The story of Forks Community Hospital (FCH) began over 90 years ago. With the formation of the state’s first Public Hospital District in the late 1940s, FCH paved the way for rural health on the Olympic Peninsula. Whether you’re a life-long resident or new to the area, you know that FCH is a hospital and health system providing compassionate, quality-driven healthcare services to communities on the West End. What you may not know, but need to know, is that FCH is experiencing ongoing and substantial financial losses directly related to its long-term care services.
For decades, FCH has been operating a long-term care unit. Unfortunately, for many of these years, LTC services have lost millions of dollars because of how these services are reimbursed in the United States. While health policies negatively impact access to care for seniors across the country, it is particularly challenging for a small rural health organization like ours.
After losing nearly $5 million in just 2020 and 2021 combined from long-term care operations and projected losses to exceed $2 million again in 2022, FCH has no choice but to take necessary action to significantly reduce the losses and strategically plan for the future of healthcare for all living and working on the West End.
Assure sustainability by continually improving the financial position of the District and by achieving the financial performance ratios that will assure funds to maintain or replace facilities.
LTC operation losses will continue because the reimbursement for patient care will remain inadequate and as such, will increase the District’s vulnerability and risks to survive.
To begin, on April 28, 2022, the FCH Board of Commissioners adopted a resolution that gives the green light to organization leaders to evaluate a plan to transition the 20 long-term nursing care beds to designated hospital non-skilled swing beds.
Don’t let the term confuse you. A ‘swing bed’ has nothing to do with the type of bed or room a patient occupies. Instead, it relates to how patient care is reimbursed from Medicare and Medicaid by patients occupying the beds and the services provided. The swing bed program permits hospitals to use their beds interchangeably between intermediate or skilled nursing care for patients. The program started in the 1970s to address a shortage of extended care beds and under occupied hospital beds. As a result, hospitals located in rural, frontier, and underserved areas have been able to meet the need for nursing services.
Simply put, the word “swing” means that the reimbursement “swings” from billing for acute care services to billing for post-acute skilled or non-skilled nursing services, even though the patient usually stays in the same bed in the same physical location. If the patient requires more acute care, the bed can “swing” back from non-skilled to acute.
In contrast, to swing bed reimbursement, FCH’s LTC beds are limited in their use, licensed only to be utilized as they are today. In simplest terms, these beds cannot be used for any other type of inpatient care.
Due to the limited types of reimbursement these beds are eligible to receive, the 20-bed LTC unit costs FCH approximately $382 in losses per occupied bed per day.
Transitioning LTC beds to non-skilled swing will allow FCH to use all beds allowed by Critical Access Hospital (CAH) participation rules interchangeably for acute or post-acute care, which will change our reimbursement. In addition, by categorizing our existing LTC beds as part of the Hospital, instead of as a separate entity, they will be considered part of the Hospital under the Medicare Cost Report. This will stem the losses because the cost of operations will be partly covered through the Medicare Cost Report, adding about $1.8 million to narrow the $2.3 million loss.
FCH is one of over 1,300 CAHs in the U.S. CAH is a designation given to eligible rural hospitals by the Centers for Medicare & Medicaid Services (CMS). Congress created the CAH designation through the Balanced Budget Act of 1997 (Public Law 105-33) in response to over four hundred rural hospital closures during the 1980s and early 1990s. Since its creation, Congress has amended the CAH designation and related program requirements several times through additional legislation.
The CAH designation was designed to reduce the financial vulnerability of rural hospitals and improve access to healthcare by keeping essential services in rural communities. To accomplish this goal, CAHs receive certain benefits, such as cost-based reimbursement for Medicare services. In addition, eligible hospitals must meet the following conditions to obtain CAH designation:
Yes, and in fact, FCH is one of the last remaining Critical Access Hospitals in Washington to convert its LTC beds to swing beds.
Currently, the LTC unit has 20 beds, while the hospital’s inpatient unit has 17 acute and swing beds combined. (emergency room, observation, and OB beds are not included in this count.) Should the transition advance, FCH will convert an additional eight beds to swing, all beds will operate under the FCH hospital license, and the total number of available beds (acute care and swing combined) will shift from 17 to 25.
