[Congressional Record (Bound Edition), Volume 148 (2002), Part 9]
[Senate]
[Pages 12133-12137]
[From the U.S. 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 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:


[[Page 12134]]

       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 
     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

[[Page 12135]]

     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).
       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.

[[Page 12136]]

       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 
     (HC4), 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 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,

[[Page 12137]]

       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.

                          ____________________