June 14, 2001 11:00 pm

By Alice Perry Linker

Observer Staff Writer

Small rural hospitals are losing money; some are closing, others are merging with larger organizations, but Grande Ronde Hospitals president says the La Grande institution will weather the bad times.

Reductions in Medicare payments, limited Oregon Health Plan resources, and a ceiling on payments from the areas largest medical insurer, Blue Cross-Blue Shield, have caused the hospitals net income from operations to drop from $1.31 million for the 2000 fiscal year to a projected $74,992 for 2002. The estimated net income for 2001 is $583,583.

During an interview with The Observer, hospital President Jim Mattes said that even with the downturn, Were in a much stronger financial position than most rural hospitals.

The hospital is debt free and over the years has accumulated a strong reserve fund, he said.

Despite the disappointing net income for operations, the hospital remains fairly healthy, with net assets of nearly $40 million, as reported to the Internal Revenue Service for fiscal year 1999-2000. The operations budget dictates the day-to-day costs of running the hospital.

Mattes predicts the financial situation will improve, maybe within the next few years.

Well weather through this cycle, he said. These are very difficult times, especially for rural hospitals.

Blue Cross-Blue Shield contracts to pay a specific amount for specific patient services. Mattes said raising patient fees would have very little effect on the overall income, because Blue Cross-Blue Shield covers between 70 per cent and 80 per cent of those with private insurance. Medicare and Medicaid patients make up between 30 percent and 40 percent of the hospitals census, and a fairly small percentage of patients has no health insurance.

Mattes said its difficult to collect the full amount owed by patients with no insurance, although a few do pay.

The Balanced Budget Act of 1997 brought a series of reductions in Medicare payments to hospitals. Some formulas pay more to urban hospitals than to rural, rationalizing that costs are lower in rural areas.

As fewer people seek professional hospital jobs, rural payroll costs are rising, because all hospitals must offer competitive salaries to attract good people, Mattes said.

The nationwide nursing shortage has not really hit the La Grande health care community, but as fewer people enter the field, it has become more difficult to find substitutes for full-time nurses. A local pool of temporary nurses once available to fill absences no longer exists.

Other health care professional positions are proving even harder to fill, especially in La Grande, Mattes said. About a month ago, two radiology technicians resigned, and the hospital has advertised for technicians throughout the Northwest.

We havent had one application; not one resum, he said. Well re-advertise.

The hospital had greater success in filling a pharmacists position last year with Mike Dempsey who wanted to live in Northeast Oregon.

The American Hospital Association reports that nationwide, 18 percent of radiology technician jobs are unfilled, as are 21 percent of pharmacist jobs and 18 percent of billing and medical coders. Eleven percent of nursing jobs go unfilled. Grande Ronde Hospital has been relying on contract help to fill a medical coder, or transcriber, position.

A recommendation that Congress provide greater payments for rural hospitals with a higher than normal number of Medicare patients probably will not affect Grande Ronde Hospital, Mattes said. Union Countys elder population reflects the national averages, he said.

Very few services have been affected locally by the downturn, but recently the hospital closed a fee-for-service companion program, and talks with the city of La Grande on a possible transfer of ambulance service are continuing through the summer. The hospital collects only about 48 cents per $1 billed for ambulance service, and projected 2002 expenses for ambulance service are about $682,000.

Except for the one program closure, there have been no layoffs in the general hospital staff, Mattes said. Administrative and non-union salaries have been held for the past two years to the cost-of-living index when possible.

Even though the bottom line is shrinking, Mattes said the hospital board has no plans to discuss merger with other health care organizations.

That would be a last resort for us, he said. Mergers often translate into a lot of loss of local control.

The hospital belongs to an organization of 19 Oregon hospitals that is discussing ways to share programs or purchasing.

Mattes said if a downward trend in payments continues, eventually there will be an impact on the building and equipment. It may eventually impact services and staff and the quality of care.

I dont think we will get there.