Archive for Monday, November 24, 2008

LMH approves budget with weak economy in mind

November 24, 2008

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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.”

Comments

Cait McKnelly 6 years, 5 months ago

There are several things I find troubling about LMH. One is in a related article about a proposed "rooftop garden". We are in very uncertain economic times where record numbers of people are going without health insurance. Is this really the time to be spending thousands of dollars on "beautifying" the hospital? There are other things in this specific article that trouble me. They are raising the rates 5% on those very people that can't afford it; the uninsured. They say they are doing so to "offset inflation". Are they in turn going to cut rates when the dollar deflates instead? Not only is that a very real possibility, in some sectors of the economy it's already happening. Just go to the local grocery store and look at the price of milk and eggs.I would also like to say that 8 million for "charity care" is a joke. LMH doesn't have charity care. If you don't have a job you qualify for Medicaid and as far as the hospital is concerned if you do have a job, even one that only makes 10$/hour, then you can make payments. Period. End of story.LMH is supposed to be a nonprofit, community hospital but all I see in this article is their concern for the bottom line. They raise rates 5% to "offset inflation" but only gave a 3% raise to their employees. If their 5% is a correct prediction then in the end their employees are going to take a 2% pay cut just for the privilege of working there.Good going LMH. (/sarcasm)

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