Despite challenges, MSHA, Wellmont post better financials

Marvin Eichorn

Marvin Eichorn

By Jeff Keeling

Wellmont Health System and Mountain States Health Alliance recently released their audited financials for the fiscal year that ended June 30. The News & Neighbor reviewed those documents, then met separately with Wellmont CFO Alice Pope and MSHA Corporate Treasurer and Chief Operating Officer Marvin Eichorn to discuss the year’s results and the various trends that are affecting the systems’ financial performance and outlook.

Pick any recent fiscal year, and Wellmont Health System and Mountain States Health Alliance have been buffeted by health care’s winds of change. That said, it’s arguable that few if any could stack up against the fiscal year ended June 30. The 12-month period was marked by continuing federal changes brought on by the Affordable Care Act. The systems joined statewide efforts to advocate for Tennessee and Virginia to avail themselves of the federal Medicaid expansion, an eventuality that would have helped their bottom lines. That effort failed. Both systems continued adjusting to the overall trends, fewer acute hospital admissions and more preventive and outpatient care, and to the reforms that are transforming the business model from fee-for-service to value-based reimbursements.

A marked increase in high deductible insurance plans created new challenges, too, as growing numbers of patients encountered difficulties paying their share of medical bills, leading to an overhang of accounts receivable. As Wellmont noted in its management discussion and analysis at the end of the fiscal year, “we continue the transition to value based payments while facing the challenge of increasingly prevalent high deductible health plans in our area.” The system also noted its opening of more urgent care centers as reflecting, “the health system’s goal to increase health care access points in the area and reshape the way the region receives care in lower cost outpatient settings.”

If all that weren’t enough, the systems dealt with a great deal of organizational uncertainty, as Wellmont’s “strategic options process” was flipped on its head by a local movement that first went public in August, pressing for it to merge with Mountain States rather than an outside entity.

That process almost certainly played into Wellmont CEO Denny DeNarvaez’s departure in September, and reached “the end of the beginning” when the two systems officially announced in April they would seek approval for a highly-regulated merger. They were in early stages of that process when the fiscal year drew to a close.

Somehow, through all of that, both systems not only ended the year in the black but saw healthy increases in net patient service revenue. Wellmont’s total was up 6.4 percent, from $743 million to $791 million; MSHA’s increased 7.1 percent, from $924 million to $989 million. Each system also saw its overall net revenues – excluding investment income – increase from 2014.

Wellmont’s income from operations (net) increased by 38 percent, from $4.84 million to $6.69 million. MSHA’s net operating revenue, ex-investments, was up nearly tenfold, from $2.42 million to $24.2 million.

The systems arrived at their end results in somewhat different ways. Wellmont’s acute inpatient volumes declined by 3.8 percent overall, though a 13 percent increase in “observation patients” more than offset that, putting so-called “patients in bed” up by 1.2 percent. Surgeries at Wellmont declined 2.3 percent overall, 3.2 percent in inpatient and 2 percent in outpatient.

Alice Pope

Alice Pope

Wellmont completed integration of a 100 percent acquisition of Wexford House, a long-term care center, and increased its ownership of Holston Valley Imaging Center from 75 percent to 100 percent. Both acquisitions, Wellmont CFO Alice Pope said, aided the bottom line and should do so going forward. “It’s part of having integrated services, an integrated network, and having what we need to provide a continuum of care.”

MSHA’s patient volumes told a different story. The system’s acute inpatient volumes increased by 8.8 percent. Observation patients, on the other hand, were down by 3.3 percent, with “patients in bed” up 5.2 percent overall. MSHA also saw its surgery volume increase by 3.9 percent overall – with the inpatient total up 2.7 percent and outpatient up 4.5 percent. “It’s probably going to be February 2016 before we know really what market share gains we had for our fiscal year, but our perception is that we did gain market share during the year on inpatient,” Eichorn said.

Eichorn said the change in trend with respect to acute admissions versus observation patients came following a concerted effort. Medicare, insurance companies and other payers have driven part of the trend toward more patients being classified under observation status, which comes with significantly lower reimbursements for providers.

At times, the conventional wisdom suggests, doctors and other providers have classified legitimately acute inpatient cases as observation patients fearing retributive audits by payers – or, Eichorn said, simply by failing to document thoroughly enough.

“We did reach out to our doctors and educate them about what really is an observation patient versus what really is an admission,” Eichorn said. “We dramatically improved our documentation.” He said patients, often coming through the emergency department, have multiple chronic conditions, “and maybe some of those conditions are playing with each other to cause some of the issues that patient’s having. If you don’t get those other things in your documentation, it may result in it being classified as just an observation.”


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