CEO: Hospital District Could Gain $200K Annually Through Drug Discount Program

The Southern Humboldt Community Healthcare District board meeting was attended by, from left, board members Gary Wellborn and Corinne Stromstad, administrative assistant Susan Gardner, board president Barbara Truitt, district CEO Matt Rees, district CFO Paul Eves, and board members Alison Rivas and David Ordoñez.

The Southern Humboldt Community Healthcare District board meeting was attended by, from left, board members Gary Wellborn and Corinne Stromstad, administrative assistant Susan Gardner, board president Barbara Truitt, district CEO Matt Rees, district CFO Paul Eves, and board members Alison Rivas and David Ordoñez.

The Southern Humboldt Community Healthcare District Board of Directors heard a financial report from the new chief financial officer (CFO), learned of a federal drug discount program that promises to bring new revenue to the district, and took another step toward creating a voucher program at their April 28 meeting.

In the district’s financial report, CFO Paul Eves reported February gross revenue was consistent with the rest of the year, and March was down. He concluded that the bottom lines for February and March were positive.

In the administrator’s report, district chief executive officer Matt Rees noted the report from district billing staff Diane Meredith-Gordon indicated that March was a great cash month. He attributed that to the new coding company’s work to catch up on the coding aspect of the billing process that had fallen behind with the district’s previous coding contractor. He expected April collections to be over $600,000. Rees gave a report about CBO, the district’s billing contractor, and told the board that the coding problem, which had delayed billing and as a result payments, is being remedied.

He added that he had arranged with CBO to provide a monthly report on their progress in catching up on the billing and to participate in a monthly telephone call. Rees said he expected the billing time frame will continue to improve and bring the district into the standard billing range for accounts receivable.

Reese gave an update on the progress of the project of obtaining a CT scanning device for the district. He reported that several companies were scheduled to meet with him to present potential CT options. He added that after gathering information, radiology staff and physicians would be consulted.

“Then we’ll bring it back to the board, and the board can discuss it,” he said.

Rees reported that he had been looking at alternatives for housing the CT device. He said the district is in the process of purchasing property next to the hospital to serve as a location for the CT scanning facility.

He said a modular building or a trailer could house the device. Rees commented that he had found the trailer to be the quickest and less expensive option, and added that with a trailer it could easily be moved if the hospital builds a new facility at a different location.

On another matter, Rees and Eves informed the board of the district’s intention to take advantage of a federal drug discount program that requires drug manufacturers to provide outpatient drugs to eligible health care organizations — including critical access hospitals such as Jerold Phelps Community Hospital — at significantly reduced prices.

Known as the 340B Drug Discount Program, Rees explained that an earlier estimate that the program would generate $40,000 annually for the district was inaccurate. He said the yearly amount instead, based on the more than 1,600 prescriptions that the hospital issues via the clinic and emergency room each month, is just over $200,000.

“This is something where we want to jump on the bandwagon,” Rees told the board.

In a subsequent interview, Rees explained that the $200,000 estimate was arrived at after recent meetings between hospital district officials and representatives of SUNRx, a Southern California concern that assists health care organizations and pharmacies with managing the 340B drug discount program. The erroneous $40,000 estimate, he added, was contained in a cost report done for the district by a Washington state firm last fall.

In terms of how exactly the program generates revenue for participating hospitals, Rees acknowledged that he wasn’t a master of all the details. Nonetheless, he made clear that the basic way is by receiving rebate checks from the pharmacies that are supplied with the discounted medications. In the case of pharmacies that obtain the discounted medications on their own from drug manufacturers, he said the district would still get rebates due to the fact that it was issuing prescriptions under the 340B program.

“We’ll negotiate pricing [with the pharmacies]. We’ll pay pharmacies a price to fill the prescriptions. And we’ll provide the prescriptions,” was the way Rees explained it.

Given the method of payment — in other words, through rebate checks — Rees said that a large chunk of money wouldn’t come in all at once. Instead, he said it would “trickle in each month.” He also said that revenue generated by the program could go up or down. “It’s based on the number of prescriptions we write,” he said.

As for patients, the 340B program, signed into law by President George H. W. Bush in the early 1990s, was intended to improve prescription drug access to the nation’s uninsured population. Which explains Rees’s comment last week that uninsured, or “self-pay,” patients would be the prime beneficiaries of the discounted drugs.

“If you have no insurance, [the 340B program] can reduce the cost [of obtaining medications] by up to 80 percent,” Rees explained.

“Some of the outpatient drugs can cost $10,000 a pop, and [under this program] you can get [such drugs] for $2,000. Lots of drugs that cost $200 you can get for $30 to $40.”

In line with the program’s focus on the outpatient population, Rees also emphasized that the discounted drugs would be available to people coming into the hospital’s Emergency Room or clinic, and not to inpatients staying the night.

In terms of what comes next, Rees described a two-step process that the district would go through to become part of the 340B program. The first involves signing an agreement with SUNRx, which he expects to happen within seven to 10 days.

SUNRx “will contract with pharmacies and help us to do the paperwork so we can get processed quickly. They’ll keep track of the inventory and of every prescription we write to make sure we get a rebate for it.”

Rees, who had experience with the 340B program in his previous job, as CEO of Mayers Memorial Hospital District in Fall River Mills, Calif., said the initial start-up cost with SUNRx would be $5,000 and that the district would pay them $500 a month to manage the program.

He indicated the expense would be worth it. “It’s a complicated inventory system. It’s kind of a headache,” he related.

The second step to becoming 340B eligible is to simply enroll in the program. Given that the next application period is in the first half of July, and that there is a mandatory 90-day waiting period after applying, Rees told board members during last week’s meeting that “the best case” is that the district would become a fully-fledged participant in October.

After closed session, the board discussed a draft policy for a voucher program that would provide residents of the Southern Humboldt Community Healthcare District that have paid the special hospital district tax, including renters of property charged the special hospital tax, with $125 vouchers redeemable for medical services provided by the district.

Board members discussed some changes to the draft policy, so it will go back to the policy committee for revisions, and be presented to the board at the next meeting. Board president Barbara Truitt suggested that the voucher program might begin in July.

Rees and the board talked about holding a special public meeting with the board of Redwoods Rural Health Center (RRHC) in order to work with them cooperatively. The board unanimously voted to invite RRHC to a joint meeting. Truitt appointed board members Dave Ordoñez and Alison Rivas to take the steps to invite the RRHC board and arrange the meeting.

The board has a strategic planning meeting scheduled on May 10 and 11. The next regular SHCHD board meeting is May 26, at 1 p.m. in the Dimmick Room at the hospital.

Humboldt Independent staff writer Keith Easthouse contributed to this report.