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Rice Hospital earns net profit for 2008

WILLMAR -- The financial picture at Rice Memorial Hospital is brightening slowly but steadily.

According to its official audit, the city-owned hospital earned a net return last year of just under $1 million. Its cash position also has improved significantly.

Members of the finance committee of the hospital board of directors reviewed the numbers Friday. The audit report goes to the full board April 14 for its approval.

"It was a pretty good year overall," said Darryn McGarvie of the Larson Allen auditing firm.

Mike Schramm, chief executive of Rice Hospital, called it good news after two years in a row of an anemic financial performance.

"We're seeing some progress. Most of the ratios are trending in the right direction," he said.

The hospital and its associated entities, the Rice Care Center and Rice Home Medical, collectively earned a net margin of $962,000 on $91.2 million in gross revenue.

Total assets, including cash and investments, grew from $113 million in 2008 to $116 million last year.

One especially telling statistic: Net revenue from providing services to patients rose by 5.2 percent.

"That's the highest it's been in four years. That's what helped fuel the operating margin," McGarvie said.

As Rice puts some new strategic initiatives into place in upcoming months, hospital officials hope to continue the upward trend.

"We want to see continued progress," Schramm said.

There'll be some challenges, though. Although outpatient volume is rising, inpatient numbers are shrinking -- and at a rate faster than projected.

Rice was $657,000 in the red at the end of February after two money-losing months in a row. Preliminary numbers for March look better but it'll take a sustained positive performance to break even and move ahead, said Bill Fenske, chief financial officer.

The hospital's budget had projected an inpatient census of around 40 in January and February but actual numbers fell far short, he said.

"We ended up only in the low 30s. That's a real hit to us in terms of what we projected and how we staff," he said. "It's a lot harder to adjust staff downwards."

"We need to be able to react to those fluctuations in volume," Schramm said.

Rice's executive team is taking a look at the numbers, department by department, and putting together a plan for how to adjust staffing and expenses.

"That's what we can control," Schramm said. "The expense side is where we're going to continue to be focused. The strategic initiatives will help over time."

An even bigger unknown is the impact of the federal health care reform bill.

The hospital industry and consultants are still reading the entire 2,000-page bill and trying to figure out how hospitals will be affected, McGarvie said. "We've got people doing research on that pretty much nonstop."

Health care providers can expect to be paid less, however, Schramm said. Along with reductions in the Medicare reimbursement formula, the numbers likely will rise of patients on Medicaid and Medicare, both of which already pay hospitals less than their actual cost of doing business.

"That's just reality. That's what we're going to have to deal with," Schramm said. "It will be a challenge for us to react to that."

Anne Polta

Anne Polta covers health care, business/economic development and general assignment. Her HealthBeat blog can be found at Follow her on Twitter at @AnnePolta.

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