Lynn County Hospital was designated by Medicare as a Critical Access Hospital in 2004. Medicare treats Critical Access Hospitals differently than any other type of hospital. They reimburse these hospitals 101% of their costs for taking care of Medicare patients.
The majority of patients at Lynn County Hospital are Medicare patients. Our mix of inpatients is usually between 70 and 80 percent Medicare. Medicare uses this number to calculate their reimbursement to us. As an example using a 75% mix of Medicare, for a nurse making $10,000, the Medicare portion of her salary would be $7,500. Medicare would then reimburse us 101% of this, or $7,575 for her services.
Most departments of the hospital are reimbursed this way, but not all. Lynnwood is not reimbursed at all by Medicare. EMS, Tahoka Drug and the Specialty Clinic are reimbursed by a different method. The Family Wellness Clinic, which Medicare designated a Rural Health Clinic in 2014, is reimbursed similarly to the hospital.
Lynn County Hospital spends a lot of time and energy analyzing the anticipated spending for the above reasons. If an expenditure falls into a department that is “reimbursable”, the decision is made a little easier because we know that Medicare will give us most of our money back within a few months. If it is a capital expenditure, like expensive equipment or buildings, this becomes a little more complicated. Medicare will still reimburse our expense, but it will be spread out over the life of the equipment or building as depreciation. They will also reimburse the interest expense incurred on any debt for these expenditures.
As an example of this, on a $12 million dollar loan for 25 years at 6.75%, the annual debt service would be $1,076,575. The annual interest and depreciation costs reimbursable by Medicare would total $1,206,072. At our 75% Medicare utilization rate, Medicare would reimburse us $904,554 yearly, leaving the hospital to pay only $301,518 per year, or just a little over $25,000 per month. This example came from a presentation by New Light Healthcare at a North West Texas Hospital Association meeting.