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Report shows gains for Rice Memorial despite challenging financial climate

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Report shows gains for Rice Memorial despite challenging financial climate
Willmar Minnesota 2208 Trott Ave. SW / P.O. Box 839 56201

WILLMAR -- As recently as five years ago, Rice Memorial Hospital had an inpatient census averaging in the high 40s.

Then the numbers started to drop: 46 ... 44 ... 38 ... 34. Dealing with the steady decline in inpatient numbers has been one of the city-owned hospital's biggest challenges these past few years. It has led to a leaner operation, with less staff and tighter internal efficiencies.

But Rice still managed to post an overall profit in 2010, suggesting that many of the belt-tightening strategies are paying off. Preliminary, unaudited figures show the hospital with an excess margin of more than $1 million on total operating revenue of $114 million. The fourth quarter of the year was especially strong, helping the hospital make up for losses suffered during the first half of 2010.

According to a financial summary presented last week to the hospital board of directors and the board finance committee, Rice also was able to solidify its performance on many key indicators.

"We're solid in a lot of areas," said Michael Schramm, chief executive of the hospital. "The variance in the inpatient volume has been incredibly difficult to overcome. We're pleased where we finished. Obviously our work is not done."

Hospital officials can't point to any single reason that's behind the declining inpatient admissions, a trend that has been occurring at many other hospitals as well.

At least some of it is due to the number of procedures that are now done on an outpatient basis, said Bill Fenske, chief financial officer.

"It's just amazing how Rice has changed over the last five years. It reflects the changes in how medicine is practiced," he said.

Fewer inpatient surgery cases, for instance, can make a big difference to the hospital's bottom line, Fenske said. "Those are very intense, high-acuity cases."

Even though inpatient beds are often empty these days, business has grown in outpatient services, officials said. Outpatient care at one time made up 30 percent of Rice's overall business; now it accounts for more than half.

Emergency-room visits and laboratory tests have grown significantly. And patient volume in the radiation oncology and dialysis departments has changed little, if at all.

Another trend that may be affecting inpatient numbers is an increasing push by Medicare to admit patients on an "observation" basis. Observation status allows these patients, most of whom are elderly, to be stabilized and monitored and receive care just short of being formally admitted to the hospital.

Although it's less costly for Medicare, it doesn't necessarily save money for hospitals, Schramm said. "The intensity of service isn't any less. If anything, it might be more, but we're being reimbursed less."

In an effort to get a better grasp on this trend, Rice officials have started separately tracking the number of observation patients seen each month. Between 2009 and the end of 2010 the number of these patients nearly doubled, from 815 to 1,715.

"It helps explain what's going on with the acute care numbers," Fenske said.

Hospital officials can't always control patient volume, Schramm said. "But there are other things you can control."

One of these has been staffing.

In 2005, Rice peaked with 825 full-time equivalents. Today's hospital is much leaner. Attrition, plus some layoffs, has reduced the staff to 776 FTEs and put the hospital in line with the industry average.

"That's made a significant impact to our performance," Schramm said.

In December Rice also began collecting deductibles and co-payments from same-day surgery patients at the time of service. The move has sped up the hospital's revenue cycle, capturing $30,000 during the first month alone, Fenske said.

Hospital officials hope the strong financial finish to 2010 has put Rice on a more sound footing for 2011. Preliminary figures for January indicate the hospital posted a profit for the month, Fenske said. "We'll start out of the gate positive this year."

Officials also hope to realize more gains this year through financial benchmarking and internal measures such as inventory control and supply efficiencies.

David Anfinson, chairman of the hospital board, said it has been "absolutely marvelous" to see how Rice has managed to stabilize and solidify its financial health.

"We have been in struggling financial times," he said. "We need to recognize how hard it is to do that in the midst of what we've been walking through."

Anne Polta

Anne Polta covers health care, business/economic development and general assignment. Her HealthBeat blog can be found at Follow her on Twitter at @AnnePolta.

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