The History of Skiff (Part V)
In the last few years of the 1960s and the first few years of the 1970s, hospitals were experiencing a period of growth in volume, facilities and funding. Financial performance was strong as the Medicare and Medicaid programs grew and health insurance benefits were offered to more and more people through their place of work. Increasing insurance coverage led to increasing utilization of health-care services and dramatic increases in health-care costs. By the early 1970s, skyrocketing health-care costs was front page news across the country. In 1973, Congress responded to the pressure to “do something” to reign in costs by passing legislation requiring every employer with more than 25 employees to include a Health Maintenance Organization (HMO) as an alternative to traditional insurance coverage.
Interestingly, in that same year Congress also expanded the Medicare program to cover additional services including outpatient therapy, treatment for patients with end-stage kidney failure, and people younger than 65 with permanent disabilities. As a way to offset the costs of these additional programs, Medicare began to decrease their payments to hospitals by moving to a “lower of cost or charges” system and eliminating some elements from the equation of calculating cost. The impact on Skiff Memorial Hospital was significant. Prior to 1973, if a hospital had an extended care facility, Medicare would cover any excess financial loss associated with these patients. This allowance ended in 1973, leaving Skiff with no choice but to reduce the number of extended care beds to 20, cutting the size of the program located in the Hunter Wing in half.
The 1970s were a difficult time for America, with unrest regarding the end of the Vietnam War, uncertainty associated with the impeachment of a president, and a middle-eastern oil embargo to cap it off. But the 1970s were also a time of innovation. In the 1960s and years prior, it was common for patients to be admitted to the hospital for simple procedures, like cataract surgery, and to be kept immobile in their beds for such extended periods of time that they would develop pneumonia due to lack of activity. It was rare for patients to be told their diagnosis, let alone be informed about medication or treatment options. The lessons learned in the 1960s, along with the evidence learned from clinical studies, began to be put in practice in the 1970s and processes of care were influenced in very positive ways.
Advancements in medical technology continued forward and included the development of MRI and CT scanning systems. Vaccines for most major diseases had been in place for many years and the last fatal case of smallpox was recorded in 1976. Immunosuppressive drugs allowed organ transplants to become a reality for ever more people, and the first antiviral drugs were created.
Skiff kept pace with the changing technology by purchasing a blood gas analyzer for the laboratory in 1971, opening a new wing of the hospital dedicated to radiology and laboratory functions as well as a new emergency room in 1973, installing an automated pacemaker checking system in 1975, and purchasing a laparoscope for the operating room in 1976. In that same year, an east addition was constructed on the hospital campus and included a four-bed coronary care unit.
The facility additions and technology acquisitions in the 1970s were funded by a combination of federal Hill-Burton funds and hospital resources, as well as a gift of 16,000 shares of Maytag common stock from the Maytag Family Foundation. Though some past renovation projects had also been funded in small ways by city tax levies, this support had ended by the mid 1970s. In 1979, the hospital’s capacity had grown to 124 beds and an annual budget of $3.1M. Who would have thought 60 years earlier that a simple nine-room hospital with a $350 monthly budget would become this large and complex?
Unfortunately, the end of the 1970s brought with it an end to several years of relative tranquility in health-care reimbursement. Fears were growing in the health-care community nationally that Medicare was considering significant changes to their reimbursement programs to slow down the rate of growth in hospital spending. These fears were founded on other changes in the mid-1970s, including Medicare’s ruling to cap the rate of physician payment growth in 1975 and a decision by Medicaid to cap the length of a paid hospital stay at seven days in 1976. By 1977, the Skiff Board of Trustees was so concerned about these changes, and additional ones being proposed by the federal government, that a letter was sent to Senator Culver expressing their apprehension. Specifically, the Board was concerned about changes being proposed for the Medicare program that would cap hospital payments at current cost-based rates. Their conclusion was that such a move would effectively lock low cost providers like Skiff into permanently low payment rates.
In 1978, the hospital community in Iowa responded to these fears by creating the Iowa Voluntary Cost Containment Committee to identify ways to reduce local health-care costs. In 1981, a front-page article appeared in the Des Moines Tribune regarding the high cost of health care in our state. Because most health-care services were provided on an inpatient basis, this was the focus of effort in most hospitals, and the focus of insurance companies as well, as evidenced by the implementation of a plan by Blue Cross/Blue Shield of Iowa in 1981 to reduce inpatient admissions. As hospital admissions declined, so did the need for inpatient capacity and, in 1982, the capacity at Skiff was voluntarily reduced to 98 beds.
In 1982, the federal government passed the Tax Equity and Fiscal Responsibility Act (TEFRA). TEFRA placed several limits on the way in which Medicare reimbursed hospitals. The act introduced targets for the average cost of care for each hospital and limited annual increases in these targets. No longer would Medicare pay actual costs of care provide; payments to hospitals would be capped. Skiff Board of Trustee minutes in December of 1982 noted the current “crisis in reimbursement” and just a few months later, in 1983, the decision was made to permanently close the extended care facility located in the Hunter Wing.
But this was not the end. In 1984, another change would be implemented that would cut the inpatient capacity of Skiff Memorial Hospital in half, would refocus the hospital in a very different direction and even result in changing the name. In July 1984, Ron Ross, the hospital administrator, would pen the following words in a letter: “As you are acutely aware, we are presently faced with the most dramatic and rapid changes ever seen affecting the delivery of health services.”
Truer words had never been spoken …