located in this MSA have had
negative total margins.''
Then the memorandum from Mr. Roe goes on to point out the
difficulties which have occurred as a result of outmigration of medical
personnel.
Similar comments were made by Vice President William J. Schoen of
Allied Services from Clarks Summit who points out:

Pocono and Allentown area hospitals are recruiting [our]
workers by offering more generous wage and benefit packages.

Of course, that is made possible by the higher reimbursement because
the MSA area is different.
A similar note was offered by Mr. James E. May, president and chief
executive officer of Mercy Health Partners who pointed out:

The Scranton/Wilkes-Barre/Hazleton MSA is surrounded by
facilities with significantly higher Medicare reimbursements.

The balance of his memo, which I will ask be printed in the Record,
details further the difficulties which his hospital system faces.
The Wyoming Valley Health Care System, in a letter dated July 5 from
Dr. William Host and Mr. Michael Scherneck, the president and chief
executive officer and the senior vice president and chief financial
officer point out the problems in retaining registered nurses because
of the lower MSA which the Wyoming Valley Health Care System has.

CEO Robert Spinelli from Bloomsburg Hospital wrote to my executive
director in Harrisburg, Andrew M. Wallace, dated July 3:

The current wage index rates have contributed to three
years of deficit income, which has resulted in the inability
to recruit qualified staff.

The Wayne Memorial Hospital, which is in the Newburgh, NY, area in a
letter from director of finance, Michael J. Clifford, dated July 3 made
the same point:

The increase in Medicare payments that would result from
this change in MSA to Newburgh, New York, would mean
approximately $450,000 of additional Medicare reimbursement
for Wayne Memorial.

Tyler Memorial Hospital in Tunkhannock, PA, sent a memorandum
expressing the same basic point.
A similar letter has been submitted by the Marian Community Hospital
by Chief Financial Officer Thomas L. Heron from Carbondale, PA.
Mr. President, I ask unanimous consent that these memoranda and
letters all be printed in the Record following my statement.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. SPECTER. These letters set forth in some detail, Mr. President,
which I will not take the time to read now, but the theme is the same.
These are hospitals in great financial distress. These are hospitals
which are serving an aging population in northeastern Pennsylvania.
Similar circumstances exist in Mercer County. The way to correct this
is to make the adjustment which is present in the House bill which can
be accomplished by the Senate receding to the House position.
As I say, last year on our conference report, we had agreed among the
conferees to make the adjustment, and then did not proceed in that way
because there was a technical problem with the provision not having
been included in either bill. But this year, the leadership of the
House of Representatives has included these corrections for these
areas, and now I call upon my colleagues on the Appropriations
Committee to recede and I call upon my colleagues in the full Senate to
approve a conference report which will include these very important
corrections for these six counties in Pennsylvania which perform great
service. But because of their being surrounded by other hospitals with
MSAs, metropolitan statistical areas giving greater reimbursement, they
cannot compete with nurses and other medical personnel.
I thank the Chair. I yield the floor.

Exhibit 1

Points for Conference Committee on Wage Index--Bernard C. Rudegehir,
Greater Hazleton Health Alliance

With competing institutions located within a 30- to 60-
minute drive from our front doors--and able to pay up to $4
per hour more to attract staff--GHHA has experienced an
outmigration of clinical staff to those areas.
In the last 18 months, 52 employees--including registered
nurses, licensed practical nurses, pharmacists, radiology
technologists and physical therapists--have resigned. More
than half of them cited the opportunity to earn higher wages
at other hospitals as the reason for their departure.
And though our staff is mobile and may be willing to
commute up to an hour for a more lucrative position, our
patient base is not.
Nearly three-quarters of our inpatient population are
Medicare recipients. It is often difficult for them to find
reliable transportation to out-of-town healthcare facilities.
As of July 1st, our malpractice insurance increased nearly
50 percent. Staff continues to find opportunities elsewhere,
driven by higher wages and attractive sign-on bonuses. We
have been forced to adjust salaries to stay competitive. That
has had a significant impact on our bottom line--a $3.2
million loss in fiscal year 2000.
In this new age of domestic security awareness, our
hospitals have become even more important fixtures in our
communities. In the event of a tragedy or terrorist event (a
nuclear power plant is located just miles away), our
communities would look to our hospitals, not only as sources
of emergency medical care, but as places of refuge,
information and comfort.
Our elderly patients are the ones who need us most. Many of
them toiled in the local coal mines and served our country in
foreign wars. Their strong work ethic and love of country has
often led to illness and injury that will plague them for the
rest of their lives. This is a proud population that we are
committed to caring for far into the future.
____

