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Red ink stains Mary Washington Healthcare ledger

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DOCUMENT: 2012 Mary Washington Healthcare financials (PDF)

Mary Washington Healthcare continued to lose money in 2012, showing a net loss of $17.7 million, according to financial records released last week.

Company officials say the loss isn’t due to fewer patients—they say much of it is due to Mary Washington Hospitalthe hospital losing its status as the area’s sole community provider for Medicare services. As a sole provider, the hospital was reimbursed for Medicare services at a higher rate.

The hospital lost that status in January 2011, after the arrival of the Spotsylvania Regional Medical Center—a change that was partly responsible for Mary Washington Healthcare’s reduced bottom line last year as well.

Chief Financial Officer Sean Barden said the company is still feeling the brunt of the loss, since it cost Mary Washington Healthcare about $25 million a year.

Also in 2012, Medicare and commercial insurers changed how they define some inpatient services, reclassifying some things as “observation status” instead of inpatient, and paying less money for services under that classification—even though, Barden said, it costs Mary Washington Hospital and Stafford Hospital nearly as much to provide “observation status” services as it would traditional inpatient services.

Finally, Barden said, the hospitals spent a great deal of money last year—nearly $25 million—on information technology upgrades to computerize doctors’ orders. The government is encouraging hospitals to do that, Barden said, and will eventually punish those that don’t. Doing so involved new software, new equipment, some temporary staff and training for the hospitals’ hundreds of doctors and nurses.

“The finances have become challenging over the last couple of years,” Barden said in an interview last week.

The loss of the Medicare sole provider status, he said, “was one pressure point we really felt last year.”

Overall the hospital system reported $543 million in net patient service revenues in 2012, not far below 2011’s $564 million.

It paid out slightly more in wages and employee benefits, although officials said they anticipate their group health costs for employees to increase “potentially by quite a bit” in the future.

Mary Washington Hospital reported an $8 million loss in operating income for the year, while Stafford Hospital lost $5.7 million.

The company has enough in investments and cash to cover its losses—Barden said 2012’s cash position improved by $10.8 million—and Barden said officials are working to trim costs.

“We’re sort of on a diet on the expense side,” he said, citing an effort to trim spending on supplies and professional services and improve insurance reimbursements.

He said that other sources of revenue, such as patient payments, are showing positive signs.

Overall, Barden said Mary Washington officials feel good about the company’s position, and pointed to positive numbers for 2013 so far. Year-to-date in 2013, the company is in the black in terms of net revenues over expenses.

“We’re very pleased with our first quarter,” Barden said.

He said that the company’s financial issues of the past couple of years are not nudging the healthcare system, which is one of the few remaining community-based nonprofit hospitals in the state, toward selling out to a for-profit company.

“Our board and senior leadership believe very strongly we can best deliver health care” locally, he said, and feel the hospital group is in “a good solid place.”

Barden said that because MWHC is nonprofit, it’s not under the same pressure as a for-profit company to make money in any given year.

He and marketing and communications senior vice president Eric Fletcher said they would rather the community evaluate the hospitals not just from their profit or loss sheet, but also in terms of their quality of care and community benefit.

The group, they said, ranks highly nationally on a number of quality indicators, and counted $60.3 million in 2012 as “community benefit” spending. Some of that is charity or unreimbursed care that the hospitals don’t get paid for, and some includes health education programs and services.

Chelyen Davis: 540/368-5028