CEO answers questions about mill levy

By Mary Alice Murphy

Participants at a Gila Economic Development Alliance Roundtable held Friday, Oct. 21, 2016, heard a presentation from Gila Regional Medical Center Chief Executive Officer Brian Cunningham on the 4-mill levy initiative on the General Election ballot.

"I want to talk about our Healthy Hospital, Healthy Community initiative," Cunningham said. "I want to simply provide information so people can vote in an informed way. There are challenges everywhere, in every industry, in government and, yes, in health care."

He said more and more financial responsibility gets pushed down to the county level, and county citizens have to decide what they want to support. "How much education, what about roads and law enforcement? I am here to talk about health care challenges."

Cunningham explained that up to a few years ago, the hospital was receiving $15 million in Medicaid supplemental funding. "We treat a lot of Medicaid patients, but the reimbursement rate is low. In one year, we went from about $15 million or $16 million down to $4 million. We were in the hole by $9 million, at the end of that fiscal year.

"We regrouped, set a clear direction and did a $10 million turn around in one year," Cunningham said. "We focused on efficiencies. We got above the break-even point the next year by about $750,000 in the black. But our equipment budget was not sufficient. We were not in the position to upgrade our equipment. The next year, we had a negative bottom line of $3 million. We took on in-house the Meditech 6 upgrade to a tune of about $6 million."

He said the hospital takes care of anyone who shows up at the emergency room, "but it's the most expensive place in the hospital."

The old sole community provider program that provided the $15 million was a combination of state and federal funding. "We would put up an amount at the county level and the state and federal funding would match it."

Sen. Howie Morales, who is the Gila Reach director at GRMC, said the federal dollars went to the state, which then distributed them to the counties. The federal agency found a calculation error and discovered that New Mexico was receiving more than it should have. "This was a Human Services Department problem. I felt it was the responsibility of state government to pay it back, but it was pushed down to local hospitals to deal with. It had gone on for years. The state didn't have to pay back the federal government, but going forward the funding was the responsibility of local hospitals."

Jeremiah Garcia, Gila EDA chairman and also chairman of the GRMC Board of Trustees, said HSD developed an estimated amount to pay the hospitals, and if the estimate is too much, the hospital has to pay back the overage.

Cunningham noted the hospital before the loss of Medicaid supplemental funding had had at least a $5 million surplus until it experienced the $11 million drop, which put the hospital in the $9 million hole.

Bruce Ashburn, Gila EDA member and employee of PNM, noted that this year, with the $3 million negative balance, the cost of Meditech is $6 million, "so actually you have a profit when the Meditech is done?"

"Yes, but even with a positive operating bottom line, that's good, but if we can't pay for capital equipment, we won't stay there long," Cunningham said.

"The good news is Gila Regional Medical Center has no debt, and has money in the bank," he continued. "We were up to 150 days in cash, but we've been drawing down that cash to fund capital expenditures, so we are down to about 100 days of cash. The average hospital our size has 30 days of cash. With funding going down, the challenges continue.

"While all this is going on, our primary focus remained quality of care," Cunningham said. "The Centers for Medicare and Medicaid recognized Gila Regional as a 4-Star Quality hospital. They look at 60 some different measures. We are one of only three hospitals in New Mexico to achieve the rating. New Mexico has no 5-Star Quality hospitals. This 4-Star rating puts us in the top 20 percent of hospitals in the country. Quality is still our No. 1 priority. It's quality, efficiency, efficiency, efficiency."

He said, when the hospital was $9 million in the red, it didn't come to the community for help. "We did our work first. We had to take the waste out of the system."

Cunningham pointed out that many rural hospitals across the country already have county tax support, with many having it for five, 10, 15 years. "This is not a new approach in hospitals. We are one of the last to come to the community for help. Our Board of Trustees passed a resolution. Most communities use a mill levy. The County Commission decided to put it on the ballot."

"Health care is important to the community," he said. "Gila Regional Medical Center generates about $96 million annually, including payroll and taxes. It's an economic driver for the community. Having good health care is good for property values. Whether you are for or against the mill levy, when it is passed, it will pay for equipment and facility upgrades that give back to the community.

