CEO: Hospital must stop its own bleeding
After racking up multi-million dollar losses in four of the past five years, Coulee Medical Center will put in place a turn-around plan to “stop the bleeding,” CEO Jonathan Owens said, “sooner, rather than later,” and that will include some strategic job cuts.
Owens said CMC will be operating in the black within eight months, predicting the restructuring plan will produce a nearly $6.6 million turnaround in 2017 and $3.6 million per year thereafter.
The hospital is currently in debt to Grant County and out of sorts with its mortgage loan conditions, so Owens said a plan that would have been implemented more slowly will be started now.
“HUD won’t wait and neither will the county,” he said, referring to the federal agency that loaned the money for building the new hospital.
From 2012 through 2016, CMC has reported losses averaging just under $3.1 million a year, with 2013 its only year to finish in the black. In 2016, the hospital and its clinics lost $5.7 million after deciding to halt implementation of a costly electronic medical record system. It took in nearly $34 million in revenue.
At the same time, the hospital has been in growth mode, with clinic visits in 2016 exceeding the year before by about 4,500, said Owens, who took over as chief executive officer last summer. The growth is still occurring, with recent signing of a new physician and another surgeon.
In November Owens ordered a stop to the medical records project that was draining cash and which had forced the hospital into using county warrants to pay its bills. And CMC is overdrawn on that account.
Owens said he and financial consultant Chris Bjornberg had been working on a plan to turn the losses around more gradually, over the next year or so, but that plan was accelerated by a call from the federal Housing and Urban Development Department, the agency that loaned CMC the money to build the new hospital.
The hospital isn’t meeting all the financial specifications the agency imposed in the loan agreement. Its “days of cash on hand,” for example, a measure of cash flow, fell from 69.36 in 2014 to 10.12 at the end of 2016. HUD wants 21 days.
HUD has instructed the hospital to submit a turnaround plan and begin implementing it within 60 days, Owens said in an interview.
Job cuts that would have been implemented as people retired or quit will now be forced into a small reduction in force. He said yesterday that he has met with department heads and that all cuts will be known by Monday.
“We need to put our resources into physicians,” not into the ancillary services that have less to do with actual delivery of healthcare, he said. CMC will hire its own nurses instead of paying for agency-employed nurses, saving more than $500,000 a year, for example. And switching to a different medical records program will save another $346,000.
But that’s only part of the turnaround plan. Speeding up billing and collection is one key. CMC is very slow in that regard, at an average of 122 days, compared to an industry average of 52. Currently, CMC has more than $7 million it’s waiting to collect.
In all, Owens said, the plan will increase revenue by $4.2 million and decrease expenses by $2.3 million.