By JOSETTE KEELOR The Winchester Star
Oct 6, 2022
Faced with a vastly smaller staff, rising costs and the potential of cutting ties with insurance companies in the coming years, Valley Health is considering its options for how to weather the economic impact sparked by the COVID-19 pandemic.
Valley Health is not in danger of closing, said Mark Nantz, president and CEO of the not-for-profit healthcare company that serves more than 500,000 people and operates four hospitals in Virginia and two in West Virginia as well as more than 70 medical practices and urgent care centers, outpatient rehabilitation and fitness, medical transport, long-term care and home health.
However, he said they are cautious about the financial implications for them as health systems around the country struggle with many of the same issues.
“At some point, it would be difficult for any health system to keep the doors open,” he said.
For now, no essential services are in jeopardy, he said, but if inflation and job vacancies continue and they can’t get revenues to increase, they will have to look across their 15-county region to decide where they can reduce, consolidate or discontinue services.
Instead of six places for surgery, it might have to be four, he said. Instead of 150 doctor’s offices, it might be 100.
“We’re looking at every service we provide,” Nantz said. “How can we do that at a reasonable margin?”
Nantz credits federal funding over the last 2½ years with keeping the health system afloat.
In a news release earlier this week, he said that if Valley Health hadn’t received $126 million through assistance programs such as the federal CARES Act, the Virginia Department of Medical Assistance Services and the Federal Emergency Management Agency, then it would have lost $100 million over the last 2½ years.
But all of that funding is gone now, and he’s less sure about how the health system will remain in the black in the coming months and years.
“I would say that the biggest lasting impact is the cost of staffing,” Nantz said.
As with many other areas of business operations, he said the cost of salaries has gone up 20% from pre-pandemic rates.
Furthermore, Valley Health has about 800 job vacancies, whether full- or part-time, and most of them are in Winchester and the counties of Clarke, Frederick, Page, Shenandoah and Warren.
“Right now we’re making up for that shortfall by either asking people to work overtime, finding temporary agency [professionals] or combining units and services so that we can try to do more with less,” Nantz said.
Despite being short-handed, he said Valley Health is still providing necessary procedures and that the trauma centers are functioning at the capacity they must to provide that critical level of care.
“At all times during the pandemic, we’ve maintained a safe level of care and standard of care,” he said.
But asking staff to work more hours at premium rates while bringing in agency professionals to fulfill temporary assignments at higher rates has been costing a lot more than if Valley Health simply had a full staff, he said.
As of February 2020, Valley Health was averaging about $800,000 per month in premium pay, Nantz said. Now it’s averaging $3 million a month.
“It’s across the country. Everyone is feeling the same thing,” Nantz said.
“The labor has gone up significantly, and it doesn’t appear to be going back down.”
Another major problem, he said, is that most insurance providers are reimbursing health-care facilities based on pre-pandemic rates, not today’s rates, which are much higher because of the cost of labor and also the cost of doing business during a time of inflation with higher gas prices and various other products.
Historically, a health system looks to commercial insurance to make up the difference in the shortfall of Medicaid, Nantz said.
Valley Health has been negotiating higher rates with companies like Anthem, Aetna, Cigna and United, and since each insurance company’s contract period expires at a different time, he said this process could take until the end of 2024.
“In between contract periods we don’t really have the right … to cancel,” Nantz said. “As those negotiation rates come up for renewal, we’ve been requesting and receiving increases that are higher than normal.”
Also, regardless of what happens with the insurance companies, he said that Valley Health’s financial assistance program will remain.
Still, they’ll have to see if it’s all enough.
“We’re a long way from going out of network,” he said. But it is a possibility that they’re considering.
“Most health insurance companies have had record years in the last 2½ years,” Nantz said.
That’s at least in part because many patients have been avoiding going to the doctor, some even putting off necessary care. Insurance companies are still making money, Nantz explained, but they’re not having to pay out as many reimbursements as they would have done before the pandemic.
In the meantime, he said, hospitals are dealing with runaway inflation.
If the insurance companies refuse to give a rate of increase equal to Valley Health’s costs, he said, “Then we can’t afford to do business with that company.”
Whatever happens, though, Valley Health will “continue being the safety net for 15 counties," he said.
“Valley Health is strong; we’ve been here for a long time,” he said. “It’s important that the community know that we didn’t come through this without a mark.”
But, he’s proud of how they’ve responded throughout the pandemic.
“We’re gonna be here,” he said. “It’s not over for us yet.”
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