Over the past six months, Central Peninsula Hospital has made several moves to expand and modernize its facilities and services.
A long-awaited new space for specialty practices, more imaging equipment and a new transitional housing project are some of the investments the Central Peninsula Hospital’s board of director has approved, and the borough has so far agreed. The purchase of additional imaging equipment is still in the air and will be up for public comment at the borough assembly’s April 8 meeting.
The hospital is financially healthy, reporting a 14.8 percent increase in gross patient revenue and a 10.5 percent increase in net patient revenue in its last financial quarter, which ended Dec. 31, 2015. The hospital’s net income also increased 17.3 percent to approximately $11.4 million over the same period in 2014, according to the hospital’s quarterly report from February.
At the same time, the hospital’s bad debt and charity care has increased over last year as well. Central Peninsula Hospital CFO Lance Spindler told the borough assembly at its Feb. 2 meeting that this could be due to an adjustment after the effects of the Patient Protection and Affordable Care Act.
Last year, the amount the hospital wrote off in charity care fell, which the hospital administrators suspect was because of increased health care insurance availability. This year, the numbers rose again.
“We have seen a significant increase in charity care,” Spindler said. “We did notice that there was a drop last year, and now that that impact has been accounted for, our charity continues to rise … on the normal trend line.”
However, the administrators are preparing for the looming changes in health care reform under the Affordable Care Act, which will have an effect that Central Peninsula Hospital CEO Rick Davis refers to as “the compression.”
“We’re under pressure, like all hospitals are,” Davis said at a January Soldotna Chamber of Commerce luncheon. “We’re using our good fortune to try to get the infrastructure in place so that the community has many services as we can that makes sense here for when that compression comes.”
In addition to approximately $1.5 million in new imaging equipment, the newly completed River Tower renovation, the purchase of a new electronic health record system and the purchase of a vacant building in Soldotna for a transitional housing facility — which is being funded primarily through grants — the hospital hopes to renovate its obstetrics departments in the near future. The obstetrics department is housed in the oldest part of the hospital and is due for an update, which could cost approximately $15 million to $20 million, Davis said.
Central Peninsula Hospital is larger than the other two hospitals on the peninsula, South Peninsula Hospital and Providence Health Services Seward. However, it is still limited by the size of the market on the peninsula and faces similar challenges as other small rural hospitals. Changes to the payment system, reduced reimbursements from Medicare and increasing costs for employees, overhead and updating equipment all weigh on small hospitals.
The hospital also stands to benefit if the federal government renews the Rural Community Hospital Demonstration Act of 2015, a program that grants higher reimbursement rates on Medicare to qualifying small hospitals. When the act sunsetted, the hospital took an approximately $5 million hit, Spindler said to the assembly. Some of that has been restored through other programs, but the House of Representatives are currently discussing a renewal of the program.
Davis has said on multiple occasions that unless the hospital plans for reduced revenues, it runs the risk of becoming one of the approximately 60 rural hospitals to close since 2010.
“Change is always hard,” Davis said at the Soldotna Chamber of Commerce luncheon. “The hospital doesn’t have that option (not to change). We have a fiduciary responsibility to leave the services here for the community after we’re all gone so the kids will want to stay here.”