Hospital hears turn around report from Quorum

Wednesday, March 1, 2017

On Jan. 30, during his review of hospital finances for the board's finance committee, Mike Harbor, chief financial officer said, "While the covenant we have with our bond holders requires us to have 70 bond days cash on hand, we ended December with 23.6 days."

Turning towards the three board members on hand at that January meeting, Herb Winters, associate vice-president of Quorum Health Resources said, "NRMC needs to attain the 70 day level by June 30. Tomorrow night, we will present a plan to address the revenue side and better control spending as well as address management of accounts payable and accounts receivable."

The next night, no such plan was discussed in the board meeting.

At Monday's finance committee meeting the group was told Bill Donatelli, Quorum Western Division Vice-President would be on hand during Tuesday's board meeting to provide analysis and a progress report.

From the end of December to the end of January, the number of bond days cash did go up, from 23.6 to 23.7.

But this time a plan was provided.

Addressing the board Tuesday, Donatelli said, "Since November, we've been working with your leadership team to identify and quantify 10 key strategic initiatives. Four of these will rebalance your cost structure with the other six increasing your patient volumes and with that, your revenue."

And the goal?

"The first quarterly goal is to get your EBIDA to $150,000 month," said Donatelli. "This will provide you with the kind of revenue which will cover all your basic costs on a consistent basis, including your bond days cash on hand."

EBIDA is earnings before interest, depreciation and amortization. This is a conservative measure of the earnings of a business.

Achieving a certain level of revenues is not enough if costs are high. A consistent EBIDA level means revenues are high and costs are contained.

The four cost rebalancing measures include keeping employee productivity levels high, renegotiate contract and service agreements, reduce travel expenses and reduce staffing costs in the Behavioral Health Unit.

"While there are some savings to be had here, especially in some of the service agreements and by keeping your docs in the BHU, the biggest bang will come from volume and revenue growth," said Donatelli."

These initiatives include improvements in revenue from better doctor charting so higher charges are received, growing the Behavioral Health Unit, growing cardiology services, taking full advantage of the new rural health clinic at the old Lovinger Building and so, instead of earning $50 for a Medicare visit, the hospital receives $137. Further initiatives include greater use of the federal program, which gives medications to hospitals at significant savings and promoting education so diabetics can better manage their health, and reduce problems.

The Quorum vice-president said his team was working on setting goals for each of the ten initiatives. Then, with the hospital leadership, teams will be formed to work on each goal and develop specific plans and timelines.

However, Donatelli continued. "Those of you who've been around a while are probably like me. You're tired of trying to just meet that 70 bond cash days level and look no further than one year at a time."

Once that level of EBIDA revenues is achieved, there must be no rest but a new plan must be ready to go to take the hospital to where it really needs to be.

"While the $150,000 level will cover your basic costs, it will not meet your long term needs such as for large equipment or remodeling of your building," said Donatelli. The next goal will be for this hospital to generate the kinds of revenue so you can handle those larger, long term expenses."

The board was told specific goals should be prepared within 30 to 45 days. Once they have been prepared, they will be shared with the board and plans can proceed.

As to not meeting the 70 bond days cash on hand requirement, Kevin Leeper, NRMC Chief Executive Officer said, "Unless for some reason a large check comes our way, we will not meet that goal. But if we can show the bond trustee that we have a solid plan, are implementing it and seeing early results, I think they will work with us."

With Donatelli came Eric Jones, whose specialty is finance. Donatelli and several others regular work with Leeper and Harbor.

Said Donatelli, "Eric is a fresh set of eyes and he's already pointed out several things I might have missed."

Jones added, "I should put this in context for you. I work with several other hospitals. You are trying to get to 70 bond cash days on hand but I'm also working with one that is working hard at getting to 7 bond cash days on hand. Yes, this hospital has real problems but you are not about to go under, not now or in the immediate future. And I am serious when I say I see a lot of real potential for this hospital.

Harbor reported January's monthly loss totaled $233,000 but added, "The hospital has been pretty full all February and so I'm expecting a month from now to report on a month when we are in the black."

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