In 1977, the hospital Board of Trustees sent a letter to Senator Culver, expressing their apprehension about new payment models being considered by the federal government to reduce the cost of hospital services.
Specifically, the board was concerned that changes being proposed for the Medicare program would cap hospital payments at rates based on then-current costs of providing care. Their conclusion was that such a move would effectively lock low-cost providers in states like Iowa into permanently low payment rates compared to other parts of the country.
One looks back at this letter now and finds it to be prophetic.
Beginning in 1982, Medicare experimented with a formula that capped the level of allowable costs, but this was just a warm-up for 1984 when Medicare implemented a system of payments which no longer paid the actual cost of providing care, but rather paid what Medicare thought the cost of care “should” be for a particular diagnosis in a particular part of the country.
This new system was based on paying for a limited number of days in the hospital for each diagnoses – patients were classified into a “diagnosis related group” (DRG) when admitted as an inpatient and the hospital would know up front how many days Medicare would allow the patient to remain there.
Interestingly, Medicare did not cap the number of days a patient could stay in the hospital; it just indicated that if a patient stayed longer than allowed, the hospital itself would be “liable for paying the costs” of any extra days.
For the first time in the history of the Medicare program, hospitals were at risk for the cost of taking care of patients. This created a strong incentive for hospitals to ensure that patients did not “overstay” their allotted time in the hospital and programs were quickly put in place throughout the country to ensure all efforts were focused on achieving the quickest recovery possible for every patient.
Suddenly, patients who would have been admitted for a week or more were being pushed through the system in three or four days. Patients who needed surgery and who had been admitted for preoperative testing in the past now found all this testing being done on an outpatient basis. Medicare supported this movement toward outpatient care by allowing payment for more and more procedures only on an outpatient basis.
In addition to capping the allowed length of stay for different diagnoses, Medicare created a standard payment amount for each DRG and then applied a regional factor to account for cost difference in different regions across the country. These regional factors were pegged to the historical costs of providing care in each part of the country and resulted in states with the most efficient hospitals (those in the upper midwest) being paid far less than hospitals in other parts of the country (the south and northeast) for providing exactly the same care.
This new payment system was called the “Prospective Payment System” (PPS) because hospitals would know on the day a patient was admitted how much they could expect to be paid.
The face of hospital care in America was changed dramatically in 1984 and this was the impetus behind the crafting of the following words by Ron Ross, Skiff’s administrator at the time: “We are presently faced with the most dramatic and rapid changes ever seen affecting the delivery of health services.”
Sensing big changes coming in the future, leadership at Skiff had begun the progress of reconfiguring operations in advance. In 1982, the Hunter Wing extended care facility was closed permanently and a nine-bed psychiatric unit was opened in a portion of the space. Though the hospital could no longer afford to provide senior care in the hospital setting, it supported the development of a local senior health center across the street (which later affiliated with Wesley Life in 1992 and became Park Centre).
The first clinic for visiting specialists was opened at Skiff in 1983; by 1985, 16 providers in a variety of specialties were providing their services locally. In a truly visionary step, in 1984 the Jasper County public health nursing service merged with Skiff in the creation of a home health department and a local hospice organization was developed with the support of the hospital and would eventually merge with the hospital in 1988.
The key to ensuring a successful shift to outpatient care was providing much greater amounts of patient education and far more transparency on the part of health-care providers. For the first time, patients were informed of their diagnosis and nurses were allowed to tell patients what medications they were administering. Health prevention education was implemented in the late 1980s and patients’ individual accountability for their health has been increasing ever since.
The operational transition from an inpatient to an outpatient focus did not come easily to hospitals anywhere, and Skiff was no exception. Simple procedures, such as obtaining a series of GI X-rays, took three days (because the different views could not be done on one day) and patients had historically been admitted because it was felt that patients could not complete the “prep” on their own.
If you have ever had a colonoscopy, you know that “prep” is something that is easily done in the privacy of your own home. The first outpatient surgery at Skiff was for a procedure we would never consider an inpatient stay for today, but the surgeon took significant convincing before he would agree to have the patient not come in until the morning of surgery. Everything went well for this patient and the precedent was set.
Medical technology continued its rapid advance during this time, as well. In 1980, the lithotripter was developed to break up kidney stones with sound waves, eliminating the need for surgery. In 1981, the first human heart-lung transplant was completed. In 1985, automated DNA sequencing was developed, as was the first surgical robot. Intravascular stents were developed in 1988 and led to the rapid development of cardiac catheterization labs in the 1990s.
Skiff kept pace with these developments, implementing the use of echocardiography, CT scanning and mammography in the mid-1980s by utilizing mobile equipment shared with other rural hospitals via a company founded in 1983 called Health Enterprises of Iowa (yes, the very same company investing in Newton right now with the construction of a new medical laboratory). Skiff also invested in an automated unit-dose medication system in the pharmacy department in 1982 and a computerized admission system in 1985.
The sweeping changes in health-care payment, advances in medical technology, and the intense push for moving care out of inpatient units and into the outpatient environment led to additional difficult, and far-reaching, decisions at Skiff. Mary Frances Skiff Memorial Hospital had reached a peak of 124 beds in 1973.
Sensing the impending changes, the bed count was reduced to 98 in 1982. In 1984, following the massive changes for inpatient reimbursement, the inpatient bed count was reduced again, to 69, where it remained until 2010. One can only imagine the difficulty the hospital leadership team must have had in coming to terms with reducing the number of beds to a level just about half as large as in the heyday.
In addition to reducing the inpatient capacity of the hospital, Ron Ross made an even more difficult recommendation: changing the name of the organization from “Mary Francis Skiff Memorial Hospital,” a name that had been in place for 65 years, to “Skiff Medical Center.”
The days of inpatient-focused hospitals had come to an end, and the leadership team realized that the new focus would need to be squarely on growing outpatient health care capacity in Newton; the new name would help ensure this transition. Thus, in 1986, the new name and a new logo were presented to the community.
A reduction in inpatient capacity and a change in name were just the beginning of Skiff’s transition to the new world of medicine. A bold vision was needed that would ensure residents of Newton and Jasper County would have access to the very best care close to home in the future. In 1988, a “strategic and facility planning” program was initiated and resulted in a 1989 video presentation titled “Skiff Medical Center — A Treasured Community Asset.”
Enthusiasm in the community was high as Skiff unveiled its plans for the next step in its evolution — a $9.3 million addition and renovation program which would culminate in the construction of a new medical arts building attached to the hospital, renovations of most of the existing spaces in the hospital, construction of new additions to house emergency services, radiology equipment, and surgery suites. New laboratory and imaging equipment was purchased, including a $600,000 CT scanner.
To ensure the widest use of these new facilities, the Newton Healthcare Development Corporation was founded with the sole purpose of recruiting additional physicians to the community. In a two-year period, six physicians moved to Newton and began practicing at the hospital.
The new facilities, equipment and physicians resulted in an increase in hospital revenue of $2 million in 1992 alone!
Thanks to visionary leadership and exceptional community support, all was well at Skiff by the mid-1990’s. But Skiff Medical Center was not typical of rural hospitals in America at this time, and unexpected changes were coming to Newton as well.