LMH expected to hit $1B mark in 2019, but finances are tightening for the hospital

photo by: Ashley Hocking/Journal-World File Photo

The emergency entrance to Lawrence Memorial Hospital is shown in this Journal-World file photo from Jan. 26, 2018.

Lawrence Memorial Hospital is projected to become a billion-dollar entity for the first time in 2019, but despite the massive revenues, leaders are dealing with a tightening financial picture.

The 2019 budget approved by the board of LMH Health last week shows the nonprofit health system continues to take in far more revenue than it has in expenses, but a tight labor market and more aggressive contracts with health insurance providers are taking a toll on LMH’s bottom line.

“It is slowing down a little bit,” Janice Early, vice president of marketing and communications, said of the hospital’s financial performance.

In 2019, LMH is budgeting to have revenues exceed expenses by $13 million, but that is down considerably from an $18 million mark LMH posted in 2017. The budget document also projects that the health system will have about a $3 million budget shortfall this year.

Last year at this time, LMH leaders budgeted for the hospital to have revenues that exceeded expenses by $13.6 million. The hospital is now projecting to finish 2018 at about $10.5 million.

The slowdown hasn’t been the result of revenue declines. LMH Health is expected to bill for about $934 million in revenue in 2018, and is budgeting to cross the billion-dollar threshold — $1.04 billion — in 2019.

But expenses have been increasing at an even faster rate. The biggest expense is the amount of discounts the hospital must give as part of contracts it has with major insurance providers. The hospital is budgeted to provide $738 million in discounts in 2019, which is up almost 33 percent from 2017.

Early said a tight labor market for health care professionals is also driving up costs. The hospital has struggled to fill some positions, meaning it has had to turn to contract labor, which comes at a higher price. LMH is on pace to pay $4.9 million in contract labor in 2018, when it had only budgeted to pay $2.8 million. In 2019, LMH is budgeted to provide a 3 percent pay raise to all its employees in an effort to reduce turnover and aid in recruitment.

Early, though, said hospital leaders are still generally pleased with the financial performance of LMH Health.

“We are very fortunate that we are still growing, and I think that growth demonstrates the confidence and trust people have in our providers and the care we offer,” Early said. “But we also have to continue to grow to serve a growing community.”

As a nonprofit, LMH does not book traditional profits that are returned to shareholders. Rather, any revenues over expenses are kept by the hospital, and used for future projects or improvements.

The 2019 budget includes about $13.7 million in capital improvement projects, with a heavy dose of technology items related to billing, records and other issues. But the hospital also plans to complete a couple of major new health initiatives in 2019.

• A major remodel of the hospital’s Cardiac Catheterization Lab, or “cath lab,” will be completed next year. The remodel will include new technology that will allow the hospital to offer electrophysiology and other procedures used to treat and diagnose heart arrhythmias. Patients needing that type of treatment currently have to go to other facilities outside of Lawrence.

• A new integrated pain management clinic will be fully functioning by the end of 2019. The pain clinic will serve as a resource for other providers in town who have patients who are suffering from chronic pain. Early said the issue of effective pain management has become even more critical as the opioid crisis has become more severe.

Other figures from the 2019 budget include:

• The hospital expects to have about 1,530 full-time equivalent employees in 2019, up from about 1,465 in 2018.

• Outpatient revenue continues to dwarf the amount of money LMH receives from hospital stays. Outpatient revenue, which includes revenue from the host of medical practices owned by LMH, is expected to be about $813 million in 2019. That’s about 77 percent of LMH Health’s entire operating revenue.

LMH is building an approximately $100 million outpatient center in northwest Lawrence to capture more of that outpatient market. The center, which is near Rock Chalk Park, is expected to open in 2020.

• LMH is budgeting to provide about $16.7 million in charity care — services that patients can’t otherwise pay for — in 2019. That is up about 7 percent from projected 2018 totals.


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