FCH does not anticipate changes to staffing (noting that currently, and due to nationwide staffing shortage, the LTC is not fully staffed), and patients can expect to receive the same high level of care and services currently provided. FCH’s average daily census (ADC), or how many beds are occupied by a patient, has historically been at two. This means that only two of our 17 Hospital beds are occupied on average. Thus, by increasing our CAH bed count to 25, we should be able to account for our ADC in Acute plus our LTC residents once they are converted to non-skilled swing.
Because CMS does not directly pay for long-term care, and reimbursements from Medicaid (which makes up for 70% of our current payer mix (2021), which is far below the actual costs to operate the long-term, FCH has experienced significant financial losses, including $2.280 million in 2020, and $2.318 in 2021. Unless a change is made, FCH expects these losses to worsen as labor and other costs increase, and reimbursement from payers remains stagnant or declines.
The nearly $5 million shortfalls of reimbursement for the essential services provided to LTC residents have required FCH to subsidize losses with revenues generated from other operations, a practice that is not sustainable nor fiscally responsible as a Public Hospital District going forward. Indeed, LTC losses, which have consistently lost money, have been detrimentally impacting the Hospital for many years and led to a lack of capital investment in the District’s facilities.
It has been suggested that FCH can simply add various outpatient and inpatient services to help subsidize current LTC operations. Unfortunately, the short answer is no; it is not possible to add services to help subsidize LTC.
Adding services that generate revenue requires market demand, growth driven by data and weighed against feasibility, significant investments, additional staffing, physical space to operate, and time to bring them online. Revenue generated from existing or new services must be reinvested into the FCH workforce, its services, and facilities and not allocated to support and supplement one service for a limited number of community beneficiaries.
The simple and definitive answer is YES! The COVID-19 pandemic has impacted FCH finances. Below is a brief breakdown of how:
First, it is widely known that in the early days of the pandemic and through 2020, hospitals and clinics across the U.S. had to cease most operations that generated the revenue that pays for staff, supplies, and essentially keeps the lights on, and doors open. As a result, rural and remote hospitals like ours especially were highly concerned about the losses, and rightfully so.
In response to the crisis, the Federal government recognized the need for organizations like ours to sustain health care services while many of their operations were interrupted for a prolonged and uncertain period.
Significant financial relief to rural hospitals came in the form of approximately $32 billion in federal support, primarily from the Provider Relief Fund (PRF), to compensate for the loss of revenue and increased expenses from the pandemic, as well as funding through the Paycheck Protection Program (PPP.) Although this support during the pandemic temporarily helped many struggling facilities, financial challenges remain across rural health care systems. For FCH, the funding was not intended to supplement for the losses in our LTC services; instead, to ensure critical aspects of the care we provide, both inpatient and outpatient, could continue.
Another significant way the pandemic has impacted FCH financials relates to our workforce. Again, it’s obvious but worth stating. Without our nurses, techs, business office staff, clinical staff, and everyone who ensures the care you need is there when you need it, FCH would be nothing but empty facilities.
In May of 2022, the Bipartisan Policy Center published a comprehensive report focused on “The Impact of COVID-19 on the Rural Health Care Landscape.” The report sheds important light on rural workforce challenges, which were substantial before 2020, and have gotten considerably worse since the pandemic. In their report, they offer, “Rural health care systems consistently report that retaining workers and ensuring adequate staffing levels is one of their most vexing challenges. Key problems during the pandemic include staff burnout, the need of providers to leave the workforce to care for family members, and wage pressures that made it difficult for financially strapped rural hospitals to compete with other employers.” This last part is particularly relevant for FCH.
Although resources and additional funding are available to address staff burnout, fatigue, recruitment, and training, these efforts do not change the fact that FCH struggles to be competitive in compensation and wages compared to other hospitals, including other small rural hospitals, in the state. For as much as we’d like to be able to be a higher-range wage provider, our LTC losses directly impact our ability to do so. In other words, there is a direct connection between our recruitment and retention efforts and the millions of dollars in LTC losses.
No amount of relief dollars will bridge the gap of the increased wages we must pay staff to be competitive and fair. For FCH to be competitive with wages and benefits is to:
The gap between revenue from Medicaid and self-pay and the cost of operations is simply too large. LTC’s primary expense is payroll, and labor costs have been escalating steeply for several years. Minimizing the loss would require severe staffing cuts that would be detrimental to resident care and quality. In previous years we kept labor costs lower by paying lower wages. In today’s fiercely competitive health care workforce job market, and considering the remoteness of our location, and faced with a nationwide shortage of nursing staff, for example, FCH must be prepared to offer higher wages and benefits to avoid being understaffed.
