Serving Boone, Blowing Rock, Banner Elk, and other towns of the North Carolina High Country | Founded 05-05-05

Psychiatric Unit at Cannon Hospital To Open in October

Local Hospitals Facing Surging Costs, Labor Shortage

Story by Kathleen McFadden Richard Sparks, CEO of Appalachian Regional Healthcare System, recently updated local media representatives on the state of healthcare in the High Country. Photo by Kathleen McFadden

Amid all the dire headlines about the problems with mental health services in North Carolina, Appalachian Regional Healthcare System and Smoky Mountain Center have some good news for High Country residents.

Plans are on track to open a 10-bed in-patient behavioral health unit at Cannon Memorial Hospital in October, said ARHS CEO Richard Sparks at a recent presentation for local media representatives, and hospital administrators are trying to obtain the necessary waiver from Medicare to increase the number of beds to 20.

Cannon’s behavioral health unit closed three years ago, Sparks said, and reopening the unit entails a significant financial commitment, but the state is willing to help.

According to Sparks, hospital administrators know that 5 to 8 percent of patients admitted for medical procedures every year will be unable to pay their hospital bills. But for psychiatric patients, that percentage rises dramatically—30 percent of psychiatric patients on average are unable to pay.

Funding one-third of a facility’s operational costs to make up for the percentage of patients who cannot pay for their care is a significant challenge, but the Cannon program is one of three pilot programs in North Carolina that the Department of Health and Social Services is funding to help alleviate the shortage of psychiatric beds in the state.

“We expect those 10 beds to be full in three months,” Sparks said, and that’s the reason behind the appeal for a Medicare waiver to double the number of beds. Sparks said that While Cannon’s classification as a critical access hospital carries a number of benefits, including a cost-based reimbursement from Medicare that has the potential to increase revenues, that classification also imposes some restraints. One of those restraints limits psychiatric programs to no more than 10 beds.

However, given the mental health crisis in North Carolina, the need for psychiatric beds and a partnership with Appalachian State University that will give the university a training site for expanding its programs in psychology, Sparks is optimistic about the chances of obtaining a waiver.

Sparks said the plan is to present the case to Medicare representatives in Washington, D.C. within the next 45 days.

In terms of the healthcare system overall, Sparks said, economic conditions, the healthcare labor shortage, and required investments in quality improvements and information technology are combing to create what he called “the perfect storm.”
Hospitals are feeling the crunch of surging costs—affecting everything from fuel to food to medical supplies. At the same time, the number of patients who are uninsured and underinsured is increasing, and the Medicare reimbursement has remained flat, with only a 1 to 1.5 percent adjustment each year. At Watauga Medical Center, Medicare accounts for 50 percent of reimbursements; at Cannon, the percentage is 65. Contributing to the financial pressure, the dollar amount of unpaid patient bills has tripled since 2005.

In 2005, Sparks said, most hospitals were “doing OK,” posting the expected 3 to 5 percent bottom line margin. Today, that number has shrunk to an average of 1 to 1.5 percent, and 50 percent of the hospitals in the state, he said, have no margin at all. When it’s available, that money is used to improve operations, purchase new equipment and expand facilities.

In terms of the healthcare labor shortage, Appalachian Regional Healthcare System has had an aggressive recruiting program in place for a number of years and has recruited 32 physicians since 2004. Between now and the end of 2008, Sparks said, the system plans to recruit 10 more physicians in primary care, for the emergency room and as hospitalists.

Equipment upgrades and advances are expensive, but necessary, he explained. Watauga Medical Center has moved to all-digital imagining, and within 8 to 12 months, Cannon will be filmless as well. “All hospitals will have to move to that level, or they won’t be able to participate in the Medicare program,” Sparks said.
A comprehensive study underway at Blowing Rock Hospital for the past 8 months should be concluded within the next 2 months, he said. Sparks said he anticipates Blowing Rock Hospital will provide post-acute care services, such as Alzheimer’s treatment, adult daycare and skilled nursing, while Watauga Medical Center and Cannon will continue to provide primary care.