MWHC better, but still in red

June 17--The federal budget cuts during sequestration and changes in health care laws have hit Mary Washington Healthcare hard, leaving the hospital system operating in the red for the second year in a row.

Fredericksburg-based MWHC lost almost $8.2 million in 2013, according to a recently released audit. The net operating loss was less than the $21.2 million net operating loss in 2012.

The health system actually earned $19.2 million more in 2013 than the previous year. But the not-for-profit company, which operates two local hospitals and other services also saw expenses rise.

Sequestration, which reduced federal spending, and the Affordable Health Care Act both hurt the health system's bottom line, said Chief Financial Officer Sean Barden. The ACA cut Medicare reimbursement rates, which left Mary Washington Healthcare providing the same services for about $14 million less.

The local health care system also lost about $3 million because of sequestration cuts, which trimmed the amount paid for federal reimbursements for health care services.

Additionally, Mary Washington Healthcare continued to suffer from losing its Medicare status as the sole community hospital, a designation that brings higher Medicare and TRICARE reimbursement rates for the provider. That loss equals about $25 million each year, Barden said.

MWHC first lost that designation in 2011, after the arrival of the Spotsylvania Regional Medical Center.

MWHC has been trying to control costs to handle the loss, Barden said.

"We have to be creative and innovative," he said. "We just have to work really hard and pinch those pennies."

Many Virginia hospitals have also been struggling to control costs, said Katharine Webb, senior vice president of the Virginia Hospital & Healthcare Association in Richmond.

"I don't know of any hospital or health system in the commonwealth that isn't looking really hard at ways to balance their expenses and revenue," Webb said. "And they have to make some tough decisions."

Virginia's political gridlock over Medicaid expansion has only made the hospitals' situation worse, she said. Gov. Terry McAuliffe, a Democrat, wants to expand Medicaid, but the Republican-dominated General Assembly has refused to act on any proposals to do so.

About 400,000 Virginians without insurance would qualify for Medicaid if the expansion passed.

"The uninsured are coming into the emergency department and we have an obligation--legal and moral--to stabilize and treat these patients," Webb said.

If Medicaid were to expand in Virginia, Barden estimates that MWHC would recoup about $14 million annually--enough to balance the losses from lower Medicare reimbursements.

Despite the challenges, Barden expects MWHC to again turn an operating profit soon. He noted that with non-operating revenue such as sale of assets and return on investments added to the 2013 numbers, the company finished the year $1.5 million in the black.

He points to some promising signs. For example, the system recently refinanced some of its debt, which will allow the company to save about $650,000 annually, Barden said. And Stafford Hospital was profitable last year for the first time since it opened in 2009.

He said there are no plans to sell the company.

"We believe we've weathered the worst of the storm," Barden said. "We're well-positioned in the future to provide care to the community."

Amy Umble: 540/735-1973

[email protected]

BY THE NUMBERS

2013 revenue: $592.6 million

2012 revenue: $573.3 million

2011 revenue: $594 million

Net operating loss 2013: $8.2 million

Net operating loss 2012: $21.2 million

Net operating profit 2011: $5.2 million

--Mary Washington Healthcare's annual audit

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