It’s just a simple date, one you’d find on a calendar. But to St. Charles Health System in central Oregon it’s a date worth $6 million and three long years of paperwork battles.
On June 7, 2022, federal officials awarded St. Charles a lucrative designation under Medicare, the government program covering seniors and people with disabilities, that was intended to recognize the importance of geographically isolated hospitals in providing care to people in their region.
Health system officials welcomed the news, but they felt the funding increase should have happened months earlier.
Now, amid continuing haggling over the start date, U.S. Sen. Ron Wyden has taken the matter public in a letter to the federal Centers for Medicare and Medicaid Services citing “the urgency of this matter” for St. Charles “and the rural communities it serves.”
The story shows how in a U.S. health care system that receives more than 40% of its funding from government sources, even a small wrinkle in federal benefits can have a major impact.
“We've got a long list of things that we would love to spend this money on,” Steve Gordon, the St. Charles President and CEO, told The Lund Report.
Pandemic merger led to opportunity
During the pandemic, St. Charles Health officials realized that if they merged St. Charles Bend and St. Charles Redmond administratively, it would have benefits.
One of them would be to qualify the merged facility for the Medicare benefit known as “sole community hospital” designation, available to hospitals with no other hospitals within 35 miles.
The program is intended to respond to the challenges faced by rural midsized hospitals and help them offer needed services. It can mean a change of nearly 15 percent in what they’re paid by Medicare, one study found.
In 2022, St. Charles needed all the help it could get, having laid off more than 100 caregivers and losing more than $20 million through April, according to OPB.
The benefits of the change were immediate after the federal government approved the designation in May, leading to Medicare paying the system $2 million more each month.
For the Bend hospital, the increase amounted to between 1-2% of its overall operating revenue, said Gordon.
But it’s also like any other financial decision, he added, the date the decision takes effect matters. “Whether it's a credit card bill or a bank loan...there's the date you get the letter, and then there's the effective date of the transaction,” Gordon said.
That’s why the health system sought to have the benefit start at the date it thought was appropriate — when the merger of its Redmond and Bend hospital operations was approved on Feb. 15, 2022.
Bureaucratic delay
Though the merger was deemed complete, the federal government denied the health system’s application, citing missing paperwork it wanted from the Oregon Health Authority. That paperwork took three months more to provide, and when federal officials in June 2022 finally approved the higher reimbursements, they dated it to May 11, 2022, not Feb. 15.
Then, the Medicare program issued a new rule that would have fixed the problem for St. Charles — except that it didn’t take effect until the following year.
Wyden, the senior member of the Oregon delegation, said in his recent letter to the federal government that he asked Medicare officials to make the new rule change retroactive, but they didn’t listen.
Meanwhile, St. Charles appealed the federal decision to start the designation well after its merger happened — and it’s still waiting for an answer from the Centers for Medicare and Medicaid Services.
St. Charles “has faced financial hardship and administrative bureaucracy due to this process,” Wyden wrote in his letter, which was dated Jan. 17.
“Taken together, I believe a merely technical matter tied up in bureaucratic red tape has placed (St. Charles) in administrative limbo for nearly three years and has cost them $6 million. I am concerned that CMS made a technical mistake that is costing (St. Charles) and the rural communities it serves.”
Federal officials did not respond to a request for comment from The Lund Report.
Gordon, the St. Charles executive, says the health system could put that $6 million to good use. The system has avoided some of the cuts and private equity partnerships that have raised controversy elsewhere, continuing to operate important care teams like neonatal intensive care, that do not generate revenue.
"We reinvest every cent of operating (profits) back into the community in terms of facilities and programs,” he said.