What the fix-it men found at AVH | AspenTimes.com
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What the fix-it men found at AVH

Eben Harrell

Since the results of Interim CEO Bob Karp’s investigation of hospital finances started trickling out to the public three months ago, there has been confusion about what’s actually going on.

Part of this confusion stems from the fact that, as the investigation has moved along, the findings have changed. Each time officials thought they had a handle on things, the situation would prove worse than thought.

“We think we’ve got it all out now,” Karp said this week. “We can now say with reasonable assurance that we’ve got our heads around this.”

So here’s what Karp and his team found, and the steps they are taking to address the problems.

Problem 1 – Billing

Most of the financial problems at AVH stem from poor billing. If a bill is formatted incorrectly, or waits too long to be sent out to patient, then it is almost always uncollectable. The $11 million loss that has recently been reported refers to $11.7 million in bills that are probably no longer collectable.

Although portions of that $11.7 million date back to 2000, hospital officials decided to write off the full amount in the 2003 budget. Efforts will continue to recoup those bills, but officials are not optimistic.

The $11.7 million write-off has led to an actual budget shortfall, or loss, of $7.5 million in 2003. The hospital’s mill levy tax, donations from the Aspen Valley Medical Foundation, and interest gained on hospital funds, make up the difference.

Solution 1

The billing problems fall into two categories: aging and coding.

Coding ensures that all services (from operating room rental to Band-Aids) be billed correctly. There are 22,000 codes, or 22,000 different things that AVH can bill for. The previous computer system had overlooked many of these codes.

For $2.5 million, the hospital has installed a new computer system.

Aging is trickier. In the past, AVH’s computer system didn’t distinguish between bills that were 5 months old or 2 years old. That has been fixed, but officials are still trying to fix human inefficiencies, such as getting workers at AVH and the hospital’s Rifle-based billing office to get bills out faster.

Problem 2 – Inefficiencies

The hospital has been run inefficiently over the last five years, according to Karp. The size of the hospital staff, for example, has exploded over the last five years. At one point earlier this year, the hospital had a staff-to-patient ratio of 9.65 to 1, about 3.35 above the state average, leading to overlaps and redundancies.

Solution 2

On April 14, the hospital laid off 34 hospital employees across 27 departments. Karp and his team continue to look for other inefficiencies, from unneeded phone lines to further reductions in staff hours.

Even after the staff cuts, Karp said, AVH’s staff is larger now than in 1997.

Problem 3 – Poor revenue

With money hemorrhaging from AVH, a primary goal is to increase revenue.

Solution 3

The hospital is looking at three big steps to increase revenue. The first is to boost federal funding to the hospital, the second is to expand services in the midvalley, and the third is an affiliation with a major New York hospital.

Congress has decreed that the federal government must support isolated, rural hospitals that offer critical services. While most hospitals receive only partial reimbursement for treating Medicare patients, so-called “critical access hospitals” receive total reimbursement.

Because of AVH’s outpatient orientation (32,000 outpatients last year, compared to 1,900 overnight), AVH qualifies for “critical access” status. Approximately 23 percent of AVH’s patients are billed through Medicare. Had the hospital received full reimbursement for these patients in 2002, revenues could have been $1.5 to $2 million more.

Hospital officials worry that AVH is losing midvalley patients to Glenwood Springs’ Valley View hospital. AVH is currently in negotiations with Valley View to consider cooperative efforts at the midvalley.

At the board’s behest, Dr. Karp is negotiating a three-way partnership between AVH, the Orthopaedic Associates of Aspen and Glenwood Springs, and the Hospital for Special Surgery (HSS), a Manhattan hospital specializing in muscular and skeletal care with world-renowned orthopedists.

The agreement, if it goes through, would see the formal “branding” of HSS for Aspen’s facility, a process whereby the New York hospital’s name recognition could attract patients to Aspen. Hospital officials hope the move could bring in up to $10 million a year.

Eben Harrell’s e-mail address is eharrell@aspentimes.com


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