Hospital Administrative District 4 directors on Sept. 22 approved a fiscal year 2005 operating budget that recognizes a change to Critical Access status for Mayo Regional Hospital. As a result of enhanced reimbursement related to the change, Mayo will avoid a general rate increase.

The budget for the hospital and its seven associated physician practices anticipates net revenues of $29.1 million and an operating income $1,513,902. The addition of non-operating income will result in an overall net income of $1,672,040 in the fiscal year that begins Oct. 1. Net income is reinvested back into the nonprofit community hospital to fund depreciation, acquire new equipment and develop new programs.

Chief Financial Officer Dennis Allen said the change to Critical Access status will have a significant positive financial impact for Mayo by increasing the overall reimbursement from the Medicare and Medicaid programs, which provide over 60% of Mayo’s revenue. He estimates an enhanced reimbursement of $2 million due to a change in the Medicare and Medicaid programs to a payment methodology based on a share of allowable costs.

Allen said revenues are also expected to rise at Mayo due to increased patient volume related to the addition of a second orthopaedic surgeon in Dover-Foxcroft and a new pediatrician in Milo.

“At a time when the public is concerned about the rising cost of healthcare, Mayo is pleased to announce that there will be no overall general increase in hospital rates in 2005,” said CEO Ralph Gabarro. “The Critical Access hospital program is designed to stabilize the rural health care system by improving the payment we receive for providing vital services. Under Critical Access reimbursement, no longer will private paying and commercially insured patients be required to shoulder a disproportionate share of the increased costs of healthcare. It will benefit both the community and the hospital.”

Mayo’s work force next year, including hospital and physician office staff, is budgeted at 301 full-time equivalent positions -- third largest in the Penquis region. Salaries and benefits will account for nearly $16.2 million.

Allen said the new budget anticipates an increase in overall utilization of hospital services. Admissions are expected to grow by 5.5%, to 1,535 per year. The budget estimates an average daily census of 13.9 patients. Outpatient revenue is expected to account for 71% of Mayo’s budget.

HAD 4 directors also authorized a hospital capital equipment budget of $1,687,672. Some of the larger items in the capital equipment budget are for a new chiller, telephone system upgrade, ultrasound equipment, an ambulance, information technology equipment, operating room equipment and cardiopulmonary equipment.