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Hospital might end year with a deficit

WILLMAR -- In spite of $3 million in budget cuts this past August, there's a chance that Rice Memorial Hospital may end the year with a deficit, officials said Friday.

"I think we may end up in the black but there's just as much chance we're going to be in the red. It's a close call for us," said Dale Hustedt, interim chief executive of the city-owned hospital.

The hospital's financial statement for August -- the most recent complete report available -- was reviewed Friday by the finance committee of the hospital board.

It shows that inpatient volume and revenue continue to lag behind projections. As of Aug. 31, the hospital had a net loss of $700,000 for the year.

Preliminary figures for September look better, but the next three months will be critical if the hospital is to meet its financial goal of earning at least a 1.5 percent return for the year, Hustedt said.

"You hope your (patient) volumes will be there but you can't control those," he said.

The impact of the $3 million worth of cutbacks will start showing up in September, said Bill Fenske, chief financial officer.

They included the discontinuation of two chronic-disease management programs for diabetes and congestive heart failure, and the layoff of 13 people. Some staff positions also had their hours reduced, and the hospital's coffee shop was shuttered.

Hospital officials reiterated Friday that what they're seeing is likely a cyclical adjustment that's happening industry-wide.

"Volumes are down everywhere, especially on the inpatient side," Fenske said.

"What I'm hearing from everyone else is exactly what I'm seeing here," Hustedt agreed.

What's different this time, though, is that the decline in patient volume is much more sustained.

"We've had a real paradigm shift in our business that's taking a few years to adjust to," Fenske said. "I think we're in the midst of adapting. We've reduced net expenditures but you just can't catch up fast enough."

He said the hospital also has seen a shift in payer mix as Medicare and Medical Assistance make up a growing proportion of hospital volume. This is resulting in larger discounts and contractual allowances, which in turn are eroding the hospital's net revenue.

Fenske said it has been "a real kick" to the hospital's bottom line.

"This unfortunately has become a consistent theme this year," he said.

Bright spots in the picture are the Rice Care Center and Rice Home Medical.

The Rice Care Center, the hospital-owned nursing home, is operating at a slight profit this year. Rice Home Medical, a durable medical equipment company owned by the hospital, is having an exceptionally successful year, with profits running more than twice as high as anticipated.

Willmar Medical Services, the joint venture between Rice Hospital and Affiliated Community Medical Centers, also is performing ahead of budget expectations, Fenske said.

Through Willmar Medical Services, the hospital and Affiliated hold equal shares in operating the Willmar Surgery Center same-day surgery service, medical imaging services, cancer care and -- as of this month -- outpatient diabetes education and management.

Although Willmar Medical Services is only 10 months old, it appears to be a beneficial arrangement for the hospital, Fenske said.

"The joint venture has helped Rice's financial position," he said.