The community did indeed rally behind the expansion of LTC beds back in 1984 by passing a $600,000 General Obligation Bond to construct and purchase equipment for the addition of the LTC wing of the hospital facility. They did so because, since the founding of FCH, the West End community has shown it cares deeply about taking care of each other at every stage of life. But unfortunately, the General Obligation Bond does not fund maintenance, operations, staffing, and all required to manage care for our long-term patients.
It cannot be overstated that FCH is a lifeline to care. It’s a place that offers comfort, welcomes new babies to the world, and provides a wide range of essential health services to all those who call the West End home. The FCH Board of Commissioners, leadership team, and staff want to do everything possible to ensure that FCH can continue its tradition of caring in an ever-changing and complex rural health environment. However, the investment made in 1984 was never anticipated or intended to sustain the LTC operations.
There is no debate, FCH is not in control of how its LTC patient care beds are reimbursed by Medicaid. Like every other CAH in the United States, (FCH one of the last in Washington to make this transition) we must address the financial losses that prohibit us from being innovative in how we meet the greater care needs of all in the District.
Just a few days after the Board adopted the Resolution to evaluate the feasibility of transitioning its LTC unit to swing beds, FCH learned that another hospital in Washington State had been challenged by a state surveyor, specifically regarding their interpretation of Centers for Medicaid and Medicare Services (CMS) rules for length of stay for swing bed patients.
In a July 11th memo to Critical Access Hospitals from the Washington State Hospital Association (WSHA) reporting back after meeting with CMS and the Department of Health (DOH), they shared the following:
These requirements call for a comprehensive discharge plan, which FCH has. FCH is committed to compliance. But, just as we are with all rules, regulations, policies, and our commitment always to put the patient’s needs; first, our transition plan will adopt new processes and procedures to ensure full compliance.
The information about swing bed services is readily available to the public.
Yes, and there will be mandatory requirements for FCH to follow and ensure those currently in our LTC are readmitted to the hospital and appropriately reported in our census.
FCH will communicate directly with patients, their families and others about the process and details pertinent to them during the transition.
In a skilled swing bed (on the hospital side of operations) discharge planning is an integral part of patient care and includes consideration for a variety of issues including:
Once LTC beds have been converted to the swing bed payment model, discharge planning will be required; however, there will be some modifications. For example, FCH staff will document all discharge planning material information, as well as both the patient and family member/care giver response to options provided during the time of consultation. Should the patient refuse the discharge plan options presented, they will be permitted to remain at FCH in the nonskilled swing bed, so long as beds are available for acute care and skilled swing bed patients. FCH will adopt new policies and procedures as required for discharge planning of non-skilled swing bed patients and does have a plan to address a surge capacity.
Every hospital of all sizes must have and maintain outpatient and inpatient surge capacity for the triage, treatment, and tracking of patients at the facility or in alternative sites of care or alternative hospitals during infectious disease outbreaks, hazardous materials exposures, and mass casualty incidents. Surge capacity is a measurable representation of ability to manage a sudden influx of patients. FCH has a well-functioning incident management system, a meticulously documented surge capacity plan, and our team is trained and prepared to manage a response to a surge of patients.
Although FCH cannot make any guarantees concerning individual long-term care insurance providers, we are committed to helping each individual in need of these services navigate the documentation, financial, and insurance aspects of non-skilled swing bed care.
Aligned with the standard practices of Critical Access Hospitals in Washington, FCH does not anticipate directly billing long-term care insurance companies. Instead, patients and their family members will be responsible for establishing coverage for this level of care.
Also, important to note is that in most cases, insurance company payments are received directly by the patient (or appointed party), and then FCH is reimbursed directly from the patient.
Historically, community members have asked to be placed on a list indicating that they would like to come to FCH LTC should the need arise and depending on bed availability. FCH has accommodated a majority of those who have chosen our LTC.
Once FCH transitions to 25 interchangeable acute care/post-acute care beds, admissions will be identical to the current 17 inpatient beds, carefully coordinated with each patient’s care team and involving an admitting provider.
FCH is incredibly fortunate to have an outstanding Foundation and community. Through their efforts, and as a direct result of their fundraising and generosity, we’ve been able to fund outings, parties, and other activities that we believe are essential to the well-being and vitality of patients. We fully anticipate continuing these services and activities if the resources are available and barring any unforeseen issues.
