WILLMAR -- Rice Memorial Hospital is proposing a 2012 budget described by hospital officials as both conservative and realistic.
It calls for patient volume to remain essentially flat next year and to end the year with a relatively modest 2 percent operating margin.
Members of the finance committee of the city-owned hospital reviewed the budget proposal Friday and voted to recommend forwarding it to the full hospital board, which meets next week.
"We feel comfortable with this budget and where it's at," said Mike Schramm, Rice's chief executive. "We put a lot of time and effort into this."
The budget outlines the hospital's expectations for revenue, spending, profit margin, patient activity and staffing levels for the next year.
Projections are for $102 million in operating revenue and just under $100 million in net operating expenses for the entire Rice organization, which includes the hospital, the Rice Care Center nursing home and short-stay rehabilitation unit, and Rice Home Medical, a durable medical equipment retail supplier.
It's anticipated the hospital will end the year with a $2 million return on operations, plus another $1 million in non-operating revenue, mainly from joint ventures.
These numbers are cautious but achievable, said Bill Fenske, chief financial officer.
"We're going to be very conservative with our volumes and we're going to work very hard every single day to make it happen," he said.
Hospital officials hope to build on this year's financial performance, which is shaping up to be the best in at least five years.
Rice is currently on track to end the year with a 4 percent overall margin, which translates into a $5.6 million return on $100.4 million in total operating revenue. Several factors are at work, starting with patient volume, which has taken a turn upwards after a prolonged and steady decline. The hospital also has implemented leaner staffing patterns and revised its cost structure to promote as much efficiency as possible.
"We've made lots of adjustments and pared out over $2 million in costs over the last two years," Schramm said.
With core staffing, the hospital has been able to increase staff hours and call people to work when volume goes up, rather than trim hours in response to low volume, Fenske said. "We wanted to try and get in front of this. ... Volumes are up in a lot of areas from where we thought they would be, and now we're chasing the volume, which is a much better position to be in."
Although the hospital's inpatient census has averaged 37 patients a day this year, hospital officials decided to be conservative and based the 2012 budget on an average daily census of 33.
To set it any higher would be "unrealistic, based on the pressure we're going to continue to expect with reimbursement," Schramm said.
Next year's budget includes a proposed price increase of 3 percent. This is lower than the 5 percent rate increases that have been approved each year since the early 2000s.
Rice also anticipates adding $5.2 million in positive cash flow to its books next year. Several initiatives are on the horizon, including the potential addition of more cardiology services, and having excess earnings will allow the hospital to plow this money back into patient care.