photo by: Ashley Hocking

A sign at the entrance to Lawrence Memorial Hospital is shown on Jan. 26, 2018.

As Lawrence Memorial Hospital prepares for one of its largest expansions in history, the hospital is still making money in 2018, but not as much as its leaders had expected, board members were told Wednesday.

Through the first five months of the year, LMH’s net operating income is about 52 percent — or about $2.5 million — below budget, according to financial reports shared with the hospital’s board of trustees.

The shortfall hasn’t created a crisis at LMH because the hospital still is solidly profitable. LMH — which technically doesn’t list a profit because it is a nonprofit entity — has posted revenues that have exceeded expenses by $2.2 million through May. But the hospital’s budget called for revenues to exceed expenses by $4.7 million.

Hospital leaders said steps were being taken to try to reduce expenses at the hospital.

“We are looking real closely at all of our expenses,” Joe Pedley, chief financial officer, told the board. “We are working with suppliers to try to get some better pricing.”

The number of patients the hospital treats continues to be strong. However, the amount of money the hospital is getting from insurance companies for those treatments has begun to change in ways that aren’t favorable to LMH. A larger percentage of its patient base is on Medicare than in past years, and Blue Cross Blue Shield of Kansas has made some changes to its payment methods, as well, Pedley said.

LMH’s net patient revenue actually is exceeding budget estimates by about $1.5 million, or about 1.3 percent, thus far in 2018. But expenses have exceeded budget by a much larger rate. Total expenses are over budget by nearly 4 percent or about $4 million.

The budget shortfalls come at a time when the hospital is undertaking a $93 million outpatient medical building near Rock Chalk Park in northwest Lawrence. The hospital’s recent financial results are not expected to slow the project. Board members were told that dirt work for the building — which will include a physical therapy center, a breast center, outpatient surgery suites and a host of doctor’s offices — is expected to begin in July.

The project has received its approvals from the Lawrence-Douglas County Planning Commission. It is awaiting some administrative approvals from city planning staff. A formal groundbreaking ceremony likely will be in late August or early September, board members were told.

In other news, the board:

Received a report about future mental health care initiatives at the hospital. Russ Johnson, president and CEO of LMH, praised continued cooperation between the hospital, the county, Bert Nash Community Mental Health Center, and many other service providers. For instance, he said the hospital’s emergency room is now making 60 to 70 referrals per month to DCCCA, which provides substance-abuse treatment.

“We can’t declare any victory yet, but I guarantee you in two or three years that it is going to be a remarkable coalition,” Johnson said. “I can feel it. I know it will be.”

Johnson also acknowledged that there has been some community discussion about whether the hospital can play a larger role in funding behavioral health services. Johnson stopped short of making any funding commitments, but said he expected new funding models to be discussed by the various groups working to improve mental health care in the community.

“We are building a stronger framework around funding,” Johnson said. “It must be adequate, equitable and sustainable. It can’t be funding that somebody feels good about this year but maybe doesn’t the next year. You can’t build infrastructure that way.”