Geisinger Health System,

Wilkes Barre, PA, July 8, 2002.
Senator Arlen Specter,
Scranton, PA.
Dear Senator Specter: Thank you very much for your
continued work on the Metropolitan Statistical Area (MSA)
Amendment Issue. This is a most important topic for the
future well-being of hospitals in Northeastern Pennsylvania,
including Geisinger Wyoming Valley Medical Center.
There are a number of ways in which Geisinger Wyoming
Valley Medical Center is currently disadvantaged due to our
region's rural designation for Medicare reimbursement.
Our area is losing a tremendous amount of health care
professional talent to neighboring areas with urban
classifications and higher wage and salary structures. RNs R
Us advertised in the Wilkes-Barre last week specifically to
transport nurses to both the Allentown and Philadelphia
areas. Geisinger Wyoming Valley Medical Center recently lost
one registered nurse to the Philadelphia area and two
registered nurses to Sacred Heart Hospital in Bethlehem for
better wages.
Despite our intensive recruitment efforts over the past 6-
12 months, it is obvious that we cannot recruit nurses from
the Allentown/Bethlehem area due to the higher wages offered
in that area.
Geisinger Wyoming Valley Medical Center and other local
hospitals have lost numerous nurses over the years to
Philadelphia hospitals--where the nurses work two, 16 hours

[[Page S6349]]

weekend shifts, receive full time wages and full time
benefits.
Geisinger Wyoming Valley experienced a 47% increase in
insurance costs from the previous year ($1.8 to $2.7
million).
Uncompensated Care for fiscal year 2002 (annualized May) at
Geisinger Wyoming Valley Medical Center is approximately $2.4
million. This includes charity care, bad debt and community
services.
Reclassification of the MSA would result in an
approximately $2 million Geisinger Wyoming Valley Medical
Center. Such an improvement to our bottom line would allow us
to further invest in providing excellent health care for the
people of Northeastern Pennsylvania. Once again, thank you
for your efforts on our behalf.
Sincerely,
Conrad W. Schintz,
Senior Vice President/Operations.
____

Community Medical Center

Healthcare System,

Scranton, PA, July 3, 2002.
Re Wage Index (Medicare), Scranton/Wilkes Barre/Hazleton MSA,
Financial Condition of Hospitals.

