TMH chief financial officer discusses 2010 budget
January 7, 2010
Craig — The Memorial Hospital has a lot to look forward to in the coming year, officials said, some of it exciting and new, and some daunting and uncertain.
Along with settling into a new facility and passing milestones like the first baby born and the first surgery, also comes the first utility bill and first loan payment.
In a November meeting, TMH board members approved the 2010 budget, which included an estimated net income of about $1 million less than 2009 because of the significant increase in the cost of depreciation with the new building.
Chief Financial Officer Bryan Chalmers began work at TMH just before the Nov. 12 move to the new facility.
Chalmers anticipates the depreciation to cost $2.5 million, up from $900,000 in 2009.
With loan payments on the new building starting in July, many TMH board members expressed concern about the coming year's tight budget in the November meeting.
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With an economic recession and increasing expenses, Chalmers said there is some fear about what the future holds.
But he remains confident about the bigger picture.
"I don't see it as scary," he said. "Even a well-managed business has problems. There's a lot of outside influence that can create problems, like the economy, but it's not just for the hospital. We're not in it alone."
When payments begin in July, the hospital will pay about $350,000 per month in loan and loan reserve payments.
The hospital will count on an increase in revenue in 2010 to make up the difference
Still, Chalmers said administrators and the community showed support for the building with good reason.
"You would not have built a building like this if you had not anticipated an increase in revenue," he said. "You'll be regaining market share, offering new services, and had that not been demonstrated, this building would not have been built."
The ability to finance the new building was assessed by a third-party company, Dixon Hughes, which produced a 57-page summary of the feasibility of building a new facility.
Based on that report and historical data of the hospital's growth, Chalmers came up with the assumption that the hospital will see a 16-percent growth in revenue in 2010.
Several TMH board members expressed concern about that number and were curious whether it was a conservative or liberal estimate.
Chalmers remains confident in the data and his projections.
"I think it's a very reasonable estimate based on achievable growth," he said. "It's literally a new operation. It's not the old hospital. Same staff, same mission, but we have three beautiful surgery rooms instead of two. We have three nurse stations instead of two, and so all of the coverage will be different. We can expand our services."
One aspect of the hospital's anticipated growth comes from its new dietary department.
The new kitchen provides better food for patients, staff and community members.
The new program accounts for most of the $500,000 budgeted increase in spending on supplies, Chalmers said.
The upgrade in food services was part of chief executive officer George Rohrich's vision.
"He had this vision to have a high-quality service from beginning to end," Chalmers said. "And a high-quality experience across the board. Everyone likes to have good food."
The rest of the expenses for supplies were for things like paper towels and extra paper for printing, which Chalmers said add up in a larger building.
After all the expenses are totaled, the 2010 budget anticipates the hospital will spend about $26 million on operating costs, which is $5 million more than last year.
Only 5.7 percent of that expense in 2010 is covered by mill levy tax. TMH is responsible for the other 94.3 percent of its expenses.
With the spending increase, Chalmers said the hospital will have to be strict with its cash flow, meaning several capital items might have to be postponed while other expenses become a priority.
Although it seems like a difficult time to launch a new facility, Chalmers said the new building is invaluable to health care and to the community in Craig and Moffat County.
To him, it shows the community is well-connected and supports its services.
"That can make Craig an attractive place for outside businesses to make a home here," he said. "It can benefit the community."
As for 2010, Chalmers knows it's a tight budget year for businesses and services across the country, but he will continue to collect data, set standards and measure growth as the operations in the new space unfold during the coming year.
"We can only take the best information we have and give you the best budget we can," he said.