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By CECE TODD; Times Leader Staff Writer
Wednesday, January 29, 1997     Page: 10B

A proposed freeze on Medicare payments to hospitals would heat up the local
health care market as hospitals compete to pull in more patients, say hospital
finance officers.
   
“We will emphasize some new programs and try to increase our market share,”
said Dave Plaviak, vice president and chief financial officer for Wyoming
Valley Health Care System, the operator of Nesbitt Memorial Hospital in
Kingston and Wilkes-Barre General Hospital.
    A freeze would not mean that patients are being cut from Medicare, but
rather, that hospitals will not be reimbursed as much as they hoped for
treating Medicare patients.
   
Hospital officials say the government already underpays for Medicare, the
federally funded health plan for the elderly. For example, Geisinger collects
about 50 percent of what it bills in Medicare; Nesbitt and Wilkes-Barre
General collect about 45 percent.
   
The federal Prospective Payment Assessment Commission recently recommended
that Congress freeze Medicare payments to hospitals, because the panel
believes rates are adequate.
   
The first-ever proposed freeze in payments would mean hospitals would not
receive an increase for inflation.
   
The move is expected to help save the ailing Medicare program. Democrats
and Republicans have predicted that Medicare will go bankrupt in five years if
changes are not made.
   
More than 60,000 Luzerne County residents are 65 and older, the age that
qualifies them for Medicare. Locally, Medicare provides 25 to 50 percent of
each hospital’s total revenues.
   
If Congress approves the freeze, hospitals would compensate, in part, by
shifting costs to insured patients. Hospitals collect more from insured
patients to make up unreimbursed costs of the uninsured and those on medical
assistance. Insurers in turn, raise their rates.
   
Tom Sokola, chief financial officer of Geisinger Eastern Region, predicted
a Medicare freeze will stir up the market as competing health systems grapple
for insured patients.
   
“Collaborations and mergers are not by any means over with yet,” Sokola
said.
   
This month, Geisinger announced it will merge with Penn State’s Hershey
Medical Center to form a new health system. Last October, the alliance became
official between Hazleton-St. Joseph Medical Center and Hazleton General
Hospital.
   
Those partnerships followed the merger of Nesbitt and General and creation
of Wyoming Valley Health Care in 1992, and the regionalization of Mercy
hospitals in Wilkes-Barre, Scranton and Nanticoke in 1994.
   
“There could be four or five large health systems in the entire state when
it’s all over,” Sokola said. “Nationally, that’s the trend.”
   
He said the merger with Penn State puts Geisinger “in a better position in
a competitive market. It gives us some recognition that helps build our market
share.”
   
Mercy spokeswoman Mary Ann Grandinetti said the Mercy system had already
planned its budgets around a zero percent increase in Medicare.
   
“The only thing we can do now is take into consideration other
cost-improvement measures,” she said. “It’s going to be tough, but it’s not a
done deal yet.”
   
Others predict Congress will approve the recommended freeze.
   
“This is a great opportunity for Congress to rely on the commission to help
with the (federal) budget,” Plaviak said.
   
The commission recommended the change because it said hospitals have
succeeded in becoming more cost-efficient.
   
At Nesbitt and General, officials say they have saved at least $3 million
to $4 million since the hospitals merged. Now, Plaviak said, Wyoming Valley
Health Care will have to increase revenues.
   
The emphasis will be on new programs Wyoming Valley Health Care plans to
introduce to the community. Plaviak said the system is not yet ready to reveal
further details of those programs.