Senator Arlen Specter,
Hart Senate Office Building,
Washington, DC.
Dear Senator Specter: I want to thank you for your
commitment expressed July 1, 2002 and your efforts on behalf
of the hospitals in the Scranton/Wilkes Barre/Hazleton MSA
relative to rectifying the Medicare Wage Index issue. As
requested, and knowing of your active interest and efforts in
attempting to find solutions to restoring the financial
viability to the hospitals of Northeastern Pennsylvania, I am
writing to you on the issue and request your continued
assistance and support. The events of September 11 and
bioterrorism threat have reinforced the need to ensure that
the healthcare delivery system's infrastructure of
Northeastern Pennsylvania, by virtue of its location to
multiple major metropolitan areas, remains intact.
Nationally, operating margins of hospitals continue to
exceed that of Northeastern Pennsylvania. The Voluntary
Hospital Association's (VHA) HBS International benchmarking
system is reporting a 3.7% operating return nationally and a
2.6% Mid-Atlantic Region for 2001. Pennsylvania continues to
be viewed negatively on Wall Street, thus placing access to
capital in jeopardy. Moody's short term forecast cites risk
and uncertainty arising from the sector.
Healthcare providers here in Northeastern Pennsylvania have
not received adequate, fair reimbursement under the Medicare
Program. Our facilities have been and continue to be
penalized for managing the costs of delivering healthcare in
light of this. The May 2002 release from the Pennsylvania
Health Care Cost Containment Council's Annual Report on the
Financial Health of Pennsylvania's Hospitals regarding the
Fiscal Year 2001 financial performance confirms this.
According to the report, Pennsylvania's average operating
margin is 2.1%. Region 6 facilities, which include
Northeastern Pennsylvania and the majority of Scranton/Wilkes
Barre/Hazleton MSA hospitals, collectively produced an
average negative 1.51% operating margin, the worst in the
Commonwealth.
As requested, I am providing you some specific information
relative to Community Medical Center, Scranton, PA, and my
concerns despite CMC's ability to continue to provide access
to vital services to our community as of this date. CMC
provides many tertiary and secondary services including being
the Regional Trauma Center, and Cardiac Surgery,
Neurosurgery, Neonatal Intensive Care Program, etc. CMC
incurred a $3.1 Million operating loss during Fiscal Year
2001 and will be posting another year of operating losses
this year. CMC's Net Patient Service Revenue Per Adjusted
Discharge, when compared against similar facilities, is
approximately $1,200 per adjusted discharge less. (Note:
CMC's annual adjusted discharges approximates 20,000.) With
respect to Medicare reimbursement above, CMC receives
significantly less than others providing the same services in
surrounding MSAs. The need to retain our talent critical to
these highly specialized services cannot be underestimated.
Medicare--Base Rate: CMC's current Medicare Base Rate is
$3,708; July 1, 1984's Medicare Base Rate was $3,421.
Net increase over 18 years to CMC: $287; 8.4% change over
18 years.
Re: Not kept pace with inflation, wage increases,
technology etc. A comparison of all MSA's Base Rates (today
vs 1984) would demonstrate Northeastern Pennsylvania's
dilemma. In the material attached, you will find a graphical
representation of CMC's Medicare Base Rate vs the Market
Basket Increase. A lot has happened in healthcare since 1984.
In addition, the uncertainty surrounding the further
regulations (HIPAA) effects of the new Outpatient Prospective
Payment System and proposed less than Market Basket increases
for FY 2003 make this initiative critical for NEPA.
I am disappointed to learn that without this ``area
adjustment'', based on the Preliminary regulations (Federal
Resister Vol. 67, No. 90) and despite the collective efforts
of the fiscal intermediary, and the hospitals in the
Scranton/Wilkes Barre/Hazleton MSA, our Medicare Regional
Wage Index, a critical variable in calculating Medicare
reimbursements to provides in projected to not exceed the
rural wage index for all of Pennsylvania (.8525).
The issues facing Northeastern Pennsylvania hospitals
include:
Immediate financial pressures on ``core operations'',
medical malpractice crisis. CMC's medical malpractice
increase alone on the primary layer went from $512K to $1.2
Million on 9/1/01 and our carrier has exited writing medical
professional liability insurance in our Commonwealth. In
addition, number of our physicians (OB) have retired or left
the state to practice elsewhere (e.g., Neurosurgery) as a
result of the increases. We are concerned with what we face I
just over 2 months (anticipate > 100% increase) in addition
to the continued exportation of talent.
Labor/Wage pressures as a result of shortages, retention
needs, and an industry need to attract talent. CMC's exit
interviews with employees indicate greater opportunities
outside the MSA. For example, a significant number of
vacancies exist at CMC. Currently CMC has 67 openings (45
FTEs). CMC's RN vacancy rate is 18%. Recruitment activity
from outside the MSA is commonplace. CMC has seen a 15% RN
turnover rate.
Dramatic reductions (greater than 2x anticipated) in
Medicare reimbursement along the delivery continum as a
result of the Balance Budget Act (``BBA'') of 1997 with a
partial return of the excess reduction retrieved through the
Balanced Budget Refinement Act and BIPA.
Managed Care (``cost'') pressures on operating margins
through a variety of techniques including the domination of
few payers, utilization management, and further reimbursement
pressures.
Soaring pharmaceutical expenditures and new technological
introductions at a rate far in advance of appropriate
reimbursement recognition with little supply side pricing
constraints.
An increase in uncompensated care being provided by our
hospitals, in particular our Trauma Center. In addition,
access to services such as CMC's trauma services, given the
malpractice crisis, for our community is threatened. CMC has
incurred in excess of $5 Million in uncompensated care year-
to-date.
Employer Health Insurance premium cost are increasing in
the double digit ranges (Financing Side of the System) with
limited or no relief to hospitals (Delivery System) as
providers of care for such cost exigency.
The financial market's performance that its effect on
earnings and cash reserves of the organization directly
limiting our ability to plan for and reinvest in facilities,
etc.
In closing, thank you for the opportunity to express my
concerns for our delivery system and allowing the expression
of the desire that a fair, adequate return be provided to
hospitals, specifically here in Northeastern Pennsylvania,
which have served the residents of Northeastern Pennsylvania
with quality, cost effective healthcare. The economic impact
of the healthcare system on Northeastern Pennsylvania is
significant.
As you have seen day in and day out, our healthcare
delivery system in Northeastern Pennsylvania is undergoing
rapid change and challenges. As such, time is of the essence
within this marketplace. I look forward to your support and
successful outcome in the Conference Committee. Feel free to
contact me should you require further information.
Sincerely,
C. Richard Hartman,
President/CEO.
____

