Board: Rework ailing budget

By Matt Kelly

Medical Center officials will rework their budget after a lower-than-expected bot-
tom line in the quarter that ended Sept. 30 and possible red ink in October.

Although firm numbers were not yet available, it appears that the Health System lost money in October, Larry Fitzgerald, associate vice president of finance for the hospital, told the Board of Visitors’ Health Affairs Committee at a meeting Nov. 15.

Board members William H. Goodwin Jr. and Thomas A. Saunders III advised Fitzgerald that it would be wise to recalculate a more realistic budget now, in light of the negative numbers.

In the quarter that ended in September, the hospital operated at a $2.3 million margin of revenues over expenses — which Fitzgerald said was not good, being $6.7 million under what had been forecast. Still, it was better than many similar institutions, hr pointed out. Patient days were up and net revenues increased compared to last year, but so did total operating expenses.

Fitzgerald blamed a 7 percent drop in admissions to the hospital’s turning away patients earlier in the year because there was no room, producing a lingering effect on referrals.

Total expenses for the Medical Center, as of the end of September, were slightly below budget, but 12.6 percent higher than last year, with salaries and wages both over budget.

William E. “Nick” Carter Jr., the Health System’s chief operating officer, assured the board that managers are developing plans to have labor costs under control and in line with the budget by Jan. 1.

Board members were also treated to some good news about the hospital finances: a reduction in nursing turnover and an increase in bed capacity. Pamela Cipriano, chief clinical officer, said 28 percent of the nursing staff are temporary workers, which is a savings on benefits, but a greater expense for wages. She said 30 of these would be gone by the end of the year, replaced by permanent nurses coming into the system.

Carter said a performance improvement project has identified $30 million in cost containment and increased revenues to be achieved over the next two years. He said $19 million of that comes from added revenue, including reimbursements to which the hospital has been entitled but not pursuing.

In other business, the board reviewed a study on how other universities structure their relationships with their hospitals and their physician practice organizations, such as the Health Services Foundation.