"We're still OK at 100 days of cash, but trending downward," Cunningham cautioned. "Holy Cross Hospital in Taos passed a mill levy when it was down to 11 or 12 days of cash. That's why we're having this proactive conversation to tell you about what happens on the downward spiral. If we lose equipment, you will have to go to at least Las Cruces, which will cost you fuel, food and if you have to stay overnight, even more money. Next, the physician that relies on that equipment here leaves to go where they have the equipment. Then nurses leave, and then people start leaving, too. When we start losing our key customers, our patients, we're in a crisis. That's why we are responsibly having the conversation now, while we have time to adjust. We are riding break even in operations costs, but we are not in a position to fund equipment."

He broke down the 4-mill levy and how much a property owner might have to pay. It equals $4 for every $1,000 in taxable value. For instance, a $100,000 house has a net taxable property valuation of about $33,000, which comes to $132 a year property tax increase, or if it's on a mortgage $11 a month increase.

"What is your cost of driving out of town?" he asked. "We want to keep our 4-Star Quality close to home."

Magdaleno Manzanares, WNMU vice president and vice-chairman of the GRMC Board of Trustees said, as board members, "we had discussions about this heart-wrenching decision to address the imminent danger to the hospital. We decided to take a pro-active rather than reactive approach. I am also on the board at Hidalgo Medical Services. I know what happened in Lordsburg when its hospital closed. HMS is now the only health care facility they have. Lordsburg was left without services for a long time."

He said under the leadership of Garcia, "we didn't jump into this right away. We had disagreements, and we had tough questions for Brian and the staff. We decided it was better to deal with it now, rather than when a crisis arrives. We need healthy institutions to provide health care. People retire here because we have good health care."

"I call the hospital our ship," Garcia said. "We have a hole and we have to be pro-active. I've been asked what would Plan B, Plan C or D look like. We have a clinically integrated network because some physician practices were having trouble surviving. We need to look at the bigger picture. We have quality physicians; we have quality of life in Grant County; we have our schools, our university."

He asked Realtor L.J. Lundy what questions she is hearing from those looking to buy a house in Grant County.

"I've helped with showing people around the community when they are looking at a job here," Lundy said. "Some wouldn't take the job for various reasons, sometimes, because it doesn't have big city amenities. If they come from a big city and want a good hospital, a good climate, and a smaller town atmosphere, they can find it here. But sometimes, we are losing homebuyers because of a lack of specialists here."

"This impacts everyone in the community, not just the hospital," Garcia said "We want enough money to maintain the infrastructure. Hillcrest wasn't being kept up and then it got so bad, it couldn't be brought up to standard, so they had to build a new one."

Skip Thacker, Gila EDA member, asked how much the mill levy would bring in.

"The county's assessed value is at about $840 million," Cunningham replied. "That would bring in about $3.3 million annually to help offset some of our $5 million in costs needed for equipment and infrastructure."

Lundy asked what happens when it sunsets in four years.

"We still have to create efficiencies and bring in more revenue," Cunningham said. "We have plans B, C and D that we are working on now."

Thacker asked the rational for the sunset.

"The mill levy will sunset in four years and could have been up to a maximum of eight years," Cunningham said. "We chose the 4 mill because we were trying to achieve about $3 million for equipment and infrastructure depreciation. We asked for the minimal time."

Garcia said the hospital building is 33 years old. "We want to take care of that infrastructure. We are doing everything we can to cut costs. We received PNM rebates, and New Mexico Gas helped us with the boilers."

Cunningham addressed the reimbursement issues. "We have more people insured under the Affordable Care Act, but most are with Medicaid. The reimbursement rate doesn't pay our costs."

Garcia said the board decided to ask the community to "give us a fair chance to support the hospital, the physicians, the nurses and the community."

Ashburn said it boils down to costs. "Yesterday (Thursday), we had a safety day at PNM. We had Native Air, which runs your emergency helicopter service. It was amazing to me that an average flight out costs $50,000."

Cunningham said: "When you hear the helicopter, and many of you have told me you do, it's because we don't have the specialty that someone needs. If it's trauma, we fly them out. Trauma is a high-risk, low-volume service. Any hospital doing trauma, heart surgery, dealing with strokes or brain surgery needs to be doing it every day, not just once in a while. So most appropriately, we send them to a larger hospital. In an aging population, the need goes up a little."

Ashburn said what he was trying to say was: "How many years of that millage would a person have to pay to pay back that $50,000 flight?" Insurance will pay some of it, but a person is likely left with at least a $10,000 bill.

