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Rice Hospital in Willmar, Minn., starts tackling financial challenges

WILLMAR -- Leaders at Rice Memorial Hospital are looking for ways to tighten the hospital's cost structure, starting with an effort to pare expenses in each department by 2 percent in upcoming months.

It's the beginning of a cost-centered initiative that will unfold over months and probably years, said Mike Schramm, Rice chief executive.

"It's going to be a multi-year plan," he said.

Plans for improving Rice's financial performance were outlined Thursday to the hospital board finance committee.

Hospital leaders want to position the city-owned hospital as best they can for changes in reimbursement that will be based on value -- quality of care, outcomes and patient satisfaction -- instead of the traditional reliance on patient volume and number of procedures. This shift will begin taking place at U.S. hospitals within the next year.

More immediately, Rice needs to recover from a slow start to the fiscal year that has left it with a $1.2 million net loss as of April 30. Although operating expenses have remained well within budget, fewer patients are coming to the hospital and revenue has fallen short of projections.

"We continue to monitor operationally where we are," Schramm said. "There's no question we've got work to do relative to our cost structure."

Department directors across the Rice organization, which includes the Rice Care Center and Rice Home Medical as well as the hospital, were asked recently to find 2 percent in cost savings in their department over the next several weeks.

The cutbacks are in actual costs being incurred, said Bill Fenske, chief financial officer. "We feel that is a better way of going at our problem vs. cutting projected costs."

Staff levels are constantly monitored.

"We're being diligent about scrutinizing (full-time equivalents) and positions as they come up. Do we need to fill it? Does it have to be full time?" Schramm said.

A management position in health information systems, for example, has been left unfilled for now, and the hospital decided not to fill a vacancy for a part-time registered nursing supervisor, he said.

Hospital officials also continue to assess all the services the hospital provides and which areas are a priority, Schramm said.

Discussions are promising for a joint venture in anesthesiology and sleep medicine services with Affiliated Community Medical Centers. The merging of the two services between Rice and ACMC has already been approved in concept but hit a snag during contract negotiations with certified registered nurse anesthetists.

The parties are now back at the table, Schramm said Thursday. "We've made significant progress. We believe we have the framework of a deal that will work. We believe this is one way we can work across the medical community to avoid duplication and enhance quality."

Rice also is looking at ways to enhance and regionally expand its nephrology services, and is taking a similar look at its mental health services.

Finally, the hospital is embarking on a comprehensive study of its space needs. The result will be a master facility plan for the most efficient use of hospital space, taking into account the trends in volume for each service and the continuing shift in care from the inpatient to the outpatient setting.

The hospital needs to prepare itself for surviving financially on the level of reimbursement Medicare will offer, Schramm said.

Education has already started with department heads on what this will entail, he said. "It's helpful to them to understand what this means and what it'll mean in the future. It doesn't give us the answer but it does point us in the direction of where we need to go and where we need to focus."

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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