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Published: 14 June 2022 14 June 2022

[Editor's Note: This part 3 and the final of a multi-part series of articles. It continues with leadership reports.]

By Mary Alice Murphy

After Interim Paul Rogers' financial report at the Gila Regional Medical Center Governing Board meeting on May 26, 2022, he presented a draft preliminary budget for the fiscal year ending June 30, 2023, that he said he would present in more detail at the June board meeting.

"It is not in your packet, because it just came together yesterday," Rogers said.

The first section addressed budget assumptions. Volumes include acute inpatient admissions, which are expected to be consistent with forecasted fiscal year 2022 admissions. Swing bed admissions will increase above the two forecasted for this year by 21 incremental admissions, with an average length of stay of 11.2 days. The acute average length of stay is expected to be consistent at 3.6 days. Deliveries, outpatient visits, surgeries and emergency visits are expected to be consistent with the FY22 forecast.

Rogers said for gross revenue, the hospital has budgeted a global price increase to occur on Oct. 1, 2022. "Except for the 21 incremental swing bed admissions, the year-over-year increase in gross revenue is solely attributable to the October price increase. No payer mix changes are budgeted."

On the topic of deductions, he said contractual deductions are budgeted to increase to 64.89% in FY23 above the FY22 63.58% "where we stand today." He noted the hospital would absorb Medicare sequestration of $432,000 accounts for .2% of the total 1.3% increase in contractual deductions that did not occur in the current year. Medicaid retroactive reduction in contractual adjustments of $1.6 million during FY22 "will not repeat in FY23, and accounts for .8% of the total 1.3% increase in contractual deductions. The case mix index is not budgeted to change from FY22 levels."

Governing Board Member Harry Browne asked for an explanation of the Medicare sequestration.

"CMS (Centers for Medicare and Medicaid), from time to time, withholds a percentage of our payment," Rogers said. "And that began withholding on April 1 of this year and it is expected to increase to maybe 4 percent sometime next calendar year. When the Medicare program needs money, they take from us."

Browne asked: "So that's not specific congressional action, they just have the authority to do that?"

HealthTechS3 Regional Vice President Mike Lieb said: "Congress authorized the sequestration a couple of years ago. It was about 2 percent. That was put on hold during the health emergency, the pandemic. It was a 2 percent cut in Medicare payments to providers. With the lifting of the emergency, it will chop our payments a bit. We should get 101 percent of our costs paid, but it's really 99 percent. It is what it is."

Browne said it was expected to be about 1 percent if Congress authorizes it. Rogers agreed, but said he had it budgeted at 4 percent, so "we have a little bit of a cushion."

Governing Board Chair Alicia Edwards said she wanted to clarify what she thought she was hearing. "So, as a critical access hospital, we are eligible to receive 101 percent of our costs, then Congress comes along and says: 'We need some money, so we'll sequester some of this.' It is not just impacting this, but due to the increase in all our costs of running a hospital, and supply chain issues and blah, blah, blah. We will recover them at a lower rate later. So, what the action does is, at 101 percent, we're making a tiny bit, at 100 percent we're breaking even, at 99 percent, we're losing money." She said it was hard to wrap her head around Congress being willing to make the hospital lose money.

Lieb said it was only based on "our Medicare volumes. We have commercial insurance, workman's comp and all that are supposed to adjust for that."

Edwards said one of the ways they adjust for that is to make non-Medicare and non-Medicaid patients to pay at a higher rate, because "we know insurance companies aren't going to cut their prices to cut their profit."

Lieb agreed and said that was one of the rationales for the increase in prices.

"This is the cost-shifting terminology you hear about," Rogers said.
Still on the budget, Rogers went to the expense side. "We have merit increases of 5 percent budgeted to occur on Jan. 1, 2023, with market adjustments for positions such as CNA, monitor tech, medical assistant and phlebotomist budgeted to occur on July 1, 2022, because of our difficulty in recruiting due to our wage rate comparison. Our contract labor is budgeted to decrease by 29 percent for about $2 million and increase salary expense by considerably less than $2 million. The replacement of 8.3 contract full-time employees with employed staff is responsible for this reduction in cost."

Fringe benefits are budgeted to increase by 8.6 percent or $468,000 and will remain flat as a percentage of gross salaries in comparison to the FY22 forecast.

Inflationary pressure for supplies is budgeted at 3.4 percent.

Other expenses include $75,000 for employee recognition activities; $294,000 for INNOVA contract revision for the ER; $96,000 for marketing; $90,000 for physician recruitment; $347,000 for inflationary pressures; $500,000 for the Cancer Center transition; $146,000 for biomedical services; $203,000 for physician contract revisions; and $465,000 for IT needs.

