The impact of hurricanes, the revenue loss, the tough leadership decisions: 5 questions with Schneider Regional Medical Center CFO Scott Nothnagel

Two Category 5 hurricanes slammed the U.S. Virgin Islands in September, stripping off roofs, knocking out power and flooding streets.

Now, more than four months later, many of those who once called those islands home have yet to return, and most places on the islands still lack power.

Schneider Regional Medical Center, the only hospital on the island of St. Thomas, which is part of the U.S. Virgin Islands, hardly made it through the storms. It lost a section of its roof, shut down its entire cancer center and suffered a drastic decrease in patient volume affecting staffing, revenue and the range of services available.

"[We saw] a negative change in our already disadvantaged payer mix. We are forecasting a revenue loss of 60 percent … The disaster totally changes our strategic plan," said Scott Nothnagel, CFO of Schneider Regional.

Mr. Nothnagel is working to ensure the hospital secures funding for recovery efforts, reproduces its destroyed financial documents and keeps its revenue cycle running efficiently post-storm.

Becker's Hospital Review recently spoke with Mr. Nothnagel about the storm's impact on the hospital's bottom line, the most challenging decision he made as CFO post-storm and his efforts to mitigate the loss of revenue.

This story is part of a series of articles that will roll out over the next few weeks chronicling Schneider's journey through the hurricanes, the damage it experienced and its efforts to rebuild.

Note: This interview was edited for length and clarity.

Question: Can you describe the storm's affect on Schneider's bottom line? How has the disaster changed your two to three year strategic plan?

Scott Nothnagel: The storms had a devastating impact on our bottom line. Schneider Regional Medical Center discharged our patients post-storm and, for a period of time after the storm, we had limited capacity… We still operate at a significantly reduced capacity, our services have been hindered and [we saw] a negative change in our already disadvantaged payer mix. We are forecasting a revenue loss of 60 percent.

The disaster totally changes our strategic plan. The events and damage to the [U.S. Virgin Island's] healthcare system is dramatic and significant. SRMC plans to partner with all healthcare organizations on the island as well as the local and federal government agencies to rebuild a stronger and better healthcare delivery system, which the residents and visitors to the U.S. Virgin Islands deserve. This is a great opportunity to improve the entire continuum of care and the hospital plans to be a major part of the rebuilding.

Q: How will you mitigate the lost revenue?

SN: Our organization is in a perilous situation. SRMC was severely underfunded prior to the storms with 73 percent of its business paying below cost, and now we are even more negatively impacted post-storm. SRMC has reacted post-storm with significant cost reductions, but we certainly can't cut our way to survival. We are also pursuing federal disaster support and recently entered into a community disaster loan to assist with the lost revenue.

My team is also aggressively lobbying for more subsidies and changes to our reimbursement system. SRMC is under the [Tax Equity and Fiscal Responsibility Act of 1982] reimbursement system for Medicare, which is a capped cost reimbursement based on a 1982 base year, which means our cost base has not changed [outside of inflation] for 35 years. The TEFRA system also disallows SRMC from any disproportionate share or assistance programs such as the 340B drug program to help us with our indigent populations. The Medicaid system is also underfunded and has a low federal match rate considering the economics of our residents. In the [U.S. Virgin Islands] federal match is 55 percent where in a similar program in the continental U.S. you would find it in the lines of 75 percent. So we continue to lobby for a more fair and just reimbursement system for the territories of the U.S.

Q: What was the most challenging decision you had to make as the CFO following the storms?

SN: The entire experience of going through two Category 5 hurricanes within weeks of each other, both professionally and personally is, to this day, hard for me to describe and there have been many challenges. We have an organization with so many amazing team members and leaders that came together during these disasters, always putting the patients and the community first. They all endured this traumatic event and helped SRMC continue to function with what we had left of our building by making repairs, cleaning and making the hospital safe to continue care. The challenge of right-sizing the staff to compliment the current state and capacity of our services was the most challenging and difficult.

Q: How do you determine how to allocate funds after a natural disaster such as this?

SN: It's all about putting the patient first. SRMC is a severely financially distressed hospital system right now, and as the only hospital on St. Thomas, our team has to manage our currently limited funds as best we can to ensure patient and employee safety and to deliver quality care to all of our residents and visitors.

Q: How are you, as CFO, helping the hospital recover?

SN: One of my main objectives is securing funding and working hard to keep the revenue cycle moving [smoothly.] The area where our financial documents were kept was destroyed during the storms and we have our challenges ahead reorganizing, setting up new locations and getting back up and running. We need to ensure a continued cash flow as we move into the recovery period.

We are staying connected with HHS as well as the [Federal Emergency Management Agency] to be prepared for the recovery phase, to optimize the federal disaster recovery funds and reimbursement for storm-related costs. And, in staying connected, we recently secured a community disaster loan to help us through.

I am also taking this opportunity to continue to aggressively lobby for changes to the reimbursement systems. I was recently in Washington, D.C., with the U.S. territories governor and his team to speak with politicians, HHS and CMS to tell our story and bring awareness to how serious the situation is and how unjust the current system is to the tax paying U.S. citizens in the U.S. Virgin Islands.

Click here to read the remarks of Schneider Regional Medical Center CEO Bernard Wheatley, DBA. 

Click here to read the article featuring Schneider Regional Medical Center CMO Luis Amaro, MD.

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