Medicare cuts likely a factor in planned Vibra closure; 127 workers to lose jobs

Dec. 21--Reductions in Medicare funding that have proved "pretty drastic" for certain specialty hospitals probably played a role in Vibra Healthcare's plans to close its Springfield hospital early in 2019 and lay off about 130 employees, the head of a hospital trade association said Thursday.

A bill passed by Congress and signed into law by then-President Barack Obama in 2013 made it harder for long-term acute-care (LTAC) hospitals to maintain current Medicare reimbursement levels, according to Lou Little, president of the Maryland-based National Association of Long Term Hospitals.

The resulting phased-in payment reductions for the 430 LTACs around the United States -- cuts that began in October 2015 and will be complete in September 2019 -- have led to the closure of at least 30 LTACs, Little said.

"It's not over," he told The State Journal-Register.

The payment change will reduce Medicare rates paid to LTACs by up to 60 percent or 70 percent for each patient unless the patient has spent at least three days in another hospital's intensive-care unit before being transferred to an LTAC.

Vibra officials in Springfield and at the privately held company's corporate office in Mechanicsburg, Pennsylvania, have declined or failed to respond to multiple requests for interviews since the company first announced in a letter Tuesday to patients and families that the 50-bed for-profit hospital at 701 N. Walnut St. will close by March 31.

Vibra Hospital of Springfield interim chief executive officer Barbara Callaghan did say in an email to the newspaper Thursday that 127 Vibra employees will be "affected" by the impending closure.

Callaghan said 88 of the total are either full-time or part-time employees. The remainder include "per diem" and other workers hired on an as-needed basis, she said.

Callaghan said in the email that the hospital was caring for 11 inpatients. Services provided by the hospital won't end until all patients are discharged, she said.

Callaghan wrote in the letter to that "reductions in health-care reimbursements and changes in referral practices over the past twelve months have made continuing operations in this location unsustainable."

She didn't elaborate on referral patterns involving other health-care providers and funding cuts.

When the 2013 federal law was passed, rate cuts for LTACs were one way of helping the federal government avoid cuts in overall Medicare payments to doctors and other practitioners, Little said.

The expected changes in Medicare payments to LTACs were projected to save the federal government $3 billion over a 10-year period, he said.

At the time, about half of all LTAC patients wouldn't have met the new criteria and in the future would generate much less than the average $40,000 to $50,000 payments for stays that typically last longer than 30 days, Little said.

Some LTACs have responded to the payment restrictions by turning away patients who wouldn't qualify for the higher Medicare reimbursements, he said. Three out of every four LTAC patients are covered by the federally funded Medicare health-insurance program.

Other companies and not-for-profit organizations operating LTACs have decided to close facilities, said Little, president and chief executive officer of not-for-profit Sparrow Specialty Hospital in Lansing, Michigan.

"That doesn't mean patients in Springfield no longer need this care," he said. "What is does mean is patients who need this care need to travel."

LTAC closures in communities such as Springfield can cause additional hardships for patients and families when other LTACs specializing in care for chronic, complex medical conditions are far away, he said.

The next-closest LTACs are in Peoria and the St. Louis area. Both areas are at least 90-minute drives from Springfield.

At Vibra's Springfield hospital -- a three-story, 40,000-square-foot facility -- 67 percent of patients were covered by Medicare and 61 percent of revenues came from Medicare in 2017, according to the Illinois Health Facilities and Services Review Board.

Medicare data indicated that reimbursements for about one-third of the Vibra hospital's Medicare fee-for-service patients in 2017 would be paid at rates below the pre-2015 levels, Little said.

He said he had no first-hand knowledge of Vibra's decisions regarding its Springfield hospital. But Little added: "It looks like Vibra did the calculus for Springfield and said, 'It isn't going to work.'"

The future of the building -- which generates $200,000 in annual property taxes -- and the prospects for selling it to another LTAC company or another entity remained unclear Thursday.

But Callaghan's letter earlier this week did say Vibra "pursued several options as it sought to keep the Springfield facility open, including seeking additional funding and resources. These efforts have been unsuccessful."

The Springfield Vibra hospital in 2013 was sold by Kindred, a publicly traded company based in Louisville, Kentucky, to Vibra for $10.5 million. The Springfield hospital sale was part of a $187 million, multi-state deal in which Vibra bought from Kindred 15 LTACs, one acute rehabilitation facility and a nursing home.

Kindred opened the Springfield hospital in late 2010 after a more-than-five-year journey in which Kindred won out over two other companies to win state "certificate-of-need" approval for an LTAC.

Officials from HSHS St. John's Hospital and Memorial Medical Center said they were surprised by Vibra's closure announcement and didn't know what prompted the Vibra administrator to cite "changes in referral practices" as a contributing factor.

Both not-for-profit hospitals supported the original request by Kindred for state approval to open an LTAC in Springfield.

Allison Paul, chief nursing officer at St. John's, said in an email: "Our team was disappointed to hear this news because of our ongoing positive relationship with the hospital. St. John's has consistently sent patients who need long-term acute care to Vibra for several years.

"Going forward, we vow to work closely with other facilities in the city and region to ensure we place patients in long-term care facilities that best meet their needs after discharge from St. John's."

Dr. Rajesh Govindaiah, chief medical officer for Memorial Medical Center's parent organization, Memorial Health System, said Vibra stopped accepting Memorial patients this week.

Memorial Medical Center hadn't reduced its referrals to Vibra in recent years, he said.

"They were providing something unique that was not available at Memorial on a long-term basis," Govindaiah said.

The closure is "a shame" because it may result in more inconvenience, travel and stress for patients and families, he said.

Contact Dean Olsen: [email protected], 788-1543, twitter.com/DeanOlsenSJR.

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