Health Care Chickens May be Coming Home to Roost
I have written several articles over the past few years addressing the financial viability of the Vidant Health System. My concern is based on the amount of cash on hand, lack of capital reserves, and large number of highly paid employees. For any one to say Vidant is a non profit and the financial rules that do not apply is an oxymoron. The management of all well run business, whether for profit or non profit, know that reserves have to accumulated to carry the business through hard times, slowdowns in patient admissions or changes in revenues.
Hospitals like Vidant are more at risk than, shall we say normal businesses. Vidant is at the mercy of MEDICARE and MEDICAID payments. The amounts and when payments are made are totally at the discretion of the federal government. This alone is a huge risk. Also, Vidant does not get paid what they say their costs are, they get paid what the governments says their costs should be.
All for profit hospitals operate under the same conditions as Vidant. Why do they manage to accumulate reserves and pay dividends to share holders.
Vidant claims they are not able to accumulate surpluses because they operate in an impoverished part of North Carolina. Non profit hospitals, who have a disproportionate share of poor patients receive DSH (Disproportionate Share Hospital) payments. These payments are intended to level the playing field.
If the playing field is level, why is Vidant behind. Running a hospital is no different from running any other business. The quality of management is important. Are managers doing all they can to be sure they are operating in an efficient way. Are they collecting money owed to them, are they over staffing , are they over paying for labor including doctors? Does the management make the effort to deal with employees in a way that would make others want to work there.
During my tenure on the Beaufort County Hospital Board, I discovered that we were not collecting money owed to us. We were grossly over staffing, and most management decisions were made based on the good buddy system, not on what was good for the financial integrity of the business.
Businesses that have grown rapidly, like Vidant, in terms of the numbers of employees usually have not taken the time and effort to make sure the concerns presented in the above paragraphs are adequately addressed. They have a tendency to throw money at problems. Rapid growth covers up a lot of bad management mistakes.
The day of reckoning always comes when revenues are threatened. Weak managements tend to panic and make more bad management decisions. They usually plead that they are exceptional for one reason or the other and they deserve special privilege. Special privilege is almost always more money or delays loan payment schedules. Very few think about cutting costs or applying better management practices to provide the services more efficiently. They have not developed the management teams capable of changing course.
Vidant has made some recent bad management decisions. They have fought the State treasurer, Dale Folwell, when he tried to clean up medical payments in the State health Plan which covers about 700,000 former and present state employees. All Folwell is asking for is honesty in billing. That is , money paid for actual services given.
Another indication of financial stress is Vidants attempted merger with ECU Physicians, essentially the medical school at East Carolina University. Looks to me like someone looked at the books and saw the financial advantage would be with Vidant. Vidant taking over the medical school would give them a direct pipe line in the taxpayers. How sweet that would be. The Legislature and State Treasurer are apparently blocking the merger which protects all of our pocket books.
Another indication of extreme financial stress, I have not said panic yet, is the article signed by Vidant's entire board that was published in the June 22, 2019 issue of the Washington Daily News. The article is titled "Local health care in peril in eastern North Carolina". The alarming statement, made about the loss of $73 million from the Brrody School situation and the State Treasurer's honest billing effort is: "The collective $73 million in cuts to Vidant system will have devastating consequences for health care in eastern North Carolina". This threat or plea depending on how you look at this situation is says a lot about Vidant management. Only an under managed non profit intent on sucking the government tit would have said this or done any of the other things mentioned in this article.
At the end of the day, Pitt County government is on the hook. They own Vidant, if any one does. They appoint the majority of Vidant's Board of Directors. Pitt County Government should sit down with a credible audit of Vidant's books and see where they are. Pitt County may believe they are insulated from Vidant;s finances, and they may be correct. But, Pitt County does not need the reputation of having a business that is failing and not doing anything about it. The bond rating companies are watching.
Beaufort County has risks too. We leased the Beaufort County Hospital to Vidant for one dollar per year with a ten million dollar pay out at the end of 30 years. Vidant would then own the hospital. Financial strains and mis management it Vidant's Greenville digs can have severe effects at the Beaufort Washington Hospital. We got nothing for our hospital. Leasing it to a for profit for an annual payment would have made better sense for us. But, the Washington Chamber of Commerce and some of our "really smart locals" carried on an intense campaign to give it to a non profit.
Beaufort County lost all our flexibility when six commissioners, Langley, Booth, Brinn, Buzzeo, Waters and Belcher secretly hired lawyers to break the Beaufort County Hospital Board and take the $3.5 million. Should a financial calamity happen in Greenville we have no money to defend ourselves with. The same bunch of commissioners spent our savings (fund balance) down to no surplus too.