Archive for Friday, February 21, 1997


February 21, 1997


The year-end financial report at Lawrence Memorial Hospital carries no red flags, but warnings can be found between the lines.

Lawrence Memorial Hospital finished 1996 with a net income of $2.08 million -- $1.54 million less than anticipated.

The difference, however, wasn't due to a lack of patients.

The budgetary news was delivered this week by LMH's chief financial officer, Dean Strathmann, and contained in a year-end fiscal report.

The hospital brought in $65.8 million in patient revenue for the year -- about $5.7 million more than projected.

More than $3 million in unexpected expenses, however, brought profits down. Higher supply costs and writeoffs from fixed-fee payments are mainly the reason for added expenses. That includes Medicare reimbursements that don't nearly cover what the hospital pays to treat a patient. For example, Strathmann said Medicare doesn't cover the cost of a prosthesis, such as a pacemaker, let alone associated costs involved in treatment, from salaries to a hospital stay.

"The primary concern to me as we closed out this year is that our operating margin is down substantially from the past," he said.

Dr. David Fortin, LMH chief of staff, said the gap in costs versus reimbursements is a dramatic example of the financial environment in which the hospital operates.

"There are probably a lot of people out there who don't understand the reality of the situation," Fortin said.

Ray Davis, chairman of the hospital's board of trustees, said the financial report didn't offer up any surprises, but it reflects a shrinking of the total financial resources of the hospital.

"We need to be careful, because the future is probably going to be unlike the past," Davis said. "If we're going to be careful financial stewards for the hospital, we need to be sure we don't get into a situation where we're trying to do things at the same time our reimbursements from whatever source doesn't meet costs.

"The real dilemma for any hospital is trying to improve quality care without spending more money than you can take in," he said.

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