Rogers said depreciation is based upon current fixed assets and the depreciation schedule for FY2022, with adjustments for new depreciable assets of $4 million for the budget year.

He noted that non-operating revenue in the amount of $3.9 million in provider relief funds will not repeat in FY23.

In the executive summary of the draft budget, Rogers said the hospital expects cash to increase to almost $25 million from $23.5 million. He also projected other assets net of depreciation to increase to about $3.062 million. Net accounts receivable are expected to decrease a bit to $7.2 million. Property, plant and equipment, also net, are expected to increase by about $300,000.

On the revenue side, "we expect an increase of almost $3 million in operating revenues and an increase in total expenses of about $3.8 million." He reiterated the loss of $3.9 million non-recurring non-operating revenue of provider relief. "That won't be a repeat."

"Whereas we are projecting a net surplus for FY22 of $6.7 million, we are budgeting for FY23 a surplus of $2.1 million, mostly due to the non-repeating $3.9 million," Rogers said. "We project an increase in the number of discharges and patient stay days due to the increase of 21 swing beds. Our total profit margin is decreasing from FY22 at 8.95 percent to 2.77 percent for FY23. However, our net accounts receivable we project will drop from 56 days to 34.9 days. And we will improve our accounts payable, dropping from 58.2 days to 54.2 days. We'll be paying our bills faster."
Rogers said the budget projects a slight improvement in the current ratio from 3.0 to 3.2 and days of cash on hand from 120 to 121.4.

The average age of plant will increase from 13.7 to 14.4. An improvement in staff productivity per paid full-time employee is expected to move from the current 5.5 to 5.65, with total net revenue per paid FTE to move from $193,389 to $199,694 due to a drop in the numbers of contracted labor. Net revenue per adjusted discharge is expected to increase from FY22 $10,786 to $11,282 for FY23.

Governing Board Member Harry Browne asked for a reminder on when surgeries restarted at the hospital after the pandemic.

Chief Nursing Officer Kelly Rodriguez said the hospital shut down surgeries in March 2020 and opened them up again in June 2021 to catch up with the backlog.

Chair Alicia Edwards asked why full-time employee salaries were more with all full-time employees and less contract labor. Rogers explained it was because the raises were more than the savings.

He briefly showed the balance sheet and assets and said they give more details. About the statement of cash flows, he said the total net revenue budgeted should provide a surplus of $2.1 million at the end of fiscal year 2023 on June 30, 2023.

Rogers said the hospital, using grants and cash, plans to expend $4.7 million for capital plant and equipment purchases. "The end of the fiscal year, we should have just under $25 million in cash."

He said the report also includes three pages of capital assets. The hospital will use grant-only funding of $5.6 million, grants matched by cash of $1.38 million, $507,000 of hospital match for the $1.38 million, and hospital capital for $1.767 million for a total of $9.229 million planned capital expenditures in fiscal year 2023.

"I am so appreciative of my staff and hospital staff in helping to create this budget," Rogers said.

"I'm excited that we are able to spend this much on capital improvements," Edwards said.

Billings asked where Rogers got the adjusted inflation rate of 3.4 percent.

"I got it from our purchase order vendor, Visiant and I took the average," Rogers said.

Lieb said those were Visiant numbers, but "we will also have numbers from pharmaceutical and medical suppliers."

Edwards presented the chief of staff report for Dr. Brian Robinson. It included the credentialing, which the board had previously approved, a new policy on pediatric hypoglycemia and new formulary changes.

Chief Quality Officer Denice Baird gave the quality report. She said that readmissions were on average down about 7 percent in 2021, and that the hospital goal is to lower the readmission rates to 6.5 percent.

"We had no readmissions on the CMS targeted diagnoses group," she said. "Those are ones that are publicly reported data and have an impact on reimbursement."

She noted that not all readmissions are related to the "index visits related to prior admissions, but they came in for something else. That's good."

Baird said they were also targeting using restraints less in the hospital. "That is a huge priority on the Joint Commission survey. We have 10 performance improvements that we are working toward to document our restraint use. Kelly and her team are active on that. CMS advises facilities to decrease their usage of restraints. We were talking about our new ER director, Heather Morrison-Been. She has a goal of a restraint-free emergency department, as she had at the last facility she served."

Billings asked if they were physical restraints.

Rodriguez said: "We have two policies, one for violent or self-destructive patients and one for non-violent non-self-destructive patients. In the latter case, we may use soft restraints, for instance to keep them from taking out an intubation tube. For the violent individuals who may do harm to themselves or others, we may also use soft restraints. We have eliminated a lot of our restraints. Truly, all we have are soft wrist or ankle restraints, physical holding of a person or chemical restraints."