Cunningham noted the helicopter remains on site at the hospital. Sometimes, when a person hears it, it is going out to pick up some one and then coming back.

Lundy said she has also heard people say it is unfair to assess just the property owners when everyone can vote it in.

"We looked at a sales tax, gross receipts tax and property tax," Cunningham said. "We don't have enough industry for a sales tax, which would disproportionately hit those with lower incomes. We couldn't reach the $3 million target with gross receipts tax, plus we already have one of the highest gross receipts tax in the state, but we have a lower property tax, so that's why we went with it.

"Whether it's a school bond, gross receipts tax or a property tax, everybody gets to vote," Cunningham said. "That's state law."

Lundy suggested a combination of gross receipts tax and property tax, so it impacts other communities that use GRMC.

Kim Clark, Grant County Association of Realtors director, said anyone who wondered how much it was going to cost them, could take their tax bill in and get an estimate of how much it will cost.

Lundy said she had heard someone say that if the hospital were to close, Lovelace or some other entity would buy it.

Cunningham said that was a possibility. "But the hub would be in the big city, and Gila Regional would be a spoke. The hub would pull all the profitable services to it, and families would have to travel to the hub, which would likely be Albuquerque, which costs a lot more than going to Las Cruces or better yet, staying here."

Ashburn pointed out that it would be large cost to close it, too. "I would much rather go to the doctor here."

"If we don't take care of our destiny, someone else will," Cunningham said.

"If the hospital were a spoke, services would be fewer and costs would be higher," Garcia noted.

Ashburn said he is a numbers guy. "When we put our wants and our needs on a schematic, if we lose the hospital, we lose people, which means we lose all across the board."

Cunningham said the hospital might also look at bonding, if needed. One of the problems is historically, 70 percent to 80 percent of hospital services were inpatient. Over the past five to 10 years, that has flipped, and about 75 percent are now outpatient. More services, less revenue. We have a behavioral health unit, which loses money. The hospital covers more services that don't make much money."

Connie Glenn said where she had come from hospitals were penalized for lack of quality.

Cunningham said: "We are now out of that. We are now receiving incentives." He also said the Medicare supplemental funding is very small at only about $100,000 to $200,000 a year."

Glenn also asked about contract services. For instance, if a low-income person goes to the emergency room and is not covered with insurance.

"In the ER, a person might be sent to radiology," Cunningham said. "They will get a bill from Gila Regional, a bill from the radiologist, and if they go to surgery, they get a bill from Gila Regional and from the surgeon."

He also noted that infinite choice brings infinite rules. "We have financial counselors to help people with their bills."

Cunningham invited people to call him at 575-538-4100 with questions, and to visit www.grmc.org to see a presentation and YouTube videos.

Participants were then asked to make announcements. Paul Leetmae of Lawley Automotive said he has available inventory of vehicles in Ford and Dodge, with being able to get only as many Toyotas as are available.

Ashburn talked about the open house at the LifeQuest Park, which also has a little library. Garcia said LifeQuest had earned funding for the park from Lion's Club.

Manzanarez asked people to vote for Bond C, which is a continuation of a bond that would bring $5 million to Western New Mexico University to renew Harlan Hall for $2 million and the other $3 million for infrastructure needs, such as roofs. "We are also working hard to recruit students. We are next going to Chile and Brazil. Applied technology courses are always packed."

Lawrence Garcia, Small Business Development Center business advisor, said the SBDC has overshot its benchmarks and created and retained more jobs than it anticipated. He announced the workshop on Oct. 26, which will address new federal overtime provisions, presented by the Department of Labor from 1-3 p.m. at the WNMU Besse-Forward Global Resource Center.

Clark said the real estate market in the county is steady, with 30 more residential sales over 2015. She also announced the Prospectors' Legislative Forum is slated for Thursday, Dec. 1, at WNMU's Light Hall. Feb. 1 will be Grant County Day in Santa Fe.

Glenn said Workforce Connections is working hard to get people back to work. A job fair will be held Dec. 2.

Santa Clara Mayor Richard Bauch said he is working with several companies that are showing an interest in relocating to the village.

Thacker announced that Bridge Community would be holding a pie auction fundraiser on Saturday, Nov. 19, with Jericho providing music.

Lundy said she has noticed that some sales are being made in the area on the higher-priced homes, which will help with appraisals.

The next Roundtable meeting will be called, as needed.