WILLMAR -- Rice Memorial Hospital expects to earn $97 million in net revenue next year, spend $95.8 million in operating expenses and end the year with a profit of just under 2 percent.
The figures are contained in the city-owned hospital's 2008 budget, which was adopted unanimously Wednesday by the hospital board of directors.
The budget -- which includes a 5 percent price in-crease -- goes before the Willmar City Council this coming month for final approval.
It contains financial targets for strengthening the hospital's fiscal health slowly but surely, according to Bill Fenske, chief financial officer.
Rice Hospital has spent most of the past year recovering from a record $2.1 million loss in 2006. It was the third time in the hospital's 70-year history that it has lost money. Hospital officials have attributed the red ink mainly to declining patient volume.
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Finances this year show signs of recovery. Fenske projects the year likely will end with a $1.2 million profit, the equivalent of a 1.3 percent return.
Next year's budget should help consolidate these gains, he said Wednesday.
"I think it's a realistic budget but we're going to have to stick really close to the numbers in order to get there," he said. "We're going to have to push."
"I think this is very optimistic but probably doable," agreed board member Dr. Rob Kruger.
Fenske said the long-term goal is to move the hospital toward an annual profit margin of 3 to 4 percent.
"That's where we need to go but it's going to take a few years to get there," he said.
Projections for 2008 call for inpatient admissions to remain mostly flat. The behavioral health unit is expected to see more patients, however, with the addition this year of more psychiatric coverage.
The hospital also has seen rising numbers of surgery cases since the summer, and has built a 3.5 percent increase into next year's surgery volume.
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"That has a big impact to us because it's a high revenue-producing area," Fenske said.
Among outpatient programs, the Rice Rehabilitation Center has been growing the most dramatically. Patient numbers also are expected to grow in the hemodialysis and radiation therapy programs.
The hospital plans on spending $7 million next year in capital improvements.
Among the projects on the list: construction of a larger canopy to shelter the main entrance and the development of a new data center.
For the hospital's 800 employees, 2008 is likely to be a kinder and gentler year than the past two years. Employees had their wages frozen in 2006, then underwent the layoffs of 17 people, primarily in non-patient care services, this past February.
Pay increases of 3 to 5 percent have been included in next year's budget. And although the number of full-time equivalents still must be slightly reduced, Fenske said this likely will be accomplished through normal attrition.