Moses Taylor

Healthcare System,

July 8, 2002.

memo

ReMSA Amendment

Senator Arlen Specter.
Several important factors highlight why the thirteen
hospitals located in the Wilkes-Barre Scranton Hazleton-MSA
need relief. Reports produced by the Pennsylvania Health Care
Cost Containment Council (PCH4) and the American Hospital
Association indicate that all of the hospitals are very
efficient and effective healthcare institutions. Despite that
fact this region has suffered losses substantially above both
the state and national level.
The Financial Analysis of all Pennsylvania Hospitals is a
report produced by PHC4. The most recent report shows that
while thirty (30) percent of all hospitals in Pennsylvania
had negative total margins for the three year period between
1999-2001, nine (9) of the thirteen (13) hospitals located in
this MSA have had negative total margins.
Every hospital in the MSA has had a negative operating
margin over that period. These losses are causing a
significant reduction in the capital base of the institutions
in this MSA. An MSA where over 45% of the Net Patient
Revenues are provided by Medicare patients.
In the AHA Hospital Statistics guide from 2001, the
efficiency of the Hospitals in this MSA is apparent.
In terms of the total labor expense per adjusted inpatient
day, the MSA is 25% below the national average and 22% below
the state average. (MSA--$826.92, United States--$1,102.61,
Pennsylavania--$1,052.53).
In terms of total full time equivalent personnel compared
to volume the MSA also compares favorably. The MSA utilizes
15% less FTE's than the nation and 12% less than the state.
(MSA--4.01 fte's per adjusted occupied bed, United States
4.61, Pennsylvania 4.52).

[[Page S6350]]

This MSA has very efficient, very effective hospitals (see
the Hospital Performance report published by PHC4) that are
losing significant amounts of money while serving the
Medicare population.
In addition to losing significant amounts of capital, the
MSA like the nation is undergoing a nursing shortage. Every
institution in the MSA has a number of open nursing
positions, especially RN's. The situation is exacerbated by
the fact that most if not all of the adjacent MSA's advertise
locally for nurses. Ads appear on a regular basis from
Allentown, Philadelphia, Harrisburg, and Monroe County each
extolling the fact that they can offer higher wages. This has
forced the local hospitals to use agency nurses at
considerable expense.
As I am sure, you are aware CMS recognizes that there are
issues with the data used for the wage index. For one example
most if not all hospitals in our MSA, employ their own
dietary and housekeeping personnel and provide benefits to
these positions. This decision actually hurts our wage index
number as many other areas of the country now contract for
those services. Quoting from the Federal Register of May 9th
page 31433, ``Therefore, excluding the costs and hours of
these services if they are provided under contract, while
including them if the services are provided directly by the
Hospital, creates an incentive for hospitals to contract for
these services in order to increase their hourly wage for
wage index purposes.'' I do not believe that the Congress
intended the wage index to drive low hourly rate employees
off hospital payrolls.
There are other examples including the amount and type of
administrative personnel that affect the wage index. 'We
believe that several of the proposed alterations to the data
collection process for the wage index will help to address
some of those concerns. However, our MSA cannot wait for
these measures to take effect, the wage index currently lags
3 to 4 years behind the current data. Any substantive change
will take at least 5 to 7 years to make an impact on the
payments to our MSA. We need help now.
Thank you for your efforts in this regard.
William Roe,
Vice President of Finance.
____

