Rice Hospital in Willmar, Minn., notches up a good financial year, but faces challenges ahead
WILLMAR — Rice Memorial Hospital has seen steady improvement in its balance sheet and overall fiscal strength in the past five years, putting it in a favorable position to weather the future, auditors told the hospital board’s finance committee on Friday.
Rice ended 2012 with a net profit of about 2 percent on total operating revenue of $100 million, according to the annual audit. The Rice organization includes the hospital, the Rice Care Center, Rice Home Medical and the Rice Health Foundation.
Dan Vandenberghe of McGladrey said the city-owned hospital’s financial performance last year was “pretty remarkable.”
“It’s a strong position to be in today as we look at all the uncertainties in health care… It shows a lot of good operations and restraint on the spending side,” he said.
In spite of a continuing decline in patient volume, Rice has been producing cash on its operations, Vandenberghe said. “Those are all signs of a healthy organization.”
Members of the hospital board finance committee will recommend acceptance of the annual audit by the full board when it meets on Wednesday.
Michael Schramm, Rice chief executive, said the board also will begin discussing the hospital’s strategic plan for 2013 and how Rice can prepare for what are likely to be significant payment changes in the next several months.
There’s continuing pressure to ratchet down the reimbursement rate for Medicare and Medicaid, which together account for more than half of the hospital’s volume, he said. Private health plans also increasingly are looking for ways to reduce what they pay for hospital care, with a growing emphasis on quality and outcomes rather than straightforward payment for procedures.
“Reimbursement is not going to go up. It’s going to continue to go down,” Schramm said. “We’re going to have to look at ways to make sure we can continue to be effective and efficient in how we provide care.”
Hospital leaders have spent countless hours in the past few years on wringing as many efficiencies out of the system as possible, from how the inventory is managed to how the revenue cycle can be improved.
The results of the 2012 audit indicate these efforts are paying off, Schramm said. “We’ve really been working hard internally… The trends are moving in the right direction.”
But there’s still work to be done, particularly on the hospital’s cost structure, he said. Hospital officials also must continue to analyze and assess hospital services, with a focus on how well they meet community needs and whether some could be structured differently, he said.
Vandenberghe and auditor Jeremy Zabel of McGladrey warned finance committee members Friday that in light of ongoing payment reform, Rice Hospital may have some money-losing years in its future.
“There’s a tremendous amount of change going on right now,” Vandenberghe said.
Maintaining a good financial performance and a strong balance sheet will be key to helping Rice weather what’s ahead and take on new initiatives, Rice officials said.
“There’s just no doubt in my mind we’re going to need cash at some point in the near future to get from where we are as a volume-driven organization to a value-driven organization,” said Bill Fenske, chief financial officer.
Several initiatives are already underway, including plans to renovate the medical imaging department and conduct an assessment of the hospital’s overall facility needs, Schramm said.
“There’s always something else on the horizon,” he said. “We’re in a capital-intensive industry. We have to have a strong balance sheet and a strong cash position to fulfill our mission.”