A Public Response to the “Hospital Fact Sheet” in Circulation from Anonymous Authors

You may have received or come across a “Hospital Fact Sheet” or seen a posting on social media making claims against the new hospital bond. Unfortunately, it is full of inaccuracies, speculations, and misrepresentations. The author(s) are also unwilling to sign their name(s) to this document, so it is impossible to contact them to set the record straight. But we, the Citizens for a New Hospital Now campaign, have created this set of responses so you as a voter, can be informed before you cast your vote on April 25th.

Please feel free to reach out to us via our Facebook page (Citizens for a New Hospital Now – Lake Chelan) or email us from our website, www.newhospitalnow.com. We’d be happy to respond to any further questions or clarify any of the information below.

  1. Opponents’ Claim: Lake Chelan Community Hospital has not met the operating budget for the past 5

Fact: This statement is true, but lacks context. LCCH sets an aggressive goal of achieving 2% net revenues. Margins on Critical Access Hospitals are typically 0.8%. Our CEO aims high in setting ambitious goals to drive excellence across departments. As a result, since 2010, LCCH has been profitable with net positive income in 6 of the last 7 years, even while purchasing the Lake Chelan Clinic which has required financial rehabilitation. The bottom line is that the “operating budget” is a projection or goal for the year and not meeting it is not a financial failure, but rather a reflection of ambitious goals.

  1. Opponents’ Claim: In 2016 the hospital was $770,000 below budget with a net income of $13,000.

Fact: These facts are correct, but not the whole story. Net income for 2016 won’t be final until April or May because many insurance reimbursements come in late. Current projections place the net income for 2016 a few hundred thousand dollars higher than was previously reported. 2016 was another good year for LCCH.

LCCH is a profitable organization that regularly performs better than other Critical Access Hospitals (CAHs). LCCH has averaged an annual profit of $483,000 over the last ten years. CAHs are designed to be low margin safety net hospital for rural communities. Medicare, through the CAH program, reimburses at 101% of costs which lowers hospital margins but also supports things like new construction. Because LCCH is reimbursed based on costs, the CAH-Medicare program will end up paying the vast majority of the loan payments on the new hospital.

  1. Opponents’ Claim: Expenses are rising faster than revenues.

Fact: False. Critical Access Hospitals (CAHs) operate at low margins as safety net hospitals for the community. Over the last 10 years, LCCH posted minor losses in 2009

and 2013 but had an average annual profit of $483,000. CAHs have a business model that is exceptionally stable but never will return great profit.

  1. Opponents’ Claim: There exists no detailed independent professionally reviewed business plan to support a $45,000,000 new

Fact: WIPFli CPAs and Consultants, an international accounting firm who has worked with over 10% of all Critical Access Hospitals nationwide prepared a plan where they evaluated LCCH’s ability to repay its loan in several sets of financial circumstances. A summary of this plan was presented in November 2016 to the Hospital Commissioners. This summary is available on the hospital website. (www.lakechelancommunityhospital.com)

  1. Opponents’ Claim: The hospital has no capital reserve or cash on hand

Fact: LCCH has 53 days of cash on hand for hospital operations. Another way to put this is the hospital keeps millions of dollars in its savings account for a rainy day.

Ten-year projections forecast an increase in the ability to build cash reserves. Debt service ratios are projected to continue to improve over time through increases in reimbursements to the new facility. A graver concern is the prospect of continuing with status quo hospital operations in the current facility. Significant liabilities exist that will continue to challenge staff and hospital finances.

  1. Opponents’ Claim: The current debt coverage ratio of 1.8 is below the industry recommended 2.0 ratio. The debt on a new hospital will put the ratio at dangerously low

Fact: False. LCCH’s debt service ratio is within norms for its industry. LCCH’s debt service ratio will only improve with the project plan of a hospital funded in part by the community and partly by LCCH itself due to the federal Medicare-CAH program paying the majority of the debt service.

  1. Opponents’ Claim: There are no transparent key financial performance indicators of the hospital and clinic operations that the community can follow. How do we hold the hospital commissioners and management accountable? How does the public know how the hospital is performing financially?

Fact: LCCH is completely transparent about its financials. Hospital financial performance is discussed at monthly Board of Commissioners meetings, which are open to the public. Agenda and minutes are posted publically on the hospital website. LCCH is audited by the Washington State Auditor’s Office and copies of LCCH’s annual audits are available at www.sao.wa.gov.

  1. Opponents’ Claim: The new hospital will have no additional

Fact: As a Critical Access Hospital, LCCH is limited to 25 inpatient beds. Currently, 11 are dedicated medical/surgical beds and 14 are in the Sanctuary unit (drug/alcohol recovery). The 11 medical/surgical beds all need to be in private rooms. Double occupancy rooms are outdated and don’t put patients’ needs first. Why are single rooms better? Lower infection rates, patient privacy/dignity and better sleep. When was the last time you shared a hotel room with a complete stranger?

However, we do need increased square footage for 3 more ER beds, 2 more observation room beds, and 4 more day-surgery recovery beds. In addition we need larger OB delivery suites, 2 enlarged ORs, 1 new endoscopy suite, and more space for radiology, physical therapy, laboratory, pharmacy, and other departments.

  1. Opponents’ Claim: The hospital commissioners have not engaged Confluence Health leadership in the discussion of regional health care. They are operating in a silo while health care consolidation is happening everywhere

Fact: Actually, LCCH and Confluence already enjoy a good collaborative relationship and the commissioners have been engaged in discussing regional care. Confluence administrators just visited the Board of Commissioners in December of 2016 and discussed areas of partnership such as mammography, echocardiograms, pathology, and other regional projects. Confluence Health would like to continue to collaborate closely with LCCH, but is not interested in a full merger.

