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Rice keeps close watch on expenses as operating deficit rises

WILLMAR -- Rice Hospital officials are closely watching expenses as the city-owned hospital struggles with a deepening operational deficit.

Although outpatient volume is strong, inpatient numbers continue to decline and revenue has declined along with them, officials said Friday.

"This is where we're really seeing some huge negative tr-ends," said Bill Fen-ske, chief financial officer.

As of April 30, Rice had accumulated an operating loss of more than $660,000 on $27.1 million in total operating revenue.

The loss is cushioned by income derived from the hospital's joint ventures and by the earnings of the Rice Care Center and Rice Home Medical, both of which are performing well financially. When non-operating income is factored in, the Rice organization as a whole managed to post a profit of nearly $18,500 for the first four months of this year.

But although the non-operating revenue helped push Rice into the black, profits still lag well behind budget.

"The hospital is in a very difficult position," Fenske said Friday during a meeting of the hospital board finance committee.

The financial situation "is not where we'd like to see it," agreed Mike Schramm, chief executive of Rice.

He and Fenske said the executive team is concentrating on ways to hold down operating costs.

"We continue to be focused on the operational side of things," Schramm said. "We've had meetings with our administrative team. We've continued to look at ways to make adjustments to get back in line."

Officials are taking a number of different approaches, he said. "We're kind of looking at anything and everything."

One such strategy is to tighten the revenue cycle so that bills are issued quickly and accurately and paid sooner. Another is to manage inventory and supplies more closely.

Officials said Friday they're also looking at staffing levels.

The challenge has been to manage the peaks and valleys in the inpatient census and to respond appropriately, especially when inpatient numbers are low, Schramm said.

"We continue looking at our core staffing. We don't want to be too high or too low," he said.

Some hospital services remain strong. Same-day surgeries and emergency-room visits are running ahead of projections this year. But inpatient admissions have fallen 20 percent behind budget. The adult health unit has been hit particularly hard, in part because the number of inpatient surgeries is more than 15 percent behind this year's budget and almost 19 percent lower than last year.

Hospital officials are hopeful the picture will begin to brighten. The addition of a new orthopedic surgeon at Affiliated Community Medical Centers in mid-April should help boost the number of inpatient surgeries as the months go by, Schramm said. "The schedule is really filling up."

Rice also adopted a new strategic plan in December that will eventually result in new and expanded services, allowing the hospital's revenue to grow.

In the meantime, though, the focus will continue to be on controlling expenses, Schramm said.

The next two to three years likely will remain challenging, he said. "It's just a tough time. The expectations are still there to provide the full array of services even when reimbursement is going in the wrong direction. We've got to continue to look at ways of being effective and efficient in how we provide care for patients."

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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