Billings asked: "What if someone need to be restrained to make everyone feel safe?"

Rodriguez said if someone is a danger, "we typically call law enforcement. If a dangerous individual says they are leaving the hospital, we let them and call law enforcement for assistance. It's a nationwide movement not to put oneself or other patients in harm's way."

Edwards said she had a conversation with the new ER director. "She has creative solutions. She is also highly conscious of dangers to those working in the ER and other patients. It is at the top of her priority."

Rodriguez said for a patient in a crisis, "we search them for contraband and change them out of their regular clothes into a hospital gown. For that particular garment going to a paper gown helps, because there are no strings or anything that a person can use to harm himself or others. Plus, patients aren't as mobile if they are in a paper gown or paper scrubs."

Baird said a lot of techniques are useful for such situations, and "Heather has been successful with them in another organization. Patient experience and willingness to recommend the hospital are part of our star rating. There has been a definite trend downward over the past few months, not just here, but in all hospitals."

She noted that outpatient surgeries are trending upward. "In March, we hit the top 10 percent. We are still having trouble transferring people out to a higher level of care. That creates delays in the emergency department experience. As the pandemic wanes, we hope people will be happier with their experience in the ER."

Baird said the hospital is still waiting on the Joint Commission to do its one-year follows up to the survey from our conversion to critical access. "We're a year overdue."

She said the hospital is also due for its biennial lab survey for testing and blood gases. "We're also due for the survey for the main part of the lab. That's also overdue. We expect those surveys at any time, so we strive to maintain a constant state of readiness, which is what our patients deserve."

"As for the infections prevention, we are expecting our new infection preventionist on June 13," Baird said. "She is a hands-on preventionist and really likes working with staff and providers giving them education and tools to be successful in preventing infections."

With no questions, the next presentation came from Lieb on the HealthTechS3 management report. "Next month, we plan to bring you the strategic plan to accept. Tony (Interim CEO Marion A. Thompson) and team will be fleshing out the action plan. The work on the Cancer Center is proceeding. And kudos to Paul and his team, as well as all the departments on the budget. I want to thank all five of you board members for the hours, the angst, the hair-pulling over the past two years. You didn't sign up for this, but we appreciate the time and energy you bring to this hospital. The real work for bringing this hospital up goes to staff. We've seen Kelly, Denice, a whole slew of HR folks, even housekeepers, doing a phenomenal amount of work. They show enormous pride in this institution."

Billings asked about morale at the hospital. "Where are we headed, and will you go public with a lot of the good news?"

"We have a lot of work to," Lieb said "It's why we budgeted $75,000 for recognition activities. Tony is working on Studer principles for the managers. We're working on getting a people position to help drive and track our activities. There's a lot of stuff going on. Dr. Robinson stopped me in the hallway this morning and said to me: 'We've got all these things going on. How will we get the information out?'"

Lieb said Thompson has entered into a contract with SkyWest to promote pride in the hospital, fix the website and provide updates on the hospital's marketing pieces.

Billings said: "We need to own where we started and make clear to people where we're going. We need to get the information out."

Under board comments, Browne and Member Javier "Harvey" Salas had none.

Ponce said he worries about morale at the hospital. "What would boost mine is to get rid of the latest Gila Regional Medical Center logo. It doesn't reflect Grant County. I don't like it. Could you make it a contest or something?"

Billings agreed and said: "Of all the things we didn't need to do, it was to replace the logo. I prefer the old logo."

Ponce said he thought a new direction would help.

Rodriguez said when the logo changed, two options were offered, and "the vote wasn't shared."

Baird said she liked the trees in the old logo, representing "our forest."

Browne said his concern about a new logo would be the amount of money that would need to be spent to create it and make signs and letterhead and the rest. "I do not believe that a logo is significant to what we're doing."

Ponce said he wanted to go for cultural change. "I think a new logo helps bring in a new culture. I would prefer to see staff work on a new logo."

Salas said he thinks the hospital needs to start with a good ad campaign asking people "to come back to our hospital."

Edwards weighed in on the logo. "If we changed the logo, it might be closure on a bad part of our history."

The meeting adjourned.

For previous articles, please visit: https://www.grantcountybeat.com/news/news-articles/72487-grmc-held-governing-meeting-may-26-2022-part-1 ; and https://www.grantcountybeat.com/news/news-articles/72513-grmc-held-governing-meeting-may-26-2022-part-2