In the near future, Guam will receive a report from the Army Corps of Engineers that will discuss their recommendations for dealing with the long neglected physical plant of GMH. A total rebuild of a new facility may be inevitable to maintain compliance with safety and regulatory standards.
Medical construction cost on Guam could easily reach or exceed $200 per square foot. Currently, GMH has about 312,000 sq.ft. Even a 200,000-sq.ft facility could cost $400 plus million.
Before serious discussion can begin on a new hospital, there has to be an evaluation of the hospital beds that are needed in the community and the utilization that exists in the marketplace of Guam's two community hospitals.
Ever since the inception of the Guam Regional Medical City (GRMC), I've wondered what the Guam hospital market would look like once GRMC developed, and what impact the new hospital would have on GMH.
This article addresses that question.
For purposes of this discussion, I am including key utilization and financial data on the two community hospitals on Guam: GMH has 161 acute care beds and also operates 40 SNF beds in a separate location, while GRMC has 136 acute care beds.
For information sources, I've used the GMH most recent audited financial statements (fiscal year ending 9/30/18) and the GRMC 2018 Medicare Cost Report (fiscal year ending 12/31/18).
Guam also has the 40-bed Naval Hospital, whose sole mission is to serve the military personnel stationed on the island.
How many hospital beds does Guam need?
The average number of occupied beds in 2018 for Guam’s two community hospitals combined was 175. Any discussion of community hospital bed need has to begin with the hospital admission rate per 1,000 population communities experience. On the mainland, the inpatient admissions per 1,000 population averaged 103 in 2016. By state the lowest was Alaska at 69, and the highest was West Virginia at 138. Hawaii's number for 2016 was 77. Guam’s number in 2016 was 87.
What is the average length of stay per admission?
In 2014, there were 45,176 patient days utilized from the 13,117 admissions at GMH. If all 161 beds at GMH were available each day of the year, there would have been 58,765 available bed days (161×365). Actual patient days of 45,176 compared to 58,765 available bed days would have meant an average occupancy rate of 76.8 percent.
The average length of stay at GMH was 3.2 days in 2014 and 4.2 in 2018. At GRMC, the average was 6 days in 2018. The national average length of stay in the U.S. was 5.5 in 2014. It is quite possible that a shortage of available beds due to staffing and facility issues impacted the GMH lower length of stay numbers in both 2014 and 2018
The marketplace of Guam community hospitals now has two providers since GRMC opened in 2015.
Although there were delays and cost overruns in the construction of the facility, and despite the dramas that resulted in the original CEO being pushed out by the company, GRMC has now developed into a reliable product that has received JCAHO and CMS certifications.
Key statistics are important for further evaluation of this expanded community hospital market place in Guam.
The most striking thing to me from the development of a second hospital in Guam is that the total number of hospital inpatient admissions from both hospitals in 2018 is almost identical to the total number of inpatient admissions that occurred at GMH in 2014. I would have thought that the addition of a new hospital would have resulted in some of the admissions that occur off island, staying in Guam with a new hospital available. GRMC has within four years (2015-2018) taken 42 percent of the in-patient admissions market share in Guam.
The two hospitals combined are now recording operating revenue (charges less contractual allowances) of $277 million annually compared to $80 million of GMH in 2014.
GRMC benefits from unique cost-based Medicare reimbursement. In 1982, the U.S. Congress created the prospective payment system for U.S. acute care hospitals using a flat rate diagnostic related group for reimbursement instead of the hospital's costs. Prior to this new payment system, hospitals were reimbursed based on their costs. Exempted from this new system were children, rehab and psych hospitals, along with hospitals in the Virgin Islands, Northern Marianas and Guam.
Being able to get reimbursed for your costs from Medicare in the hospital industry is a beautiful thing. Unfortunately, GMH has struggled for many years to overcome several bureaucratic obstacles that keep it from achieving what Congress had provided for. They are now closer to this goal, yet they are still some distance away.
GRMC had experienced consulting help in the development with Medicare of their cost and basis for reimbursement, which impacts both their Medicare and Medicaid level of reimbursement. As a result, they are able to get reimbursed for the high costs of facilities, physician staffing, etc. The unique cost-based reimbursement available to GRMC is not available to statewide community hospitals and helps insure a financially viable GRMC program.
In January 2019, GMH realized a huge boost on its decades-long struggle to get its CMS Medicare discharge approved rate improved. Medicare agreed to rebase GMH to its 2013 audited costs. However, GMH still has a significant gap between its cost per discharge of $14,282 and the Medicare rebased approved rate of $10,856.
A new GMH. Once the Army Corps of Engineers issued its report on GMH, the leadership of Guam and GMH will be faced with difficult challenges and decisions related to the future of the public hospital.
If GMH can get its CMS approved rate to cover its updated costs of discharge, then there could be a viable basis for the planning of a new facility. If not, it may be time to look at other models of ownership of GMH.
If an experienced hospital provider could be attracted, it might be wise to turn the GMH ownership over to someone with extensive experience running hospitals. First of all, a new owner should be able to apply for CMS certification and get the high cost of a new facility included in its Medicare rate. Second, a non-government owner would be free of the cumbersome government of Guam employment practices and allow the provider to manage its own human resources. Provision would also have to be made for the significant number of indigent patients that need service.
While the average occupied beds in Guam's two community hospitals is currently about 175, there should be at least 230 beds available in the community to handle seasonal fluctuations and moderate growth in population.
Most U.S. states have Health Planning and Certificate of Need programs that require hospitals to report on services and utilization on a regular basis and to request approval for any planned changes in beds or services. With two providers of hospital services to Guam that now have combined operating expenses annually in excess of $300 million (most of which is paid for by taxpayers), it only makes sense for the Government of Guam to have such a program.
My prayers and best wishes in the New Year go to the leadership of The government of Guam and its hospitals who have a solemn responsibility for taking care of the acute healthcare needs of Guam residents. And to my friends and readers of the Pacific Island Times, I wish you all a Happy New Year.
Theodore Lewis is former CEO of Guam Memorial Hospital and has a healthcare consulting business based out of Portland, Maine. He is collecting stories about lessons learned in life and can be reached at firstname.lastname@example.org.
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