We begin to address some of the distortions and inaccurate information that have been put out | Eastern North Carolina Now

     Publisher's Note: We do very much appreciate this fine article on the BRHS debacle from our friends at the Beaufort Observer. It is the opinion of this publisher that their continued, complete reporting and analysis of this controversial issue is unparalleled in scope.

    In this article we look at a continuing distortion about reimbursement and the difference in impact on the local economy by a non-profit vs a for-profit operator

    We have begun to prepare a series of articles reviewing the Hospital story. One of the things that has immediately become clear is that in the course of the controversy there has been much inaccurate and distorted information put out. We will document more of this in future articles, but there are two examples that need to be reviewed immediately.

    The first we have already reviewed, but will repeat it because it persists. It is a distortion that says: "the reason the hospital got into such bad financial shape was because of the reimbursement system from Medicaid, Medicare and insurance companies." Commissioner Jay McRoy made this assertion early on at a Commissioners' meeting and even though we have documented this to be a gross distortion, Commissioner Jay McRoy continues to spread the misinformation. He did so at a recent Down East Republican Club meeting.

    The fact is that comparing "reimbursement rates" computed as a percent of what a hospital bills is bogus because they can bill anything they want, but the Federal reimbursements are standardized for all hospitals. The exceptions and details are explained in the link above.

    And while Mr. McRoy claims insurance companies vary their reimbursement, he knows that their reimbursements are protected confidential information so he has no way of knowing what it is, except by speculation. Blue Cross denies it is significantly different except where actual costs vary. And Blue Cross points out that their reimbursement is not based on how much the provider "bills" for services. Thus, comparing insurance reimbursements among hospitals has the same problem as Federal reimbursements. Mr. McRoy knows this but he continues to talk about "reimbursement rates."

    Another example of gross fabrication and distortion came in the public hearing on February 9. David Wheeler spoke and used the same information he presented to the Down East Republican Club meeting on January 27, contending that because University Health System (UHS) is a non-profit it will prevent what he computed to be $350 million leaving the county which he claims would have happened if Community Health Systems (CHS), a for-profit, had been selected.

    The video below is Mr. Wheeler's presentation at the public hearing February 9:



    Apparently Mr. Wheeler simply took some kind of estimated percent of profit and multiplied that times the gross revenue and derived his $350 million number that he claimed would leave the county's revenue never enters the county's economy in the first place. The only revenue, for the most part, that does enter Beaufort's economy is that which is paid for salaries to people who live (or at least spend their money) in Beaufort County and any operating expenses that are paid to businesses in Beaufort County. And Mr. Wheeler has no way of knowing those amounts because such data do not exist.

    Second, Mr. Wheeler obviously has no way of knowing what kind of margin CHS would operate on. If CHS continued the same expenditure pattern as has been present in the past it would not make a profit any more than the current Health System has unless it increased its revenue by a sufficient amount to generate that profit. There are not even enough beds in the Hospital to accomplish that feat, so it is impossible.

    Mr. Wheeler is to be commended for trying to assess the economic impact of the BRHS on the county's economy. But he violates even basic economics in doing so.

    Mr. Wheeler makes the same mistake that many politicians and economic development "experts" make when they say a new industry or business will "add X dollars to the local economy." A good example of this is the impact a big box store has on the local economy.

    If a new Wal-mart or Lowes comes to town and does $100 million in sales a year that does not mean $100 million is pumped into the local economy. Much of that $100 million is in fact taken out of the economy. One of Wal-mart's standard practices is to transfer receipts to its corporate headquarters several times a day. So if you go to Wal-mart and spend $100, as much as $50 goes immediately to Arkansas, never to return to Beaufort County. That $50 comes out of the local economy, you can't count the $100 in sales as "added to the local economy."

    So for Mr. Wheeler's number ($350 million removed from the economy) to be correct you would have to know what percent of CHS's total revenue was actually spent locally and compare that number to what UHS will spend locally to know the difference in impact on the Beaufort County economy. The difference between local expenditures and total expenditures is what is "taken out of Beaufort County" and that has nothing to do with profit or margin. The basic error Mr. Wheeler makes is to use revenue rather than expenditures.

    There is no doubt that the Health System is a major component of the Beaufort County economy. But whether that impact is enhanced or diminished going forward will depend on many factors, not the least of which is the patient census.

    Beaufort has over a 100 beds. In recent years it has had a census of less than 50 patients on average per day. Recently its been more like 35. If CHS were to increase that utilization to 70% but UHS increased it only to 50% (because of referrals to Greenville) then the impact on the local economy, because of payrolls, would be significantly different between CHS and UHS. So to know which will have the greater impact on the local economy you have to know which will improve the utilization, or census, more.

    Some suggest that it stands to reason that UHS will send more patients to Greenville than CHS would. If you accept that premise then it is obvious that CHS would have a more positive impact on the local economy than would UHS. But neither one will impact it by $350 million unless we have a lot more sick people in Beaufort than we have ever had.

    Again, we commend Mr. Wheeler for focusing attention on the impact of the Health System on the local economy. It is indeed one of the most important factors the County Commissioners should consider in making their decision, along with several other "most important" factors. But we need to be careful about how we assess that impact. It needs to be accurate, or as accurate as feasible. Mr. Wheeler's economics are simply bogus.

    Mr. McRoy is a different matter. Mr. McRoy knows what he is saying is not accurate. We think he, as a public official, does the county a grave disservice by spreading false and misleading information when he knows it is not accurate. One has to wonder why he would do such a thing?