CHARLESTON -- More than 100 health care administrators, legislators and business leaders were grim during a Wednesday symposium profiling the declining financial situation of West Virginia's hospitals.
They learned about a dozen of the state's 69 hospitals have posted patient services' losses for two years running as federal and state reimbursements continue to fail to cover costs for about half of West Virginia's patients.
Perhaps most distressing was a clear message from national lending representatives that many West Virginia hospitals are not what they would consider a good risk for bond issuance.
"Cash is still king in this market because of the increased risks associated with health care," said Kenneth Rodgers Jr. of Standard & Poor's New York office. He was speaking of hospitals' need to have a steady profit margin each year in order to borrow for major improvements.
Rodgers, one of several national experts to address the symposium, said Standard & Poor's has rated six West Virginia hospitals for bonds. Three of them have a rating that puts them into a speculative bond category that is sometimes referred to as junk bonds, he added. One of those hospitals is Grafton City Hospital, which falls in the lowest speculative rating.
"When you get into that category, accessing capital becomes very difficult," Rodgers said.
Hospital administrators already know that.
"Capital money is a huge problem for us; so is physician recruitment," said William Kline, board of trustees president for Grant Memorial Hospital in the Eastern Panhandle.
That hospital issued an $8 million bond five years ago for major facility improvements, but he said getting one now would be much more difficult.
With a patient-base stretching across the Potomac Highlands, the rural Grant County hospital is generally short on the numbers that make bond issuers feel secure in their investment, Kline said. About 75 percent of Grant's patients receive government-funded health care.
In fact, bond insurer Carolyn Tain said her company, MBIA Insurance Corporation, is looking for hospitals with a patient services' revenue minimum of $70 million per year and admissions of at least 3,000 per year. As an insurer of bonds, MBIA is even more selective about whom it does business with, charging much higher fees to hospitals who are bigger risks.
"Health care is a business: Get used to it," Tain told the audience. "You've got to make money."
She also told administrators that as the competition for bond loans increases among cash-strapped hospitals, they will have to prepare to play by national standards.
"When you're talking about accessing the debt market, you're talking about a national market," Tain said. "You're not being compared to other West Virginia hospitals."
While single-site hospitals are a common West Virginia situation, New York's financial world finds that shocking, she added. A single-site hospital is one without auxiliary sources of revenue such as a nursing home or continuous care retirement community.
The reason state hospitals are increasingly interested in strategies such as issuing bonds is no secret, speakers said.
The federal Balanced Budget Amendment of 1997 limited reimbursements made through Medicaid and Medicare to amounts hospital administrators said are below their cost. About 50 percent of West Virginia's patients use those services to purchase health care, making this state one of the hardest hit in the nation.
Also contributing to the state's financial woes is the Public Employees Insurance Agency, which is also underfunding services for the thousands of West Virginians it covers, speakers said.
To increase their fiscal health and become better candidates for special bond projects, both Standard & Poor's Rodgers and a representative of Moody's Investors Service recommended area hospitals go with a national trend of returning to basic services. While investments such as hotels or malls should possibly be kept if they are profitable, most hospitals should focus on health care as their source of income, they said.
Mark Doak, chief operating officer of Davis Health Systems in Elkins, said hospitals will also have to consider additional ways to cut costs without cutting quality. He compared it to a restaurant offering the same food on a buffet line instead of through table service.
Rodgers also said hospitals should strive to protect their market share, protect services that have a higher profit margin, maintain a good relationship with physicians, develop a strong management team and develop an e-commerce strategy.
He and several other speakers additionally encouraged administrators not to wait for, or even expect, government to solve the problem, although several of them anticipate either a step-by-step repeal of the Balanced Budget Act or some form of a socialized medicine proposal on the horizon.
At least one legislator who attended the session believe the government has a responsibility to move soon.
"We need to make sure that we payers are not shifting the responsibility," said state Sen. Martha Walker, D-Kanawha, chair of the Senate Health Committee. "You can only cut payments so far."
Joan Ohl, secretary for state Health and Human Resources, said the symposium may play a key role in uniting the many players needed to secure the health-care field.
"It's bringing into total focus a lot of pieces that we've known about for a period of time," Ohl said.
The symposium was organized by the West Hospital Association.
Regional editor Nora Edinger can be reached at 626-1403.
