Following unsuccessful efforts to keep it operational, theskilled nursing facility at King’s Daughters Medical Center willshut down March 11, hospital officials said.

Chief Executive Office Phillip Grady cited financialconsiderations and other factors in the decision to close thefacility, also known as the hospital’s sub-acute unit. The facilityacts as a “step down” unit for patients who no longer require acutecare in a normal hospital setting but are not yet ready to gohome.

Grady said Medicare reimbursement levels had dropped since theunit opened in 1994. That year the total reimbursement was around$1.5 million, but it had dropped to $500,000 a year in 2003.

“There’s been a significant drop in reimbursement,” Grady said.”At the same time, costs are going up.”

Grady mentioned labor, drugs and other expenses.

In fiscal year 2003, the direct cost loss in the facility was$320,000. Grady said that total included staff, medication andsupplies but did not include other services such food, utilitiesand laundry.

“We’ve actually been operating the unit at a loss or break evenlevel for a couple of years,” Grady said. “We felt it was a benefitto the patients to be able to stay in the community.”

KDMC is one of the last in the area to have a hospital-basedunit. Grady said the hospital kept its unit when other hospitalsclosed theirs.

“We explored every option we could to operate the unit as adifferent type of facility,” Grady said. “Those avenues were notavailable to us.”

One option considered was a rehabilitative-type facility.However, Grady said geographic licensing restrictions preventedthat.

Grady said KDMC had tried for three years to keep the unitoperating. He mentioned a volume- and expenses-related move toreduce the number of beds from 14 to 10 about a year and a halfago.

Although losing money, hospital officials said the unit wasproviding a service to patients, Grady said.

Also, other Medicare reimbursement programs in other areasprovided a means to allow the hospital to continue sub-acuteservices. When those reimbursements dropped from $1.1 million to$350,000, however, it was no longer able to absorb the losses,Grady said.

Declining patient volume was another factor. On the day hospitalofficials decided to close the unit, it had no patients, Gradysaid.

“Our volume had dropped off as well,” Grady said.

Grady cited significant increases in professional liabilityinsurance premiums as another factor in the closure decision. Hesaid premiums had risen over $400,000 in the last five years.

Grady said the hospital has no plans to close any otherservices.

As for sub-acute unit employees, Grady said they will haveopportunities elsewhere in the hospital.

“It is our goal to have the employees be able to apply for openpositions in the hospital,” Grady said.

Regarding the rooms themselves, they are required by Medicareregulations to be maintained as sub-acute rooms until March 11.After that, Grady indicated they would be used as normal hospitalrooms.

Grady said the decision was a tough one, but the financialconsiderations made it difficult to support programs that did notsupport themselves.

“We regret it, but it was the right decision,” Grady said.

Grady said some of the sub-acute services can be handled bynursing homes or hospices.

“It’s not that the community is going to be without theseservices once the unit closes,” Grady said.