LMH virus numbers continue to improve, but financial losses are stark; CEO pay cut by $100K due to 2019 finances

photo by: Chris Conde

LMH Health is pictured in a file photo from October 2018.

There has been good news on the medical front, if not necessarily on the money front, at Lawrence’s hospital.

At a Wednesday meeting, members of the hospital’s nonprofit board of trustees heard about millions in dollar losses related to the COVID-19 disruptions and reduced the total compensation of LMH Health’s chief executive officer by more than $100,000. But it also heard that a relatively mild number of virus cases has the hospital inching back toward normal.

Data released Thursday shows that LMH has gone nine consecutive days without having a positive COVID-19 patient admitted to the hospital. Further, the data shows you have to go back to April 29 to find a day when the hospital had more than one COVID-19 patient admitted. On that day there were two.

The low numbers come even as the hospital has gotten more aggressive with testing. Board members were told the hospital does have in-house capabilities to run its own lab results for COVID-19 tests, which allows for results in less than an hour. The hospital is using that rapid testing on all patients admitted for overnight stays.

In addition, the hospital is requiring all people coming to the hospital for outpatient surgeries or other such procedures to get tested 48 hours in advance of their procedures. That gives the hospital an opportunity to postpone nonemergency procedures and stop infected patients from entering the hospital. Board members were told the tests did detect one patient last week that was asymptomatic but tested positive for the disease. The hospital delayed the procedure to limit the number of people the patient came into contact with.

The case numbers and the additional testing have allowed LMH to begin allowing more elective procedures and to confidently promote the hospital as safe for all types of patients.

“This is a clinical decision,” Russ Johnson, president and CEO of LMH Health, said of the greater activity happening at the hospital. “It is not a financial decision.”

Board members, though, received multiple pieces of information detailing growing losses at the hospital, which suffered revenue declines as a result of postponing all elective procedures and as many residents avoided the hospital for other types of treatment due to COVID-19 concerns.

Among the financial details given to the board:

• March’s financial report showed the hospital posted a $3.9 million operating loss for the month. In addition, losses on investments the hospital holds added another $2.4 million in losses, bringing the hospital’s total losses to about $6.4 million for the month.

• In April, LMH Health posted a $2.3 million operating loss, but the actual results would have been closer to a $7.3 million loss, had it not been for $5 million in federal and state grant money LMH received to deal with the pandemic. The hospital did benefit from a rebound in the financial markets, as LMH’s investments increased by $1.6 million for the month.

• Patient numbers showed emergency visits declined by 45% for April, compared with the same month a year ago. The average number of patients the hospital was caring for on any given day, generally people admitted for an overnight stay at the hospital, was down about 25% for the month.

• Commerce Bank, LMH’s longtime bank, has offered a $20 million line of credit to help the hospital navigate unexpected declines in revenues or spikes in expenses related to the pandemic. LMH leaders said they were still evaluating whether to use the line of credit, which is essentially a loan that can be used a little at a time when needed.

As part of the meeting, hospital trustees agreed to cut the amount of pay Johnson receives as president and CEO of LMH Health. Johnson is scheduled to receive $482,709 in compensation for 2020, which is a reduction of $100,103 from his previous compensation plan.

The reduction was not unexpected and wasn’t really related to the pandemic. Johnson, who has been with the hospital since 2016, signed a contract that has him getting paid in two ways. The first is through a straight salary. The second is through a “variable compensation” plan that essentially pays Johnson an annual bonus based upon several performance goals. Many of those goals are tied to the hospital’s overall financial results. In 2019, the LMH board approved $100,103 in variable compensation for Johnson. On Wednesday, the board did not approve any variable compensation.

The hospital in 2019 — before the pandemic struck — posted one of its worst financial years in recent memory. The hospital posted a $15.8 million operating loss, as the hospital suffered through lower payments from some health insurance companies and also had labor expenses greater than expected. All told, the hospital’s bottom line — revenues over expenses — came in $27 million less than expected.

Before the pandemic struck, LMH said it had successfully negotiated a new contract with Blue Cross Blue Shield, the largest private health insurer in the state, that would be more favorable to the hospital. LMH also had undertaken a major efficiency study that it expected to produce several million dollars in savings.

Given the 2019 financial results, it has been clear for months that Johnson was not going to qualify for any of the bonus money that is part of his variable compensation plan. Even before the pandemic struck, all senior management executives of the hospital had agreed not to take any increase in their base salaries for the year. That freeze applied to Johnson’s base salary as well. His base salary remains unchanged from 2019 levels at $482,709.

Despite the poor financial results in 2019, the hospital’s board of trustees said Wednesday that it remained pleased with Johnson’s performance.

“Russ has been a strategic and visionary leader for LMH Health,” board of trustee president Cindy Yulich said in a written statement. “He recognized three years ago that changes at the local, regional and national levels in healthcare meant that LMH Health would have to evolve.”

Johnson last year signed a five-year extension to his employment contract with the hospital.


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