WILLMAR -- Rice Memorial Hospital will focus this coming year on strengthening its operations and putting the city-owned hospital in a better position for growth and new strategic initiatives.
Hospital officials plan to accomplish this by controlling expenses and solidifying the balance sheet.
"We've got to be in a position to make those strategic investments down the road, nearly all of which take capital," said Mike Schramm, the chief executive at Rice.
The goals were laid out Wednesday as part of a $100 million budget for next year. The hospital board of directors voted unanimously to approve the budget. The final step is review and approval by the Willmar City Council.
Next year's budget is a record amount. It calls for a $1 million net profit for the year, or a 1.1 percent return.
Rice Hospital, with projected operating revenue of $83.8 million next year and projected expenses of $87.5 million, is the largest entity, accounting for 90 percent of the Rice organization's overall finances. The Rice Care Center skilled nursing facility and Rice Home Medical make up the rest.
One of the biggest challenges in developing the 2010 budget has been a continuing decline in patient admissions. Over the past five years, inpatient volume has fallen by 18 percent; meanwhile, outpatient business in services such as the emergency room and dialysis has climbed. Outpatient services now account for more than half of Rice's overall patient volume.
This shift has been happening throughout the hospital industry, Schramm said.
"Many other hospitals have seen that a few years ago," he said. "That finally flipped for Rice in 2009 and it flipped dramatically. We're expecting to see that continue."
The 2010 budget is based on a census of 40 inpatients per day, the lowest this number has been in recent history.
It has been hard to pin down an accurate census projection, said Bill Fenske, chief financial officer at Rice.
Inpatient numbers were down significantly in August and September, then rose to the mid-40s during October. But in November they dropped back down to a daily average of 29, Fenske said.
"We're continuing to see that roller-coaster," he said. "We felt it would be best not to be aggressive."
In the coming year, hospital officials will focus much more intently on controllable expenses to help ensure the hospital operation is generating a profit -- a move that will allow it to rely less on non-operating income from its investments and joint ventures such as Willmar Medical Services.
Controllable expenses fall into categories such as staffing and supplies.
Layoffs over the past three years have left Rice Hospital at a staffing level that's unlikely to need any more downward adjustments, Fenske said.
"I feel we have hit the spot we need to be. We're not quite at the benchmark but we're in the right range," he said.
This means the strongest focus will be on the hospital's inventory and how its supplies and other services are purchased.
"We watch things like materials and supplies that are being ordered and the decisions that are being made," said Maureen Ideker, chief nursing officer.
Obtaining the best price for supplies can also be significant in saving money, Fenske said. With group purchasing, for instance, a 10 percent savings on surgical supplies at the Willmar Surgery Center can be realized this coming year, he said.
These data all are tracked for each hospital department, Schramm said.
"We know where the areas are that we need to monitor," he said. "We're going to have to be very attentive. ... We're going to have to continually look at our expense structure."
Although hospital costs are projected to go up next year, hospital officials are aiming to keep the increase at around 3 percent, the same level as the rate of inflation.