Payer mix, patient volumes contributed to Astria Regional's financial issues

Jan. 19--During Tuesday's hearing in U.S. Bankruptcy Court, nurses, physicians and other staff members emphasized the impact the closure of Astria Regional Medical Center would have on the poorest members of the community.

"I'm worried what it means for our most vulnerable population," said Dr. Rachel Monick, who was an emergency department physician at Astria Regional. "The first thing I thought Wednesday (Jan. 8), when a friend told me on Facebook it was closing, was our patients. I was worried about what they're going to do."

A sizable percentage of Astria Regional's patients were low-income and older, as shown by 2018 figures from the state Department of Health's hospital discharge data. The hospital had 214 beds.

Of the 1,405 patients discharged from Astria Regional Medical Center's acute care and rehabilitation departments in 2018, 74% had Medicare or Medicaid -- typically, low-income and older patients with limited means.

In comparison, at Virginia Mason Memorial, about 70% of 14,031 patients discharged from the hospital in 2018 were Medicare or Medicaid payers. It was 71% in 2019, according to Memorial officials.

"If you start getting above 55% to 60% Medicaid/Medicare, things you get really hard because you don't have enough commercial carriers to offset that cost," said Robert Malte, clinical associate professor and practitioner in residence for the master of health administration program at the University of Washington. Previously, Malte served as CEO of EvergreenHealth in Kirkland for eight years.

Malte said a high rate of Medicare and Medicaid patients doesn't automatically doom a hospital -- but it does makes things more difficult.

Medicare or Medicaid insurance payments vary depending on the service, but are generally well below cost. Commercial insurers typically pay more -- sometimes above cost.

A quarter of Astria Regional patients discharged in 2018 had private health insurance, compared to 28% of Memorial's patients during the same year.

"It's a big source of concern and certainly can make things even more challenging for a business that has fairly thin margins," Malte said.

Malte said most hospitals are working to maintain margins of 1.5% to 2%.

Other factors could contribute to a hospital's financial issues, such as low patient volume. The number of patients at Astria Regional dropped from nearly 5,400 in 2013 (when it was Yakima Regional Medical and Cardiac Center) to just over 1,400 in 2018, a year after it was purchased by Astria Health.

Memorial discharged 14,461 patients in 2013, just under its total for 2018. So, even though a smaller percentage of patients there were Medicare and Medicaid payers, the hospital ended up serving more of those patients than Regional due to its overall volume.

Running a hospital is a fixed-cost business, Malte said. A hospital must maintain the same costs, whether it serves 15 or 150 patients.

While hospitals manage to stay open even with a significant Medicare/Medicaid payer mix and declining volumes, some find themselves evaluating whether they can offer a full array of inpatient services, Malte said.

Astria Regional was starting to reduce services in the months leading up to its May bankruptcy. The most notable cut was its 15-bed inpatient rehabilitation unit, which closed in December 2018.

Data shows that in 2018, 60 of the 68 patients discharged from Regional's rehabilitation unit -- 88% -- were Medicaid or Medicare patients.

"When things start to get tight, it makes it difficult to have that complete set of services," Malte said.

In the end, however, more Washington hospitals may be forced to consider closing, Malte said.

"There are probably another 10 rural hospitals in the state that may be facing the same challenge," he said.

Reach Mai Hoang at [email protected] or Twitter @maiphoang

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