TMH board approves 2010 budget
November 24, 2009
In other action
The Memorial Hospital board:
• Approved, 6-0, the appointment of Philip Freedman, MD, to provisional staff.
• Approved, 6-0, the reappointment of J.D. Gilliland, MD, to associate staff.
• Approved, 6-0, the reappointment of Robert Lile, MD, to associate staff.
• Approved, 6-0, the reappointment of Stanley Pense, MD, to active staff.
• Approved, 6-0, a request for Larry Kipe, MD, to receive privileges to provide obstetric services.
• Approved, 5-0, a recommendation to buy out the equipment lease of the old MRI machine in the Moffat Building.
• Approved, 5-0, a recommendation to terminate the lease at the Moffat Building.
Brian Chalmers started work as The Memorial Hospital's chief financial officer in late September.
In under two months, he was expected to get up to speed on procedures, move into a new, $42.6 million building and start almost from scratch on a 2010 budget that accounts for an economic recession and the looming reality of a $2 million loan payment.
The final product was presented to the TMH board in its monthly meeting Monday night: a four-page summary of a budget full of unknowns.
The board approved, 6-0, more than $30 million budget, which reflected a projected net income of $231,623, compared with last year's net income of more than $1 million.
A more than $4 million increase in expenses is mostly because of the new facility, which is the main source of the unknown factors making this year different than any other.
Chief executive officer George Rohrich said administrators worked hard to keep the budget within safe boundaries of assumptions and projections.
"We want to be conservative with our budget," Rohrich said. "It's a better place to be than to be aggressive. There are a lot of significant unknowns as we move into the new building and dissolve the old one. We want something that is well-thought through."
Still, some board members were a little uncomfortable with the assumptions that the 2010 budget is based on, including an anticipated 16-percent growth in revenue.
However, Chalmers was confident the hospital could reach that figure based on historical data from TMH and research studies that show the affect of new facilities on critical access hospitals.
He also assumed that the hospital could utilize the higher levels of productivity that the new facility provides to help alleviate bad debt and increase market share.
The board's main concern was payments on the new building.
Because TMH moved into a new facility, it will receive increased reimbursements from the federal government through Medicare.
However, those reimbursements won't be adjusted completely until the beginning of 2011.
The issue lies with the fact that while payments on the building loan begin in July 2010, the increased revenue from the federal government still is six months past that.
In addition, the payments on the building loan will increase in 2011.
Board chair Ron Danner said the key to making the large payments in 2011 will be the Medicare reimbursements.
"That's the biggest lever we have," he said. "That's the answer."
However, Rohrich said TMH would have to watch its expenses closely and keep an eye on the unknown factors throughout the year.
"The scary part is we're relying on the government here," he said. "The most control we have is over expenses. We don't fully realize changes in reimbursements until 2011, and we don't catch up until then. And the government doesn't catch up with us until then. 2010 will be our bad year."
The realities of a "bad year" means that capital purchases, such as requests for new equipment and medical technology, will be considered on a case-by-case basis throughout the year.
"None of this will happen if we don't have the cash," he said, referring to the list of requested equipment. "Cash is king. The reality is that we would have liked two more months to work on this."
Chalmers agreed that he normally would spend three to four months on a budget of this magnitude.
"I just wasn't afforded the time," he said. "We had to make assumptions using historical data and then prove them the best we can. It will come down to recognizing when we come up against a shortfall. We can be aware of it."
County Commissioner Tom Gray said he recognized the looming issues of loan payments and revenue uncertainties, but that there always would be unknowns when dealing with a transition like TMH's.
"You can only be so certain," he said. "So, instead of planning for the best, you just plan for not quite the worst."