Allied Services,

Clarks Summit, PA, July 1, 2002.
Hon. Arlen Specter,
Hart Senate Office Building,
Washington, DC.
Senator Specter: The following are some information points
regarding the wage index and how a re-classification would
aid Allied Services:
As northeastern Pennsylvania's largest rehabilitation
medicine provider, Allied experiences a high volume of
patients covered under Medicare. This, coupled with a low
wage index rate, impacts Allied's ability to recruit and
retain healthcare workers. Re-classification to the Newburg,
NY, MSA would provide over $6 million in additional funds
while re-classification to Allentown adds over $3 million for
use in employee recruitment/retention programs.
Pocono and Allentown area hospitals are recruiting NEPA
workers by offering more generous wage and benefit packages.
This is being promoted through ads in local newspapers, on
radio stations and on billboards. This impacts our workers as
recruitment for healthcare workers is extremely difficult.
This problem is further exacerbated when competing providers
recruit away workers thanks to their higher wage rate
reimbursements.
Despite staff shortages, the need to provide services
continues to be high. This is particularly so given the large
elderly population in northeastern Pennsylvania. A wage rate
re-classification is a fair way to ``level the playing
field'' for healthcare providers.
In 2001, Allied Services provided $2,751,610 in charity
care/uncompensated care/and governmental subsidy. Services
are provided without regard to patients' abilities to pay.
This impacts Allied's financial health.
Hopefully, this helps outline some important points
regarding the wage index issue. All of us here thank you for
your work on this issue and stand ready to assist in helping
you achieve a successful conclusion.
Sincerely,
William J. Schoen,
Vice President.
____

Mercy Health Partners,

Scranton, PA, July 3, 2002.
Hon. Arlen Specter,
U.S. Senate, Hart Senate Office Building,
Washington, DC.
Dear Senator Specter: I want to thank you and Congressman
Sherwood for meeting with the representatives of all the
hospitals in Northeastern Pennsylvania on June 1, 2002. Your
continual efforts in seeking a resolution to our Medicare
wage index problem, and in particular your support of
Congressman Sherwood's amendment to the 2002 Supplemental
Appropriations Bill, is critical for the survival of our
hospitals.
The Scranton/Wilkes-Barre/Hazelton MSA is surrounded by
facilities with significantly higher Medicare reimbursement.
Our hospitals have struggled for many years now with an
unfair Medicare reimbursement rate. We at Mercy have
continued to lose health professionals to other regions
around us. On a weekly basis our local newspapers carry
employment ads recruiting these individuals from our
facilities as well as local colleges and universities outside
our area. An example of these ads are attached for your
review. Even billboards have sprung up within our MSA such as
the one discussed in the November 11, 2001 Times Leader. I
have attached this as well to illustrate our point.
Our problem will further deteriorate when the proposed
Fiscal Year 2003 wage indexes based on our 1999 fiscal year
that we were published in the May 2002 Federal Register are
finalized in September 2002. Our MSA has once again fallen
below the Pennsylvania rural rate. This has occurred from
1999 through 2001, a period when employment expenses have
risen 14%.
This will put even greater pressure on our institutions
which in turn jeopardizes the quality of care that our
institutions provide to our communities in general and our
large Medicare age population in particular.
This reduction could not come at a worse time. Per the most
recent Pennsylvania Cost Containment Council Financial
Analysis. Our region, Region 6-Northeastern Pennsylvania, had
the worst operating margin of all Pennsylvania Hospitals--
1.51% and a total margin at -0.23%. I have attached this
report for your review as well.
These statistics are even more eye-opening when you compare
them to national averages. The average total margin for
hospitals across the country is 4.5% based on the latest
American Hospital Association data in conjunction with the
Center for Medicare Services.
In closing, I would like to once again emphasize the
importance of this legislation and its impact on the Mercy
Health System. Listed below is our Net Operating Income for
our last three fiscal years and the first five months of
2002.
FY 1999 ($1,827,000).
FY 2000 ($7,071,000).
FY 2001 ($6,001,000).
May 2002 ($2,582,000).
These net operating losses couples with competition in
recruitment from surrounding areas make it imperative that
this legislation be passed.
Thank you again. I hope this information will be helpful as
you work on our behalf.
Sincerely,
James E. May,
President and Chief Executive Officer.
____

