photo by: LMH Health

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

LMH Health leaders on Wednesday approved a 2022 budget that makes a big bet that the nonprofit hospital has gotten a lot healthier financially in the last couple of years, despite the pandemic.

LMH board members approved a budget that calls for the hospital and its affiliated businesses — doctors offices and other such facilities — to have revenues that are about $5 million greater than expenses in 2022.

Compare that with 2019 — the last year the hospital operated without impacts from the pandemic — when the hospital posted an $8.7 million loss. Add it all up, and the hospital is projecting about a $14 million positive swing in its bottom line from 2019.

Deb Cartwright, LMH’s chief financial officer who began with the organization at the end of 2019, said LMH has become more efficient in its operations since then, plus it has been working to get better contracts with insurance providers, as evidenced by the recently concluded negotiations with Blue Cross Blue Shield of Kansas, where LMH contemplated dropping out of the state’s largest insurance network if it could not get paid better rates.

“That’s helping a little bit, but I can’t really say much more than that,” Cartwright said of how much the new BCBS of Kansas contract is helping with the hospital’s 2022 budget.

Although parts of the negotiations played out in public as area residents worried whether their BCBS of Kansas plans would be accepted at Lawrence’s only hospital, both LMH and BCBS of Kansas have declined to release the financial details of their new deal that keeps LMH in the BCBS of Kansas network for at least three years.

The 2022 budget will be a key one to watch for LMH because it will be the first one in the last two years that likely will not include a multimillion-dollar infusion of cash from the federal government to help offset impacts from COVID-19.

LMH has received about $2.5 million in federal COVID money this year, but Cartwright is budgeting for no such federal funds in 2022. In addition to the better insurance rates, Cartwright said LMH should benefit from a better billing system that more accurately reflects the services that the hospital is providing. That should result in more accurate invoices being sent to insurance companies or patients for payment.

That system includes a new patient portal that the hospital hopes to launch before the end of the year, which will make it easier for patients to see their charges. It also will involve ending a contract with an outside vendor for part of LMH’s billing operations and bringing that work in house.

“We really have pivoted since 2019 to have fewer consultants who aren’t in Lawrence or Kansas working for us,” Cartwright said. “We have been self-performing more work.”

While the hospital has made some changes since 2019, it also is facing a couple of new challenges: inflation and a labor shortage.

“Inflation is really the biggest trick to this budget,” Cartwright said. “We’ve tried to make assumptions that are appropriate.”

LMH is budgeting expenses to increase by about 7.5% for the year, with employee wages and salaries seeing some of the largest increases. That line item is expected to grow 9.4% to about $151 million paid in wages and salaries in 2022.

Cartwright said part of that increase includes a budgeted 3% across-the-board wage increase for virtually every LMH employee. That increase likely will be presented to the board for approval in December and would begin in early 2022.

The hospital also is budgeting for about 100 new positions compared with this year, but Cartwright said those are mainly positions the hospital has previously had but that recently have been filled by temporary contract workers due to labor shortages.

Whether those labor shortages will subside is a big question for the next year, she said.

“It is both recruitment and retention,” Cartwright said of the challenges LMH is facing in the labor market. “There is so much competition for people. We want our staff to feel great about coming to work. We want them to feel as appreciated as they really are, but that is tough to do with some of the constraints we’re facing.”

Here’s a look at some of the numbers in the approved 2022 budget:

• Net patient revenue, the hospital’s key metric, is expected to grow by 9.5% in 2022 to about $337 million. However, most of that growth is expected to come through better billing and better insurance rates. Cartwright said inpatient hospital revenues are expected to grow less than 2% for the year.

• LMH’s operating profit is budgeted to be $3.4 million in 2022. That reflects how much more the nonprofit hospital expects to receive in revenue for services than it spends to provide those services. In recent years, that number has been much less. Through October of this year, the hospital is operating at about a $500,000 loss. In 2020, the hospital posted a $10.5 million operating loss, and in 2019 it posted a $15.8 million operating loss.

• LMH also has a significant amount of non-operating revenue, which recently has included federal COVID relief funds, and also includes investment gains the hospital receives from the millions of dollars it has sitting in reserves. When those non-operating revenues are added to the mix, LMH is budgeting for a $5 million bottom-line gain in 2022. That is actually down a bit from where LMH may finish 2021. Through October, LMH has posted a $7.6 million gain, with most of that coming from increases in the value of LMH’s investments.

“They are kind of paper gains at this point,” Cartwright said, since LMH has not cashed out of those investments.

• As a nonprofit, LMH reinvests any of its gains either in capital projects or to bolster the hospital’s reserve funds. LMH is budgeting to spend about $12 million on capital projects in 2022, down from about $12.5 million this year. Much of that money involves maintenance and equipment upgrades, but Cartwright said about $500,000 has been set aside to do design work for LMH’s new cancer center project. That project will involve multiple upgrades to the onsite oncology department at LMH’s main campus. Construction work, however, is not expected to begin in 2022, Cartwright said.