Lawrence Memorial Hospital leaders recently approved a 2009 budget that reacts to a weakening economy.
It anticipates a profit of $8.7 million, down 25 percent compared to the $11 million projected for this year, and down 38 percent from 2007’s profit of $14 million. Rates are also going up 5 percent.
“Our revenue environment for the last two or three years has been very soft — just barely growing,” said Chuck Heath, finance committee chairman. “We operate on fixed-rate contracts with our payers, so there’s not a lot we can do to elevate and grow faster.”
Meanwhile, LMH is dealing with an increase in interest and depreciation costs associated with approximately 100,000 square feet in new construction and 35,000 square feet in renovations.
“That is a substantial and significant expansion. Our utilities are going to go way up and we haven’t captured revenue to the full extent yet,” Heath said.
“So, it’s a combination of a soft revenue environment and a new project. I guess you could cynically say, ‘Build and they will come and they are not coming yet.’ But, they will.”
LMH anticipates $159 million in revenue, up 5.7 percent over this year’s projected numbers. It also expects to earn $2.2 million in interest, down 25 percent from this year. It expects inpatient activity to increase 2.7 percent and outpatient volume to rise 4.7 percent because of new physicians and services.
The hospital is raising its rates 5 percent to offset inflation.
Expenses are expected to climb to $152 million, up 7.6 percent or $10.8 million. This includes a 23 percent increase for utilities. Maintenance fees, which includes technical support, are expected to increase 47 percent while medical and surgical supplies are predicted to cost 9 percent more.
Salaries and wages are expected to cost $53 million in 2009, slightly less than the numbers expected this year. That’s because full-time employees received a rare $500 bonus in the summer for dealing with the construction. The board approved a 3 percent raise for all employees in 2009.
The budget also includes contributions of $8 million for charity care and in-kind services donations, which is an increase of 19 percent.
Capital costs are predicted to rise 16.8 percent.
Total capital equipment purchases for next year are projected at $9.9 million. Major capital purchases include:
• $1.4 million for Alaris “Smart” Intravenous pumps that can integrate with the hospital’s electronic medical record system.
• $3.1 million for equipping the new surgery expansion project, which is scheduled to open in March.
• $425,000 for a digital radiology room.
Heath said the hospital is financially secure and predicts it will continue to make strides in the coming year.
“Even with the decline in our bottom line, our profit margin is still double — it’s more than double — what hospitals of our credit quality and ranking are making,” he said. “We still have ample cash to meet the overall mission of bettering health care for the community.”