Erlanger Has Biggest Loss Yet - $4 Million For March; Administration To Get Help From Consultants As Losses Climb Above $17 Million

CEO Woodard-Thompson: "We've Got To Do A Lot More To Get Our Physicians To Come Back"

Monday, April 23, 2012

Erlanger Health System officials on Monday reported the public hospital's biggest loss yet - over $4 million in March. The loss was $4,084,594. That brings total losses for the fiscal year to $17,174,884.

CEO Charlsetta Woodard-Thompson, saying April will bring more dire financial news, told board members she wants to hire a consulting team to help get the hospital back on track. She said she hopes to have the consultants in place by the first of June.

Ms. Woodard-Thompson said a major factor in the continuing bad financial news is an exodus of doctors from Erlanger.

She said, "We are not seeing the physicians return. We are finding that the feelings were a lot deeper than we assumed. We've got to do a lot more to get our physicians to come back."

Noting that inpatient surgery volumes continue to lag, she said, "There is some unresolved discontent that has lagged over from the past several years." Surgical inpatients are down almost 10 percent.

Births are down 8.5 percent and emergency room admissions down 6.9 percent. Hospital admissions are down 3.8 percent over the previous year.

Hospital officials said there is a danger that Erlanger can fall out of compliance with bond covenants due to the continuing losses. Britt Tabor, finance director, said, "Cash on hand and the debt service ratio are two areas I'm worried about."

If the hospital does fall out of compliance on the bonds, there would be a requirement that a team of consultants come in to help run the hospital, it was noted. Mr. Tabor said hiring the consultants now gets the jump on that.

He said the hospital would be allowed to continue with the consultants it chooses and would not be under the obligation to follow all their suggestions as it would if ordered to hire consultants.

Ms. Woodard-Thompson said she has begun negotating with consultant teams. She said one has agreed only to be paid if certain improvement goals are met.

Mr. Tabor said recent layoffs are saving the hospital at least $600,000 per month. But he said the hospital is still dealing with major severance payouts - including almost $900,000 in March for the third wave of layoffs. Severance payments are now above $2.4 million for this fiscal year.

Donnie Hutcherson, finance committee chairman, opened the meeting by saying the financial report "is not going to be pretty."

He said, "We need to get things turned around in very short order."

Dr. Richard Casavant, board member, said, "We have a severe revenue problem that did not occur overnight. And it will not be cured overnight."

Ms. Woodard-Thompson said, "We don't have a lot of time to get this turned around. We're kind of on that leg - where we make it" or falter.

The consultants are to report to both the board and the administration.

Mr. Tabor said part of the hospital's problem is $7.5 million in uncompensated care for the month. He said Erlanger carries the load on indigents by far - saying it is four times more than other hospitals and soon will be five times.

He said in 2010 Erlanger was at $82 million, Parkridge at $22.6 million and Memorial at $20.7 million.

Officials said they also are seeing a downturn in income from the Life Force helicopter service. Calls for service are actually up, but officials said a number of calls have to be declined due to weather conditions. Federal authorities have continually tightened the rules on when helicopters can fly.    

One bright spot was that admissions at Children's Hospital are up 11.2 percent.

The finance committee approved buying a new urology table for $530,260 from Siemens. One doctor said the current table is 12 years old and at times breaks down during operations, causing the patient to have to be moved in the middle of the operation. He said he would just close down that room rather than have to continue to face the embarrassing problem of the mid-operations equipment failure.

The panel also approved hiring Price Waterhouse to help handle a backlog of billings that Mr. Tabor said are connected to a newly required federal form. The cost for the work over several months is expected to be $300,000-$400,000, but it is expected to yield $5.8 million-$7.5 million in collections.

The committee was told that Surgical Management Partners will be formed to manage a hospital outpatient surgery department for Erlanger. The hospital previously agreed to buy 49 percent of the ownership interest in the surgery center used by  Plaza Physicians, Spine Surgery Associates and University Surgical Associates. It was decided to have those groups form the SMP. Officials said reimbursements are more favorable for hospital-based surgical operations.

The medical director will be paid $165 per hour and there will be a fixed annual management fee of $180,000 and an annual quality metric incentive up to $120,000. Erlanger will reimburse for non-physician personnel costs as a pass-through expense plus 8.49 percent.

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