photo by: LMH Health

LMH Health, 325 Maine St., is pictured in May 2021.

LMH Health is facing another budget deficit as 2023 draws to a close, but hospital President and CEO Russ Johnson is optimistic it won’t be as bad as the year-to-date numbers might indicate.

That was the message from Johnson at Wednesday morning’s LMH Health Board of Trustees meeting, during which he delivered some remarks about the hospital’s 2023 year-to-date financial performance. Much like last year, LMH Health is staring down a multimillion-dollar budget deficit entering the new year.

Johnson told board members that through October, LMH Health’s operating expenses total $296 million, about $5 million less than what hospital leaders predicted by this time in the 2023 budget. But “dramatic” challenges at the top end of the budget greatly offset that gap, Johnson said — net operating revenue is $17 million below its 2023 budget prediction.

Through October, the operations at LMH — including the hospital and its physician enterprises — have posted an operating loss of about $5.7 million, according to financial statements provided to the board.

“I think it’s important for leadership, it’s important for this team, it’s important for the budget, for the board to understand that we’re not out of whack because we have uncontrolled operating costs in this organization,” Johnson said. “We’re really managing those pretty effectively.”

A sizable chunk of those expenses are what Johnson called costs “related to people” — salaries for employees, benefits, clinician contracts and other similar expenses account for nearly $170 million in spending. But he said those costs are right around the amount the hospital has budgeted for.

There are other positive signs Johnson pointed out, such as that the hospital has brought on 400 new external hires and promoted almost 200 people from within the organization. Also, revenue for the month of November seemed like it would be close to what was budgeted, Johnson said, and that could mean there’s some progress before the end of the year in reducing the year-to-date deficit.

That optimism extends beyond the calendar year, too. The board of trustees on Wednesday also approved LMH Health’s 2024 budget, which is predicting that the hospital will have exceeded its operating margin by about $6.6 million by the end of next year, an anticipated 1.8% revenue over earnings. The budget accounts for roughly $369 million in operating revenue and about $362.5 million in expenses.

But that margin is about the same as the $6.1 million pre-audit budget deficit LMH Health faced at the start of 2023, which ended up being even higher according to a budget document shared with board members. The actual 2022 budget figures show that the hospital ended 2022 with a $7,453,557 budget deficit. And this wasn’t a new problem, either; the hospital was facing financial pressure at the end of 2021, too, a product of the labor challenges brought on by the COVID-19 pandemic.

Board chair Pat Miller at Wednesday’s meeting shared a statement about the “very challenging financial landscape” that still exists for hospitals across the country. Miller said the challenges for LMH Health include, in part, depressed operating margins, bad debt, workforce challenges and state and federal policy stressors like the lack of Medicaid expansion in Kansas.

That’s had a dramatic impact on both LMH Health’s 2023 bottom line and the 2024 budget recommendation, Miller said, but it hasn’t stopped the hospital from investing in improved patient outcomes.

“While the 2024 budget requires real and significant changes across the vast majority of our system, LMH’s priority is and will continue to be patient safety,” Miller said. “The opportunities for cost savings and reduction in overhead through efficiencies does not impede our sharp focus on patients.”

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In other business, the board met in executive session to discuss an investigation that was initiated several weeks ago after the hospital fired its recently hired chief financial officer.

As the Journal-World reported, Mike Rogers was removed from the CFO position after it was revealed that he was a convicted felon and legally changed his name last year and didn’t disclose those details during his hiring process. Rogers had been convicted of mail fraud in Oklahoma City in 2005 in a scheme involving the sale of football tickets, then arrested again in 2007 in Louisiana after being accused of illegally using hospital credit cards while employed as CFO at Franklin Parish Medical Center.

The investigation, called a “root cause analysis,” was conducted throughout the month of November. The board didn’t discuss the investigation or make any decisions related to it in its open, public session on Wednesday, but LMH Health spokesperson Autumn Bishop told the Journal-World Tuesday that more information would be coming soon. Bishop said hospital leadership would be working with legal staff to determine what information the hospital can share in a timely manner.

Johnson did comment briefly on the hospital’s CFO position, which has been vacant since Rogers was fired in late October, and said he’s confident the hospital’s financial staff will be OK as the search for a replacement continues.

“I have met with each of them several times — initially immediately but also in follow-up — just to make sure that we are in good order, and they are very confident in their ability to continue to do their work in revenue cycle, in our finance side and supply chain, etc.” Johnson said. “While that’s an important role and we’re going to continue to work with our national recruiting firm to fill it, we don’t need to feel anxious about it. We aren’t in a hurry, and we weren’t in a hurry, and we’re going to take our time and make sure we fill that role thoughtfully.”