Shore Regional Health and the University of Maryland Medical System remain committed to building a new regional medical center at the site adjacent to the Talbot County Community Center. The overlapping of several well-documented factors is, however, causing a period of unprecedented financial uncertainty for hospitals:
- While healthcare market share remains relatively stable, statewide, hospitals continue to feel the fallout of the recent recession in the form of reduced patient utilization, which has reduced revenue faster and to a greater extent than hospitals have been able to reduce their fixed costs.
- Hospitals have had to absorb the full impact of multiple significant cuts in Medicare funding.
- The State of Maryland’s Health Services Cost Review Commission has disallowed adequate rate adjustments for five years to Maryland hospitals, despite the continually rising cost of providing patient care.
- The State of Maryland’s decision to attempt to overhaul the existing hospital rate-setting mechanism presents numerous financial unknowns that make thoughtful financial planning difficult.
- The as-yet unknown effects of national health care reform on hospital revenues pose a further source of financial risk.
“These factors already severely stress the finances of hospitals and health care systems, both in terms of their operating budgets and in their ability to plan capital investments,” says Ken Kozel, President and CEO, Shore Regional Health. “The financial challenges Maryland hospitals face have now resulted in reductions in our hospital workforce and those of other hospitals, as well as the consolidation of programs and services. Hospitals and health systems, nationally and especially in Maryland, have been unable to proceed as planned with major capital projects due to this financial uncertainty.”
Shore Regional Health is still awaiting the decisions of the Maryland Health Care Commission and the Health Services Cost Review Commission on the Certificate of Need application for a new regional medical center. During this time, leadership has discussed these financial challenges at the highest levels of the organization, exploring all options and studying the impact of possible changes to the original construction schedule.
“As a result of the review of current issues, and without the decision of the MHCC and the HSCRC having yet been rendered, the Board of Shore Health has decided to implement a rolling delay for the start of a regional medical center until conditions are more favorable for incurring the financial commitment of this magnitude,” says John Dillon, Chairman of the Board of Directors, Shore Regional Health.
Shore Regional Health is not alone in this type of decision. Earlier this year, Upper Chesapeake Health System in affluent and booming Harford County put its plans for a new hospital on indefinite hold. The situation is widely shared among hospitals nationwide. A recent study conducted by the American Hospital Association indicated that more than two-thirds of hospitals surveyed had delayed construction projects due the effects of the recession and uncertainty about hospital finances moving forward.
“Despite the decision for a rolling delay, we remain fully committed to this project and we intend for the Certificate of Need process to continue on its full course. This delay does not affect the Memoranda of Understanding that we have with Caroline and Queen Anne’s counties,” adds Kozel.
“We could receive approval to proceed with construction as a result of the current Certificate and Need review by the Maryland Health Care Commission. While we could even be approved for a rate adjustment by the HSCRC as part of our request to build the new hospital, the key decision point for our organization now is not these approvals as much as it is our ability to gain confidence that our capital budget, as well as operating budget, will allow us to start the construction. The reasons for a new regional medical center remain valid and to the extent that we are able, we will proceed with the project at a future time.”
Shore Regional Health is thankful to all of its community partners for their support during this lengthy process—especially the Talbot County Council, the Easton Town Council, the staff of both the town and county, as well as Easton Utilities Commission, the Governor, local legislators, the State of Maryland, State Highway Administration, and many other agencies and organizations and their staff. We remain hopeful that the many national and state financial challenges in health care will be addressed soon so that we can proceed with the plans for a new regional medical center.