Wyoming Valley, Health Care System, Wilkes-Barre General
Hospital,
Wilkes-Barre, PA, July 5, 2002.
Hon. Arlen Specter,
U.S. Senate, Hart Senate Office Building,
Washington, DC.
Dear Senator Specter: On behalf of Wyoming Valley Health
Care System, Its Board of Directors, and the entire Wilkes-
Barre/Scranton community, we would like to thank you for the
efforts that you, Representative Sherwood, and your
respective staffs have committed to addressing the disparity
caused by the Medicare wage index.
While you certainly have developed an appreciation for the
challenges facing the hospitals in our region, we would like
to share with you the following points that we believe are
relevant to our situation:
WVHCS-Hospital (comprised of Wilkes-Barre General Hospital
and Nesbitt memorial Hospital), the largest provider in both
the Scranton/Wilkes-Barre Metropolitan Statistical Area and
the Northeastern Pennsylvania region (Region 6) as defined by
the Pennsylvania Health Care Cost Containment Council (HC
⁴), has suffered operating deficits in each of the
fiscal years since the year ended June 30, 1998. The smallest
operating deficit was $5,542,000 in 1998, and the operating
loss for the year just ended is expected to exceed
$10,000,000.
In the face of adversity, our Hospital has done everything
possible to manage the extent of those losses, including
numerous staff reductions. The total number of paid full time
equivalents (FTE's) for 1998 was 2,708 FTE's As of may 31,
2002, that figure had dropped to just over 1,809 FTE's, a
reduction of almost 900 FTE positions.
Medicare beneficiaries account for almost \2/3\'s of the
inpatient days within our Hospital. Furthermore, the Medicare
payment program has become the basis for several other
payment programs in the Commonwealth of Pennsylvania,
including auto insurance and workers compensation services.
There is no opportunity for a shortfall in Medicare payments
to be absorbed by other payers, which had lead to our
significant operating deficits.
Luzerne and Lackawanna counties have the highest
concentration of Medicare beneficiaries of all counties
throughout the Commonwealth of Pennsylvania with populations
of 200,000 residents or greater. And, the proportion of
Medicare beneficiaries within those counties are among the
highest of any major county throughout the country.
Based upon data presented by the HC⁴ for the
2001 fiscal year, seven of nine regions within Pennsylvania
enjoyed positive operating results ranging from 0.81%
(Northwestern Pennsylvania) to 3.75% (Lehigh Valley). Altoona
area hospitals experienced a slight operating deficit of
-0.27%. Most notable in the most recent HC⁴
release was the fact that hospitals in Northeastern
Pennsylvania were faced with operating deficits averaging
-1.51% of revenue.
Of the 13 hospitals within our metropolitan statistical
area, the four largest providers experienced operating
deficits ranging between -2.56% and -4.81%. Five of the
remaining nine hospitals also experienced significant
operating deficits.
As the largest hospital in Luzerne County, and sponsor of a
very active family practice residency program, WVHCS-Hospital
provides a significant amount of free care. For

[[Page S6351]]

