VMH Board of Trustees approves operational budget for FY2005-06

With no written or stated comments for or against the budget, the board ultimately stamped it with approval.

VMH Financial Director Scott Knode explained some of the key points used to help formulate the budget for the upcoming year, stating that anticipated patient volume for each year’s budget is based on an average of patient volume from the previous three years. This year’s patient volume consideration, however, allowed for a three percent increase on the assumption that the new Gundersen Clinic would have an impact on patient volumes at VMH.

Other considerations within the budget planning center around hospital personnel decisions, an anticipated patient charge increase of five percent that will become effective July 1, and Medicare/Medicaid patient volumes. Knode noted that there is no contrary indication to the fact that Medicare/Medicaid will continue to be fully reimbursed for VMH, and revealed that approximately 70% of the patient volume at VMH is, indeed, reimbursed by Medicare or Medicaid.

On the expense side of budget considerations is a nationwide trend of bad debts and charity care for healthcare organizations. Knode noted that VMH is assuming about four percent of its patient charges will fall into the bad debt category, and that approximately one and one-half percent is expected to be written off as charity care.

“With these assumptions, we were able to put together a budget that will reflect a bottom line of a 4.7% profit margin, a profit of approximately $442,000,” Knode explained.

With the operational budget in place, VMH will now begin to assess its capital expenditures for the upcoming year. A majority of that capital spending will center around reclaiming the third floor of the hospital for patient rooms after Gundersen Clinic moves into its new facility later this year.

After a recent visit from its auditors, Knode wanted to reveal to the public that Veterans Memorial Hospital is a considerably more self-sufficient facility in comparison to other hospitals from across the state. “We continue to get $9,000 from the City of Waukon,” he explained in regard to support received from the City of Waukon. “And, based on what our auditor says, there are 18 hospitals across the state of Iowa that receive tax subsidies in excess of one million dollars. The average of all hospitals such as ours is around $550,000, which really puts our numbers into perspective. We also get free use of water, but that’s basically it, as far as any type of subsidy.”

PROFITABLE JANUARY

Looking at current financial numbers, VMH recorded a second consecutive month of at least a $70,000 profit, reporting a net income of $73,055 for the month of January. “The real key for January was that we recorded the second highest skilled patient census month in seven years,” Knode explained.

That highly skilled census has translated into a more than 150% increase in net income from what had been budgeted for the month of January, which stood at just $28,494. An even greater impact was evident in the fact that January of 2004 resulted in a $9,000 loss for VMH, this year’s net income being a 908% improvement from that timeframe just a year ago.

VMH Administrator Mike Myers explained that flu and pneumonia had been filling the beds at VMH on a consistent basis. What that has translated into is nearly a 30% decrease in deductions from revenue from what had been budgeted for this year, as most of those patients fell into the skilled patient census, which is reimbursed by Medicare.

“I think, overall, we’ve had a pretty strong year to date,” Myers said. “But, we’ve also demonstrated earlier in the year that one bad month can wipe out a whole bunch of gain. So, we always keep that in mind, not only when we budget, but also in how we operate on a daily basis.”

Year-to-date, a balanced result of operating revenue being .6% over budget while total expenses came in at .6% under budget translates into a $263,485 net income for the fiscal year so far, which is more than 30% above what had been anticipated, year-to-date, for the facility at this point in time.