WILLMAR -- Three months into a new fiscal year, Rice Memorial Hospital is struggling with a deficit driven largely by a drop in patient volume.
The red ink follows a strong financial performance in 2011 and underscores one of the critical challenges faced by hospitals: the cyclical and often unpredictable nature of how many patients they see and the extent to which it affects the bottom line.
"We've seen these cycles before. It's never fun to be on the downward side of these trends but they cycle back," said Mike Schramm, chief executive of the city-owned hospital.
In the meantime, Rice will continue to focus its efforts on managing its cost structure, he said. "We're going to have to continually find ways to be more efficient as an organization."
The hospital's financial performance for March was reviewed Friday by the finance committee of the board of directors.
The news was disappointing: Rice sustained a $161,000 loss during March on $8.2 million in net operating revenue.
On top of losses earlier in the year, Rice and its affiliated entities -- the Rice Care Center and Rice Home Medical -- had a combined $476,000 deficit as of March 30.
The books haven't yet been closed on April, but the preliminary numbers show that patient volume was sluggish in April as well.
"We're really getting hit by our soft volume numbers now," said Bill Fenske, chief financial officer. "Hopefully our volumes will turn a little bit but we need to keep watching our activity and input so we're adjusting."
Patient volume has always been elusive for hospitals to manage. It can be influenced by many things: the severity or mildness of influenza season, patient demand for elective procedures, local demographics, the economy, and even the local mix of physicians who admit patients to the hospital.
Last year was notable for how patient volume rebounded at Rice after a steady and significant decline. Hospital officials think some of this may have been pent-up demand from patients who delayed seeking care during the recession.
But it doesn't fully explain the ups and downs in patient numbers that Rice and many other Minnesota hospitals have been experiencing in recent years.
It's difficult to pin down, for example, why surgery cases are running nearly 15 percent behind projections this year, Fenske said.
"That's a real concern to us," he said. "That's just business that's not occurring or is going elsewhere. We don't have the answer right now."
Many hospitals are seeing a similar trend, said Teri Beyer, chief quality officer. "Everybody is kind of singing the same song that things just seem slower than a year ago."
Nationally there's been a slowdown as well in patient visits to the doctor's office.
"You never know totally what drives that volume," Schramm said.
Rice's budget was additionally hurt by the implementation in February of a new medical records system that integrates clinical and billing information. It was a massive change, and hospital officials said it's taking considerable time to smooth out the billing process and ensure that charges are being fully captured.
"I think we know without a doubt we've left charges on the table," Schramm said. "From a revenue and process standpoint, we need to get our arms around it. At this point we've got work to do."
He said Rice officials try to be conservative in their projections as they plan the budget each year. But with limited ability to control patient volume, hospitals that fare the best are those that work the hardest to manage their costs.
"We call off staff. We adjust staffing. We continue to look at our cost structure," Schramm said. "It's just something we're going to have to continue to deal with... You don't want to run red numbers and you can't afford to. We're going to focus on what we need to. The volume will come back."