INCREASING COSTS, DECREASING REIMBURSEMENTS MAY RESULT IN SIGNIFICANT HOSPITAL BUDGET CUTS

Tuesday's regular meeting of the Veterans Memorial Hospital Board of Trustees was characterized by lengthy, somewhat disappointing discussion.
To initiate the meeting, trustees were updated on the status of the building and renovation project. Unfortunately, due to unforeseen delays in scheduling contractors, asbestos removal for example, the construction deadline has been delayed until mid-October. Though this will not affect the new fiscal year's budget as the project was not scheduled to begin expensing until January 2001, it was rather disappointing in that hospital personnel had originally anticipated an early August completion date.
Trustees were further notified that the same-day surgery suite is nearing completion and will allow patients visiting the hospital for same-day procedures to be prepared for surgery and recover from an operation in a private area directly adjoining the hospital's operating rooms. This will avoid occupation of the main floor patient rooms, as was the case before the new construction.
Additionally, work on patient rooms will continue as one, new construction, has been fully completed. Contractors are currently working on a block of three patient rooms, in addition to the new home health and medical records areas, with a tentative completion date of mid-to-late June.
The hospital's kitchen and dining areas have been fully completed and dietary staff have, once again, assumed responsibility for both patient and employee meal preparation. While the area was under construction, patient meals were prepared in a cooperative effort with neighboring Good Samaritan Center.
And finally, contractors have undertaken construction in the new ambulance port. Though access to the area is somewhat limited, according to Mike Myers, hospital administrator, a path has and will continue to be implemented to allow emergency personnel and patients to utilize emergency rooms on the west side of the hospital.
In other discussion, analyzation of April's month end financial report, as well as year-to-date status of the hospital, led to discussion of the need to cut an estimated $150,000 in expenses in the upcoming fiscal year.
Specifically, the hospital experienced a loss of $15,651 in April 2000 as compared to a loss of $2,714 the prior year. Gross patient revenue was 2.1% over budget and 14.8% over April 1999; however, after allowing for deductions from revenue, which includes charity care and costs non-reimbursable by Medicare or other insurance, net operating revenue was 5.2% under budget and 8.9% over last April.
Adding to the bottom line loss for April was the fact that expenses were 1.5% over budget and 12.1% over last April.
The loss of $15,651 had a major impact on the hospital's bottom line considering a budgeted gain of $8,464 for the month.
Despite financially strapping months as of late, the hospital is, however, still in the black with $26,522 in revenues year-to-date; a disappointment, however, when compared to budgeted revenues of $88,750 for the current fiscal year by the end of April. According to Myers, the facility is on track for a break even year as May showed little volume increase and hospital staff prepare for what is historically the slowest month of the year in June.
Specifically, year-to-date figures indicate that gross patient revenue is 1.8% over budget and 8.3% over last year, due mainly to higher than expected outpatient services provided. Net operating revenue is only .9% over budget and 4.6% over last year.
Offsetting these positive percentages, however, is the fact that expenses are also up, specifically 2.8% over budget and 3.3% over last year. According to Scott Knode, financial services director, if expenses had remained consistent with budget expectations, the hospital would be on line for a profit of $154,461 this year, exceeding budget expectations. It is, instead, operating at a .5% profit margin instead of the budgeted 2% profit margin.
"In order to remain viable, this hospital needs to be operating at a 2% profit margin, preferably 5%," says Myers. "In addition, we have approved somewhere between $180,000 and $189,000 in wage increases for the upcoming year, expenses above and beyond those we face in the current year."
He adds, "Complicating matters even further is the fact that we have sold bonds to fund the current building and renovation project, and have an obligation to our bond holders to assure that this hospital is run in a fiscally responsible manner."
In order to do so, Myers says hospital personnel are now faced with trimming an estimated $150,000 from the upcoming year’s budget, a difficult task given the fact that expenses incurred this fiscal year have already been closely monitored and drastically cut from the previous year.
"We have only four options," states Myers. "We could do nothing, which would be detrimental to this facility; raise rates to cover expenses, an option that would only reflect in higher deductions from revenue; freeze wages, which is not a plausible solution as this facility needs to pay competitively to retain quality staff; or further trim expenses, which seems the only logical alternative."
Myers further points out that the hospital is still actively seeking critical access designation, with final approval expected by October 1, which will help ease the stress imposed by fractional Medicare and Medicaid reimbursements. "However," he states, "critical access designation will merely assure near full reimbursement of costs incurred in treating Medicare and Medicaid patients. It will not assure revenues beyond that cost."
According to Myers, this leaves only 25% of the bottom line to generate revenues, 5% of which is annually written off in bad debt and charity care. The 20% potential revenue stream that remains must be generated among self-pay patients or those with insurance, the latter of whom typically require a 3%-10% discount on medical costs.
"Minimal to no growth in volume in the past two years, ever-increasing expenses due simply to increasing costs for supplies and quality staff, and shrinking payments from insurance companies leave us no alternative but to closely look at and reevaluate our expenses," concludes Myers.
And in final discussion, further adding to what was already a somewhat somber meeting, the board regretfully accepted the resignation of trustee Tom Tierney, effective immediately. The board will seek a replacement to fulfill the remainder of Tierney's term, the sum of which is nearly three and one-half years.
To end the meeting on a positive note, Myers did report that over 120 registrations have been accepted for the upcoming Progressive Farmer Farm Safety Day Camp, planned June 8, with the potential for up to 150 participants. Last year was the first time this type of camp had been offered in Allamakee County, an event that met with an overwhelming reception. This year, the program has been revamped to allow a greater number of participants and, by Myers anticipation, will be every bit as popular as the previous year.
Also proven a great success was the April “Spring into Family Wellness” Fair, co-sponsored by the hospital. The fair, according to Myers, was well attended and met with many positive comments from attendees. The event is held annually and offers an opportunity for county and area agencies to reach and educate potential consumers on services offered. Each booth offers information on the respective agency and some type of interactive activity.