WILLMAR -- Rice Memorial Hospital is proposing a $101 million budget for next year for the city-owned hospital, Rice Care Center and Rice Home Medical, with a goal of ending 2011 with a $1 million net profit.
The budget, released Friday to the hospital board's finance committee, contains a 5 percent hospital rate increase.
It's based on projections of an inpatient census of 30 patients, the lowest this number has been in more than two decades.
Hospital officials said Friday that the proposed budget was developed through a series of meetings over the past month among the executive team.
"We spent a lot of time on this," said Mike Schramm, the hospital's chief executive. "We've tried to be conservative with our estimates."
The budget goes to the full hospital board next week for its approval. It then will be forwarded to the Willmar City Council for final approval.
As they put together the budget, one of the main objectives of hospital officials was to manage operating costs as tightly as possible.
Five years ago, the hospital census averaged 50 inpatients per day. Now it's not unusual for it to be in the low 30s. Although outpatient procedures now account for more than half of Rice's annual volume, this revenue isn't enough to make up for the loss of inpatient admissions, hospital officials said.
Rice has struggled this year to turn an operating profit. The most recent figures, through September, suggest the Rice organization will likely end the year slightly above the break-even point. The Rice Care Center and Rice Home Medical are operating in the black, but the hospital itself, by far the largest Rice entity, has sustained operating losses in four out of the last five years.
All of this means expenses -- especially for hospital staffing, the single largest expense category -- will need to be monitored closely, said Bill Fenske, chief financial officer.
For the past couple of years, the hospital has been responding to the declining census by ramping down staff hours, he said. The new model will take the opposite approach: staffing at a basic level and then ramping up to meet demand.
"Our goal is that we're going to try to get in front of this declining census," Fenske said. "That's one of the big changes that we've put in here. ... We're really going to be tight on that and we're going to be watching that. It's critical we really get our operating costs in line to where our targets are."
Increases are projected next year in surgery and rehabilitation services, but volume for the rest of the hospital's services is expected to stay mostly flat.
It's been a difficult year for the rest of the hospital industry as well, Fenske said, noting that many of the main industry benchmarks have been adjusted downward to reflect what hospitals have been experiencing.
"I think we've all seen the tough sledding we've had. Others are having that too," he said.
Rice Hospital and its associated entities -- the Rice Care Center and Rice Home Medical -- are projecting $191.6 million in gross patient revenue in 2011. But by the time insurance discounts and other contractual allowances are applied, the net revenue the hospital, the nursing home and home medical retail outlet actually receive will be about half this amount -- an estimated $99.3 million.
The Rice organization is projecting $101 million in total operating expenses next year, about $200,000 less than this year.
The addition of $705,000 in non-operating revenue, mainly from investments and joint ventures, will leave Rice with an anticipated $1 million return at the end of 2011.
Adjustments to staffing levels and hours are expected to result in 25 to 30 fewer full-time equivalents at the hospital next year.
About half of those adjustments were already made this year, Schramm said. "The majority of it was through attrition," he said.
There have also been some layoffs and reductions in hours, he said. Departments throughout the hospital have been affected.
Rice has always adjusted its staff levels up or down in response to patient volume, but this process has become much more tightly managed, Schramm said. "We're just going to have to continuously monitor our activity level and set staffing levels accordingly."