Open Source: What’s going on at Knox Community Hospital?

MOUNT VERNON — Knox Community Hospital has made changes over the past several months, and Knox Pages readers are asking why.

CEO Bruce White explained what was happening, starting with the broad picture and moving to specifics.

Overall, there are financial issues facing hospitals nationwide, and Knox Community Hospital is no exception.

“One-half of hospitals lost money in 2024,” White said. “During COVID-19, we saw labor and other costs go up, but reimbursement did not. We didn’t anticipate how long that was going to continue.

“We’re in the position of where we’re losing money. We saw a lot of hospitals cutting services and reducing workforce.”

White said it is not just rural or urban hospitals that are facing money problems.

“It’s a mix. Nobody’s doing great,” he said. “For those who made money, the median operating income margin was 1.5%.”

White said the KCH Board of Trustees faced a decision: cut back measures that would impact employees or take beds out of service.

“We really did not want to take beds out of service. People in rural areas need those services,” he said.

“We didn’t want any ramifications to our workforce because [employees] are so difficult to get.”

The board agreed that getting back in the black would take a multi-year process and put measures in place to do so.

“Things were going well until 2024,” White said. “We were meeting our financial metrics.”

Unexpected cyber attack

In February 2024, a cyber attack hit Change Health Care. The company is a clearinghouse that many hospitals, including Knox Community Hospital, use for billing.

White said KCH took action to recover and found another vendor. However, the attack interrupted KCH’s revenue cycle and made it difficult to pay bills.

“We could not accept credit cards,” he said. “People had to come in to pay.

“We also had some people retire who performed the [billing] function. So it was a myriad of things that affected our financial cycle.”

Medicare Advantage

Another issue that compounds problems with hospitals’ revenue streams is Medicare Advantage.

White said when Medicare moved toward Medicare Advantage plans, the Centers for Medicare and Medicaid handed the process over to insurance companies.

“I don’t think people realize what that means,” he said. “When you used to be able to send to Medicare, they at least would pay quicker, and we didn’t have to chase them.

“Now we’ve got an added layer of work.”

White said Medicare denied claims at a rate of 4% to 6%, while commercial companies deny claims at 15% or more.

“It’s a game they play. Drag it out and delay having to pay the hospital,” White said.

He cited denials due to medical necessity as an example of the “game” the carriers play.

When insurance carriers deny a claim, providers must call the company to discuss the case. White said physicians often do not have time to do that.

“When they do talk to the carrier, frequently they aren’t talking to an equivalent physician. An orthopedic surgeon might be talking to a pediatrician,” he explained.

Surgery is another prime area for denial.

The surgeon notifies the insurance company of everything potentially involved in the procedure and gets pre-authorization.

If anything changes during surgery and KCH bills for the new procedure(s), it must notify the insurance carrier within 24 hours or risk a denial based on no pre-authorization.

“What’s magical about 24 hours?” White asked. “How does that matter?

“We have busy surgeons. The minute the procedure is over, after talking with the family, you have to look at pre-authorizations and make sure that information gets to the people in billing.

“Those denials end up costing us money,” he said. “Insurance companies have a profit motive. Despite the fact they said they want to do business as usual, they’re not.”

Knox Community Hospital responds

Over the past months, Knox Community Hospital has cut costs by $6.8 million.

One cost-cutting move many readers asked about was discontinuing shuttles from the employee parking lot to the building. Nine drivers lost their positions.

White said the hospital started the shuttles 20 years ago during a construction project. The hospital planned to run the shuttles only during construction.

“Once the construction was over and we mentioned we were going to discontinue it, people quickly reacted. We had the money, so we continued it,” White said.

White said it costs $250,000 a year to maintain the shuttles.

“Those were good people. It had nothing to do with them doing their job. They were so nice to the employees and enjoyed their job,” White said of the drivers.

During inclement weather, maintenance staff will run the shuttles during limited times.

Relocating practices

The hospital relocated several single providers to reduce the overhead of individual offices. White said the goal was to avoid harming the workforce and not impact salaries and benefits.

Moving an endocrinology practice enabled the hospital to open a walk-in clinic in the Wright Family Pavilion.

The walk-in clinic sees about 47 patients daily, but does not draw patients from the urgent care or emergency room.

Acute rehab unit

The hospital closed its eight-bed acute rehab unit. When it opened, hospital officials assumed an average daily census of six.

“Unfortunately, because of different reasons, including opening in the middle of COVID, we did not see that census,” White said.

The daily average was 3.1, and the hospital faced a $1 million annual loss.

Allergy clinic and dermatology

White said giving allergy shots is a service but not a contributor to the profit margin.

“Long-term maintenance does not make money,” he said.

“We hated to discontinue dermatology because it’s something the community really benefits from, but it also does not contribute to the operating margin.”

Recruiting costs also factored into the decision. White said engaging a recruiting company costs about $30,000, with $15,000 payable upfront.

White said weighing the contribution to operating revenue vs. whether a service is vital makes for a difficult decision when deciding who to recruit.

STEMI

The STEMI unit (ST-elevated myocardial infarction) is one area where White said recruitment makes sense.

“That is a service that must remain intact,” he said. “When I have to weigh where do we put our money … that area is critically important.”

The hospital recruited two physicians who have experience in STEMI. They will arrive in August.

Looking ahead

White acknowledged the hospital still faces a financial challenge.

“Our 2025 budget will still be at a loss, but our hope is if we can meet this year, then in 2026 we will have a break-even year,” he said.

“Our operating loss this year will be -2%. Fortunately, we have reserves to help us through this. The question is, how long will those reserves last?”

Despite the bleak financial picture, White said bright spots include two new cardiologists and a neurologist arriving in August.

Recent recruitment brought a urologist trained in robotic surgery and an orthopedic surgeon trained to do anterior hip replacements, a less invasive procedure.

White said the hospital is working to enhance access to primary care so that patients get appointments in a reasonable time frame.

Additionally, the hospital is evaluating procedures for efficiency and whether it is using enough telemedicine.