A picture is worth -- a thousand misconceptions
By Wayne Sikes
Chairman, Gwinnett Health System Board of Directors
for Gwinnett Forum.com

(Editor's note: The medical arena is fraught with problems these days, as the nation seeks to find ways to address this problem. We asked Wayne Sikes to give us a local view.)

May 22, 2001 -- When you drive through any of Gwinnett Health System's campuses, you see big buildings, full parking lots and, usually, evidence of expansion or new construction. The word that flashes through your mind is probably "prosperity."

But appearances can be deceiving.

As the big water tower out on Interstate-85 proclaims, "Gwinnett is Great." But Gwinnett Health System, in spite of its excellent location, is not immune to the financial pressures that are plaguing hospitals and health systems all across the nation.

There was a time when the growing population in Gwinnett County and surrounding areas was a boon to our health system. The growing population brought increasing demand for a wide range of healthcare services. Our big challenge was to stay a step ahead of growth and demand through strategic planning. Our five to seven percent operating margin was sufficient to fund new and expanding services and facilities.

But in the late 1990s, Congress passed the Balanced Budget Act of 1997 (BBA), which was designed to reduce federal spending on Medicare by $110 billion between 1998 and 2002. The actual impact of the BBA, however, is expected to exceed $220 billion. This, along with the diminishing reimbursements from managed care and annual indigent and charity care costs approaching $18 million, has reduced our collectable revenue each year since the BBA was enacted.

For every dollar we billed in 1993, for example, we were paid 68 cents. The other 32 cents went to government deductions, managed care discounts and indigent and charity care. By 2000, our paid net patient revenue had dropped to 55 cents of every dollar billed.

Still, our community continues to grow and demand for our services continues to increase. Our current budgeted operating margin of two percent makes it very challenging to keep pace with demand for services, technology and physical space to house it all.

While we welcome growth in our community, we now live with an inescapable irony: the more our volumes increase, the harder we must work to be reimbursed less by managed care, Medicare and Medicaid. We are now in danger of being paid less than the cost of providing services. And as our population increases, so do our numbers of indigent and charity cases.

Though these are challenging times for all hospitals and healthcare organizations, Gwinnett Health System is working very hard to be good stewards of its resources. I think that shows in our small but positive operating margin. Many of our neighbor hospitals are seeing red ink.

Gwinnett Health System is here to restore, improve and protect the health of everyone in our community. Help us continue our work by getting involved---as a volunteer in our Auxiliary or as financial contributor through our Gwinnett Hospital System Foundation.

-30-