Hospital told to negotiate better insurance rates
In an unprecedented move, Hospital District trustee Val Zudans has sent an open letter to the Indian River Medical Center chairman of the board, calling for hospital CEO Jeff Susi to negotiate better rates with private insurance companies to improve the hospital’s financial position, or quit.
Zudans, who was appointed to the Hospital District by Gov. Rick Scott a year ago to fill a vacancy, said the governor told him if IRMC were run by a for-profit company, it would probably be making a $40 million profit instead of relying on millions from taxpayers to break even.
The problem, Zudans said, lies in the reimbursement rates IRMC has negotiated with private insurance companies. Neighboring private hospitals like Sebastian River Medical Center get paid more than twice as much per patient by private insurers, while St. Lucie hospitals are paid almost three times what IRMC gets.
“It is now clear that the fundamental financial issue for IRMC is the significantly lower reimbursement rates that IRMC has negotiated with private insurance companies relative to the for-profits,” he said in his letter.
If better rates were negotiated, Zudans said, “it would instantly change the hospital from a taxpayer expense to an incredible community asset,” with no need for reliance on property taxes and more money to pay nurses and staff.
He said if CEO Susi were able to negotiate reimbursement rates even two thirds those received by Sebastian River, the hospital would be making a profit of $20 million a year compared to its present break-even status.
“I think our CEO can and will get our community hospital a fairly negotiated contract” of this amount, Zudans said. If Susi succeeds, wrote Zudans, “I will thank him immensely and praise him for a job well done. If he cannot deliver, then he should resign. “
Zudans, who sent the letter to hospital board chairman Dr. Wayne Hockmeyer on Oct. 2, said he has to date received no response. So he took the unusual step of making the letter public in full page ads in this week’s issues of Vero Beach 32963, Vero News and Sebastian River News.
In the letter, the Vero Beach ophthalmologist – who is running for a full term on the Hospital District board – pointed out that IRMC depends on over $7 million from taxpayers, as well as millions from the hospital foundation just to “break even,” after suffering multimillion-dollar losses for years.
During the past year as a new District trustee, Zudans said he repeatedly questioned how neighboring hospitals operated with multimillion-dollar profits without financial help, while IRMC didn’t.
The answer came, he said, when hospital CFO Greg Gardner explained at a recent hospital finance committee meeting what a state study of private insurance reimbursements at area hospitals showed.
Area hospitals, said Gardner quoting the study, negotiated contracts with private insurance companies that resulted in the following Medicare percentage reimbursement rates: 141% (IRMC), 298% (Sebastian), 397% (Hospital B in St. Lucie County), and 363% (Hospital C in St. Lucie County).
“If IRMC were able to negotiate these same higher rates that the other hospitals did ... this would mean an IRMC profit of $55 million (Sebastian rates) to $90 million (Hospital B rates) per year instead of a break-even operation,” Zudans said in his letter.
One way of achieving this, he wrote, would be for the hospital to join a network of nonprofit hospitals to be in a stronger position to negotiate better insurance rates. But this choice, he said, had already been rejected by the hospital.
The alternative, he said, is charging its CEO Susi with negotiating better private insurance rates.
After hearing community complaints that Susi’s yearly compensation exceeds $1 million and his $5.5 percent pay cut was erased by a raise in overall compensation, Zudans predicted that a successful negotiation would be Susi’s “perfect opportunity to show us that he is earning it.”
Further, Zudans said, “this success will go a long way towards the District and IRMC working in harmony to improve the health of our community.”