Large hospitals generally only buy small hospitals for one of two reasons. Either that hospital is very profitable, making it a lucrative purchase (rare), or to secure a referral stream to the larger hospital’s specialists (common). Given that Critical Access Hospitals operate on average with a 0.8% profit margin, LCCH doesn’t pose an attractive financial option to Confluence.  And, because Wenatchee is the closest larger city with specialists, Confluence is already assured of referrals from LCCH and the clinic.

  1. Opponents’ Claim: National trends show a decline in the use of rural hospitals. Our hospital is showing this same trend with a steadily decreasing market share, a decrease in the number of inpatient days and the inability to meet its operating budget for the past 5

Fact: Many rural hospitals do face an uphill battle. But the future for Lake Chelan Community Hospital is very bright. Due to our growing community, our strong administration and staff, and our expanding outpatient profit centers, we have much to be proud of and much to look forward to. But, we need a new facility to take the next step towards a bright health care future. Additionally, not all rural hospitals enjoy Critical Access Hospital status. As a CAH, LCCH is guaranteed 101% of expense reimbursement on over 60% of its business. This creates a very stable operating position.

Fact: LCCH’s inpatient visits have actually been very steady over the last 6 years. The average daily census has been 17. This appears on reports as a loss of market share because our region is growing. With the additional flexibility offered by private patient

rooms in the new hospital, the flat inpatient numbers would likely rise. Health care consumers are attracted to new and pleasing environments. The important point is that inpatient stays account for only 30% of LCCH revenue. The outpatient revenue (70% of total) has been steadily increasing, jumping by over $1,000,000 in 2016 alone.

Fact: LCCH sets an aggressive budget of achieving 2% net revenues. Margins on Critical Access Hospitals are typically 0.8%. Since our current CEO started in 2010, LCCH has been profitable with net positive income in 6 of the last 7 years.

  1. Opponents’ Claim: A new hospital will increase the existing non-voted debt by

$22,000,000 for a total non-voted debt of $30,000,000 (includes purchase of Namas property). This debt is in addition to the $20,000,000 levy being voted on April 25th for a total combined debt of $50,000,000. (cost of Town Toyota Center – and we know how that turned out.)

Fact: Our hospital is no Town Toyota Center (TTC). Given its designation as a Critical Access Hospital which secures strong and consistent reimbursements, the hospital faces a very strong financial future in a new building. In addition, LCCH has a long financial history as a known entity from which to base its ability to borrow money and afford to pay it back. That was not the case with TTC. And by law, voters cannot be forced to pay for more than they agree to by a public vote (only the $20,000,000 portion). Given our valley is a thriving and growing community, it’s important we have a modern, dependable health care facility to meet our needs.

  1. Opponents’ Claim: The property taxpayers are responsible for all

Fact: By law, voters cannot be asked to pay for any more than they have approved in a vote. So, if LCCH has difficulty paying its bills, it would have to work with the lender to find a solution. There would be NO extra payments to be made by the public. The

$20,000,000 bond is all the taxpayers are responsible for paying.

  1. Opponents’ Claim: There is no financial safety net and no contingency plan if the hospital does not meet its financial

Fact: The Critical Access Hospital (CAH) program is the hospital’s financial safety net. It guarantees coverage of 101% of expenses for the majority of the hospital’s patients.

The hospital will never make excessive profits in this structure and this is by design, but it does create a stable revenue stream. The CAH program offers consistent health care to our community and 49 million other people nationwide.

Additionally, our hospital has a long-tradition of starting innovative programs to supplement the CAH program. In the 1990’s the Sanctuary Drug and Alcohol treatment center was established. And more recently, a host of out-patient departments including physical and occupational therapy have been created or expanded. The hospital’s outpatient revenues jumped by $1,000,000 in 2016 alone.

  1. Opponents’ Claim: 60% of the hospital’s income comes from federal reimbursements. There is great uncertainty about future federal reimbursements due to the new administration and the repealing of the Affordable Care Act (ACA).

Fact: There is no uncertainty about the Critical Access Hospital program which is the cornerstone of our hospital’s finances and the cornerstone of small community hospitals nationwide. Given recent events in Washington DC, it appears the ACA will remain the law of the land for the foreseeable future. Additionally, our hospital wasn’t a big winner when the ACA was passed.  LCCH reported only a 4% increase in Medicaid patients.

So, were there to be any changes to this program in the future, it would have a minimal effect on the hospital’s bottom line.

  1. Opponents’ Claim: Now is not the time to burden our citizens with this huge new debt.

Fact: Now is the time to support a new hospital for our community, because we can’t afford to wait any longer. The current hospital’s infrastructure is on its last legs, it’s bursting at the seams for space, has difficulty recruiting new staff, and the financial outlook looks much worse in the current building vs. a great outlook in a new one. The taxpayers are being asked to support half the expense of the new hospital, with the hospital shouldering its half by borrowing as much money as it can safely afford to do. The cost to the individual family after the bond is passed is roughly similar to the percent of property tax paid to support the library system. What is your family’s health worth to you?

This is the best decision financially, and the wisest investment of the community’s resources. This is the best decision medically, helping to provide higher quality care to our community. Without a replacement hospital, quality care and fiscal responsibility become more and more challenging and our community will likely face a cutback in services. Are we ready to let go of obstetrical services and the concept of being “born and raised in Chelan”? Are we ready to let go of all surgical services? Let’s keep healthcare local. Support your community and Vote “YES” for a new hospital on April 25th.  We can’t afford to wait.