For a skilled swing bed, the length of stay is no more than 100 days; however, the State Operations Manual of CMS states in part that “there is no length of stay restriction for a swing bed patient whether they are in a hospital or a CAH. There is no required discharge to a nursing home and no transfer agreement. Patients may be discharged to a nursing home as part of discharge planning, but it is not required.
Unfortunately, and regrettably, without the LTC unit transitioning to a swing bed, FCH will not be able to operate its LTC. The Board’s primary responsibility is to protect and invest in the District as a whole, which means it is imperative to address the ongoing financial conditions creating millions of dollars of loss for the entire organization year after year.
FCH is wholly committed to providing services that meet the diverse needs of the communities we serve, including our senior population and those in need of longer-term care. Under our current financial constraints, FCH cannot pursue ideas, plans, and options designed to grow and enhance services that respond to our aging community’s health needs previously identified and explored through strategic planning.
Once the LTC transition to the swing bed model of payment is complete, FCH will, over time, be in a better position to invest revenue into programs, services, and strategies that provide for community members to age in place.
Our 2021-2024 Strategic Plan includes a goal to “Re-Envision Community Based Long-Term Care.” Sustainable funding is necessary to make any new program or service a reality.
We want our communities to feel confident in knowing that FCH has a comprehensive plan to manage and respond to inpatient surges.
Typically, patients requiring hospitalization after a surgery or medical emergency are admitted for observation for up to 48 hours. During that time, another patient will most likely be discharged. But, again, it is worth repeating that FCH is not unique. These scenarios are not uncommon and are precisely what leaders and our experienced staff prepare for. Larger CAHs like Jefferson Healthcare in Port Townsend also only have 25 inpatient beds available.
Our obstetrics beds are not counted among inpatient beds until delivery, and newborn babies are not counted among the census. FCH, like other CAHs offering OB services are always working to balance bed capacity.
With a total inpatient bed capacity of 25, FCH will do everything possible to balance the needs of inpatients, be it obstetrics, those needing care after an illness or injury, or need longer-term care and recovery.
FCH currently has transfer agreements with facilities in Port Angeles and Sequim in the event of an evacuation of the LTC unit. FCH is reviewing these agreements to explore the feasibility of expanding agreement terms to accommodate a transfer should the need arise out of a temporary bed shortage.
Through a comprehensive strategic planning process, which included considerable input from community members, FCH leaders identified several avenues to explore, including evaluating a community paramedicine program, more in-home senior support services in collaboration with other community partners, and expanding to offer physical therapy and home evaluations for safety, and more. As Healthier West End initiatives progress, expanding services that meet the needs of our aging population will be a priority.
The losses from LTC have been causing the District to keep capital investments to a minimum in the hope that our financial outlook would improve. But unfortunately, we are at this point because they have only worsened.
After the construction of Bogachiel Clinic, significant capital investments in the hospital ground to a halt. But unfortunately, the need to address our aging physical plant did not disappear. The HVAC and boilers both had sections that were 50 years old, far beyond their useful life. Taking a deeper dive into the District’s capital needs in the Summer of 2020, we found that much of our equipment was past its useful life, often many years past. To address long-standing underfunded capital needs, FCH Administration sought a Revenue Bond and loaned the money needed to reinvest in our infrastructure. A Revenue Bond does not add a tax to the local taxpayers but is a pledge by the District to pay for the loan through its operations and revenues collected from patient care. However, this funding is specifically designated for capital investment in the District and cannot be used to cover the losses in LTC.
There are multiple steps in the transition process, including applying for a change in licensure. When changing the Nursing Home beds to Swing Beds, the shift is seen as a technical “closure” of the Nursing Home portion of the facility, for which WAC 388-97-4320 requires that all residents and resident representatives, along with the Department’s designated disability services administration office, and State long term care ombudsman be given 60 days’ notice of the voluntary closure. The facility will then have to relinquish its Nursing Home license within 24 hours after the last resident is discharged from LTC. followed by seamless readmission to an FCH non-skilled swing bed. Important to note is that this process is one of an administrative function and that those occupying beds in LTC will not be required to physically move to another area of FCH. We will also provide residents with 60 days’ notice and specific details of the bed status change, even though there will be no requirement for them to physically move.
The transition process is anticipated to conclude in 120 days, pending unforeseen delays.
The economic relief from the enormous financial losses will not be realized for some time, at the earliest, in our 2023 financials reported in early 2024.
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