In an attempt to reverse a new trend of expenses outpacing revenue, St. John’s Medical Center will raise its prices 8% in fiscal year 2020, which started Monday.
At its monthly meeting Thursday the hospital’s board of trustees voted unanimously for the average increase in its charge master, the document that sets its list prices for services. The bump is more than double St. John’s five-year average price increase, which was 3.6 percent heading into fiscal year 2019.
Trustees cited the need to boost revenue and bring prices more in line with competitors. Scott Gibson, who heads the finance committee, said insurance companies, not patients, will bear the brunt of the increase, though, like much of hospital finance, the picture may not be so clear.
“Most patients aren’t paying charge master prices,” St. John’s Communications Director Karen Connelly said. “Most of our patients won’t see an 8% out-of-pocket increase in the price of their care.”
The increase in average prices also doesn’t mean every service at St. John’s will go up by 8%. Some may go up more, some less. Because of the intricacies of how hospitals are paid, it is difficult to tell exactly how individual patients’ bills may change.
Since insurance companies, Medicare and Medicaid pay for most services, and they negotiate prices that are lower than what is in the charge master, St. John’s may receive less than the list price for patients with insurance. Patients have copays and an out-of-pocket maximum in their insurance, so the price increases may not be passed on to them if insurance companies don’t raise those rates.
But nothing precludes them from doing so.
“The insurance companies will bear the cost,” at least in the short term, Dr. Thomas Clobes wrote in an email to the News&Guide. “Eventually, though, the insurance companies are likely to increase the costs to the patients, most likely through premium increases and copays.”
Clobes, a professor in Colorado State University-Global’s hospital administration program, said insurance companies could spread that cost across their clients, so Teton County patients could see less of an overall increase.
Why the hike
Hospital administrators and trustees spoke at Thursday’s meeting about several factors that pushed expenses higher than revenue the past two fiscal years. The first was that, on average, prices at St. John’s are lower than at other regional hospitals or at ones in other resort towns. Prices gathered through the Centers for Medicare and Medicaid Services show St. John’s prices for several common procedures to be relatively even with similar hospitals or up to roughly 30% percent cheaper (see sidebar).
For example, at the Yampa Valley Medical Center in Steamboat Springs, Colorado, the charges for a knee or hip replacement would be almost identical as at St. John’s. However, St. John’s patients paying for heart failure care would see a bill about 12% cheaper. For a St. John’s patient with pneumonia, the cost would be about 15% cheaper than Yampa Valley Medical Center.
Another reason for the increase was the addition of several new specialists and therapies, including brachytherapy, a radiation treatment for cancer.
“Each time we bring on a specialist it’s about $1 million a year,” St. John’s Board of Trustees Chairwoman Cynthia Hogan said during the meeting. “It takes two to three years to get adjusted into the community and have the volume break even.”
Staff receives pay bump
CEO Dr. Paul Beaupre also spoke about the need to increase staff pay. Trustees approved his request for a 3.5% bump in the staffing budget. The increase would not be an across-the-board raise for all employees but would target specific areas.
One area Beaupre identified was entry-level hourly pay, which includes positions like janitors and child care workers. He said in an interview June 24 that high costs of living in Jackson push entry-level wages higher across all industries and that the hospital needed to raise its wages accordingly.
The increased salary budget will also cover cost-of-living and merit increases for employees that the administration hopes will help it retain employees. With the highest cost of living in the state, Jackson presents its own challenges to hospital administrators, but St. John’s is not unique in needing to pay its employees well to retain them.
“Wyoming is a difficult place to keep physicians,” Wyoming Hospital Association Vice President Josh Hannes said. “Generally the rural nature of Wyoming is that it is difficult to recruit and keep folks.”
Before the vote Trustee Joe Albright asked Beaupre if he had looked elsewhere in the budget to avoid such a large price increase. Beaupre said he had already cut down on administration costs by eliminating some middle management positions and could not justify removing any services to cover the deficit.
“We all recognize this will not be a tasty pill for people in the community,” Albright said. “You’ve made a good case that this the time we have to bite the bullet.”