Cordell Memorial Hospital Making Changes To Survive Lean Times

It is no surprise that Cordell Memorial Hospital is struggling financially. In addition to a declining average daily census (the number of inpatients registered at the hospital on a daily basis), the hospital has also had to repay Medicare overpayments in each of the past two years.

Hospital CEO Kenny Downs sat down with The Beacon earlier this week to discuss the ongoing financial concerns at the hospital and the steps being taken to help preserve it as a functioning entity in Cordell.

One major issue contributing to the hospital’s current financial crisis has been the repayment of Medicare overpayments. Downs said the hospital has had to repay approximately $800,000 to Medicare over the past two years because of overpayments. He said the problem is caused by Medicare’s business model, in which Medicare estimates the hospital’s costs versus expenses and the mix of Medicare to private or no insurance patients. Those numbers are combined in a formula that determines the hospital’s specific reimbursement rate from Medicare.

The problem, he said, comes when those estimates are off, as has happened in Cordell Memorial’s case. Due to changing reimbursement rates based on the difference between the actual and estimated numbers, CMH was overpaid and had to return those overpaid funds.

“You can’t plan for something like that,” he said. “It’s the toughest business model I’ve ever seen. They don’t want you to make any money, they want you to break even.”

Cordell Memorial Hospital has taken several steps to help address the financial crisis, Downs said. First, the hospital has begun participating in the federal 340B drug pricing program. This program allows participating hospitals and health care centers to purchase pharmaceuticals from the manufacturers at significantly discounted rates, which allows them to pass savings on to their patients while increasing the hospital’s revenue on those medications.

Secondly, the hospital asked for a one percent increase in the city’s sales tax, earmarked to help fund the hospital. The city council agreed to place the issue on the ballot, and it was overwhelmingly approved by Cordell voters. The hospital should start seeing the proceeds of that sales tax, which became effective Jan. 1, 2020, next month.

The hospital has also made staffing and salary changes with an eye toward reducing day-today operational expenses. During the past few months, five full-time nursing positions have been eliminated at the hospital, bringing the hospital’s staff down to roughly 49 full-time equivalents. Additionally, Downs went to the board of directors and voluntarily reduced his salary. The hospital’s CFO is moving to a contract position, which will also mean a lower salary and save the hospital the cost of benefits.

The staffing cuts, Downs said, save money, but also create other potential problems for the hospital.

“The average daily census isnt everything,” he said. “We have to keep staff on hand to deal with emergencies. We have to have the ability to respond.”

Downs said the hospital’s emergency room doesn’t really generate a reliable revenue stream for the hospital, but it’s a vital community service the hospital offers to local patients.

“The emergency room costs money to operate, but it’s necessary for providing local care to our patients. It’s a necessary community service. We can stabilize patients here and then transport them to whatever facility is best suited to care for their needs.”

Looking forward, Downs said hospital administration is looking at “every possible avenue” to reduce costs while maintaining sufficient staff and services to continue providing quality care to Cordell and surrounding-area patients. One of those possible avenues involves expanding the hospital’s existing relationship with St. Anthony’s.

Currently, the hospital is a St. Anthony’s affiliate. Cordell Memorial partners with St. Anthony’s to provide Tele-Hospitalist services and electronic medical records. Downs said representatives from St. Anthony’s have met with CMH’s board of directors and begun preliminary conversations about entering into a management agreement between the hospital and St. Anthony’s. Such a relationship exists in Weatherford, which began when that hospital was experiencing financial issues similar to those being faced by Cordell Memorial, Downs said.

“Right now we’re in a preliminary discussion about what a management agreement might look like,” he said. “We’ve had a good working relationship with St. Anthony’s for years.”

All told, Downs said the prognosis for Cordell Memorial Hospital is good.

“We’re going through some lean times right now, but it’s my hope and belief that making these cuts, getting a bit leaner, and a possible deal with St. Anthony’s, are going to help us through it,” he said. “My hope is that Cordell Memorial Hospital will be here for decades to come and we’re trying to do things now to make sure that happens.”