MERCY HEALTHCARE: Sacramento System Bleeding Red Ink
Mercy Healthcare Sacramento posted third-quarter losses totaling $8 million, bringing the year-to-date losses to $17.5 million. The Sacramento Business Journal reports that the seven-hospital system, which "controls one-third of the health care" in the Sacramento area, is "being squeezed on the revenue side by low reimbursement rates from health insurers and by government," and on the "expense side" by costly projects and contracts. Mercy faces a $70 million bill for earthquake retrofitting projects, a $5 million to $8 million bill for fixing Year 2000 computer glitches and a new contract with Woodland nurses that will cost $2.8 million over three years. "In the short term, we need rate relief," said CFO Richard Rothberger. "We are in the process of developing a turnaround plan," he added.
The Sacramento Business Journal reports that part of that plan will be "trying to get health plans to pay more on insurance contracts." But Medicare, not insurers or HMOs, is the "main culprit" of low reimbursement rates, according to Rothberger. He said if the federal government does not increase rates Mercy might have to pull out of the Medicare HMO market. "[W]e may not do it anymore," he said. Another tenet of Mercy's turnaround plan will be "tighter management of scarce resources and more work with affiliated doctors' groups," according to Rothberger. The Sacramento Business Journal reports that the "belt-tightening has begun": Mercy doctors "took an average 10% pay cut" and Mercy recently relicensed its Woodland Clinic so Medicare will pay the overhead. In addition, Mercy will open a new trauma center next spring at its San Juan facility, saving the system an estimated $2 million that it currently spends to send its members to non-network hospitals for care (Robertson, 11/2 issue). Click Mercy for previous coverage of the health plan.