Hospital exceeds income projections
Cost reduction project cited as factor in revenue increase
July 16, 2001
Sometimes plans really do come together.
Occasionally the goals set and programs enacted actually produce the desired results, with no unexpected side effects or unseen impacts.
The Memorial Hospital (TMH) is right now enjoying a three-month stretch of just such a situation. Despite the fact that hospital use is down, net income projections for April, May and June were exceeded, mostly because of the Rapid Cycle Cost Reduction Project, TMH Chief Financial Officer Roger White said.
For April, net income was $116, 750, which was $76,433 over the projected $40,317, and in May the net income was approximately $65,000 over the projected $53,644 for an approximate total income of $118,644.
The final numbers are not yet available for June, but, according to preliminary numbers, White said the is continuing.
TMH implemented the Rapid Cycle Cost Reduction Project to make its operations more efficient and produce revenue for projects and expenses.
The Cost Reduction Project is organized into three stages: Cost reductions that can be captured in 100 days, reductions to be captured in six months and reductions that won’t be seen for nine months or more. In each cycle, portions of the budget or specific programs are targeted for examination and economizing.
Savings from avoiding duplication and excess expenditure are the first goal. Savings from operational or budgetary adjustments are the second goal. Some adjustments are as simple as finding a new distributor offering a product at a better price than what TMH is already paying. Changing long distance carriers is a step officials are looking at, which is projected to save $21,000 a year.
At present, TMH has identified $660,000 in savings, and with continued success in the program, that amount could grow to $886,000.
For now, these projections are becoming reality.
“We’re seeing some of the realization because of the [Rapid Cycle Cost Reduction Project],” White said. “This essentially allows us to maintain our cash position, our cash reserves.”
The savings to date for the year have been approximately $242,000, and couldn’t come at a better time.
According to the Quorum Management Report for June, use of the hospital is down. Patient days are off 26 percent compared to last year. The year-to-date average bed occupancy is 7.5 patients compared to 10.2 for the same five months last year and surgical minutes are down 37 percent from last year.
To compensate, the hospital has reduced personnel hours by 4 percent.
The money saved from the Cost Reduction Project is being used to replenish the cash that has been diverted toward land acquisitions for a potential hospital expansion.
“This helps me because we’re experiencing net income, which means more money for operations, because I have the working capital that we need for expenses,” White said. “Over this 24-month period, we have outlayed capital to acquire the land for the new facility, and we need to put that money back into the operating budget.”