Southcoast Health's operating loss doubles as federal reimbursement declines

New Bedford, Mass.-based Southcoast Health System's operating loss doubled in the first half of fiscal year 2017 compared to the same period of the year prior, according to the Boston Business Journal.

The four-hospital system's revenue fell to $480.9 million in the six-month period that ended March 31, down from $487.6 million in the same period of fiscal year 2016.

In the first six months of fiscal year 2017, Southcoast's federal reimbursements dropped by $1 million due to changes from the federal government. A math error made by Boston-based Partners Healthcare caused Southcoast's federal reimbursement to decline by an additional $6 million year over year.

Medicare payments to hospitals are adjusted annually based on a rural wage index that CMS calculates for each state using local hospital worker wages and labor costs. Federal law requires Medicare to reimburse a state's urban hospitals at least at the baseline rate set by rural hospitals in the state. Partners submitted incorrect wage and cost data for 19-bed Nantucket (Mass.) Cottage Hospital, which sets the floor for reimbursement in Massachusetts as the state's only rural hospitals. This caused hospitals across the state to receive lower reimbursement.

Southcoast's revenue growth in the first half of fiscal year 2017 was also affected by a drop in patient volume as staff continued to adapt to using its Epic EHR system, according to the Boston Business Journal.

To stem future revenue loss, Southcoast is making several changes, including adding two new urgent care centers and joining a Medicaid ACO.

Southcoast ended the first half of fiscal year 2017 with an operating loss of $19.3 million, compared to an operating loss of $9.8 million in the same period of the year prior.

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