the year just ended, it is estimated that WVHCS-Hospital
provided uncompensated care valued at over $6,000,000. In
addition, there were almost 18,000 patient encounters within
our family practice residency program, the majority of which
were to Medical Assistance or other uninsured/underinsured
patients who otherwise would have ended up in emergency
rooms.
Under the current rules, Medicare applies the wage index to
about 71% of the average hospital's non-capital cost pool.
Based upon our calculations, the portion of our costs to
which that index should be applied is estimated to be far
less, approximately 58%. The result is that areas like ours,
where the wage index is less than 1.00, are paid less than
cost for a portion of their supply expenses.
For the 2002 fiscal year, we have experienced registered
nurse (RN) staffing turnover approximating 15% of our total
RN pool. This is driven by the fact that the average wage
rate which we can afford to offer for a registered nurse is
$20.28, well below other contiguous metropolitan statistical
areas. In addition, the current vacancy rate for certified
registered nurse anesthetists is 25%. Despite the fact we
operate one of the largest and most successful schools of
nurse anesthetists in the nation, surrounding areas are
paying $5 to $6/per hour more than our region.
Registered nurses are not the only area of need with which
we are faced. For example, radiology/imaging technologists
are earning (an average hourly rate of $14.88, again, well
below other nearby metropolitan statistical areas). The
result is that for the first half of 2002, we have
experienced almost 20% turnover in imaging technicians,
particularly in the areas of nuclear medicine, CT scanning,
magnetic resonance imaging (MRI) and general radiology
services.
Without additional relief, we are losing staff to
surrounding communities!
In addition to these labor related pressures, we are faced
with other issues affecting costs including the malpractice
insurance crisis, bioterrorism preparedness, as well as,
added regulatory requirements under the Health Insurance
Portability and Accountability Act (HIPAA). While it is not
our intention to redirect wage-related reimbursements to
those areas, the fact remains that the amount of funds which
we will have available to address our staffing needs will be
even further limited.
Once again, we would like to thank you, Representative
Sherwood, Representative Kanjorski, Senator Santorum and each
of your respective staffs for all of the efforts which you
have put into this important cause. In particular, we would
like to thank you and Representative Sherwood for spending
time with representatives from area hospitals on Monday, July
1, 2002.
We look forward to hearing from you as to when the
conference committee hearings will be scheduled as we would
like to be present to represent our community and this
critical issue.
Sincerely,
William R. Host,
President and Chief Executive Officer.
Michael D. Scherneck,
Senior Vice President and Chief Financial Officer.
____

The Bloomsburg Hospital,

Bloomsburg, PA, July 3, 2002.
Memo to: Andrew M. Wallace, Executive Director, Northeast
Region.
From: Robert J. Spinelli, CEO, The Bloomsburg Hospital,
Bloomsburg, PA.
The Medicare Reimbursement issue currently debated is
extremely important for The Bloomsburg Hospital. As a
community hospital located in Northeast Pennsylvania, the
current wage index rates have contributed to three years of
deficit income, which has resulted in the inability to
recruit qualified staff. In addition, our hospital has had to
furlough individuals and not fill positions as vacancies
become available.
Your help in this wage index change is greatly appreciated.
Thank you.
I will be available to attend the Conference Committee
meeting. Please contact me.
____

Wayne Memorial Hospital,

Honesdale, PA, July 3, 2002.
Senator Arlen Specter,
Scranton, PA.
Dear Senator Specter: Thank you for holding the briefing on
the Medicare reimbursement issues and the Wage Index issue in
particular. We truly appreciate all your efforts on our
behalf to assure that Medicare Reimbursements to providers of
services are adequate.
I am summarizing a few of the issues facing us in our
fiscal 2003, which began on Monday, July 1, 2002, the same
day as your briefing.
We are anticipating an increase in our Medicare payment
rate of approximately 3% effective with the beginning of the
next federal fiscal year on 10-1-02. The increase is based on
a Market Basket increase less .55%, as I recall has been the
reduction factor over the last several years. Medicare is
saying that, inflation is running 3.55% and we'll give you a
3.00% increase in rates. This makes it extremely difficult to
keep net revenues above expenses when by definition, expenses
are increasing faster than revenue or rates. Capital costs
are included in this same methodology. Wayne Memorial is
currently in a planning process that may well identify the
need to spend capital dollars. Medicare reimbursement will
not change as a result of this capital project and the
proposed increase for fiscal 2003 will make it difficult to
cover additional debt service on any new debt that may be
required.
We have also recently absorbed an 80% increase in our
annual General and Professional liability (malpractice)
insurance premium that must be paid from this 3% increase
from Medicare. We are facing serious physician recruitment
issues related to the malpractice crisis here in
Pennsylvania, as well. The increase in our malpractice
premium will total over $725,000 on an annual basis. The
increase in Medicare payments that would result from this
change in MSA to Newburg, New York would mean approximately
$450,000 of additional Medicare reimbursement for Wayne
Memorial.
I want to thank you again for your hard work on these
serious issues facing healthcare providers in Pennsylvania
and hope that all of our efforts, together, can move us
toward a Medicare payment system that is more adequate.
Sincerely,
Michael J. Clifford,
Director of Finance.

Mr. SPECTER. In the absence of any other Senator seeking recognition,
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Mr. President, are we in a period of morning business?
The PRESIDING OFFICER. We are not.

____________________