Rice Hospital projects stagnant finances for 2014
WILLMAR — Rice Memorial Hospital has proposed a tightly constrained budget for 2014 that aims for a conservative 2 percent margin and projects little or no change in revenue and expenses.
Look for the hospital to continue focusing on its cost structure next year, Bill Fenske, chief financial officer, told the hospital board finance committee this week.
A 2 percent return on hospital operations is “a stretch from where we’re at,” he said. “We’re going to have to push on that.”
Members of the finance committee reviewed the budget forecast in detail at a meeting Thursday, voting to recommend approval of the 2014 budget by the full hospital board this coming week.
The pressures faced by Rice Hospital are similar to those being encountered by the rest of the American hospital industry: stagnant or declining patient volume and an increasing squeeze on reimbursement, especially for Medicare and Medicaid, the main two publicly funded health care payers.
“One of the things that we’ve seen is that our volumes have remarkably flattened out,” Fenske said.
Patient days, which hovered between 16,000 and 17,000 a year as recently as five years ago, have dropped to around 14,400 and are projected to remain at this level next year.
At the same time, Medicare and Medicaid are making up an increasing share of the hospital’s reimbursement. Sixty-five percent of patient revenue now comes from governmental sources, and this likely will rise to 66 percent in 2014, Fenske said.
“What all of that did was it put continued pressure on our expenses and our costs,” he said.
Rice has struggled this year to earn a return on its operations. Hospital departments have tackled supply costs in a quest for greater financial efficiency, and department heads have been working since summer to identify and implement a 2 percent reduction in their costs. But despite these measures, Rice as a whole is projected to sustain an operating loss this year. The organization includes the hospital, Rice Home Medical and the Rice Care Center and Therapy Suites.
One of the fiscal targets next year will be purchased services from vendors and consultants, Fenske said. “We have to find savings there,” he said.
He also anticipates that staffing levels will be affected.
“We’re going to be watching our volumes and adjusting our staffing. Our (full-time equivalent positions) are likely to be pushed down,” he said. “We’re going to need to do a lot of that through attrition and really holding the line on replacements.”
“We’ve looked hard at our cost structure,” agreed Mike Schramm, Rice chief executive. “There’s a lot of different things we’re looking at and continue to look at.”
The 2014 budget calls for $98 million in operating revenue, $96 million in operating expenses and a $2 million net return. It also contains a 3 percent price increase.
Hospital leaders took a slightly different approach this fall to budgeting for next year, using a forecast method that looks at historic trends in patient volume, revenue and spending to develop realistic projections.