View Mobile Site

KershawHealth lost $3.6 million in Fiscal Year 2013

Posted: November 21, 2013 5:15 p.m.
Updated: November 22, 2013 5:00 a.m.


It won’t be official until an audit is conducted in December, but internal financial statements at KershawHealth show the organization lost $3.62 million in Fiscal Year 2013 and a decrease in net assets of $4.75 million. The fiscal year ended Sept. 30.

KershawHealth Executive Vice President and COO/CFO Mike Bunch reported on September’s monthly financial statements, FY 2013’s financial performance and October’s monthly statement during a nearly four-hour meeting Tuesday. The board normally meets twice a month, but -- due to holiday schedules -- decided to hold only one regular meeting each in November and December. That meant trustees, who also voted to narrow a field of interim CEO candidates to two (see accompanying story), had a lot of information for Bunch to provide them.

“Poor financials.” “Not clearly what we want.” “This performance is not sustainable.”

That’s how Bunch described September and October’s financial performances as well as FY 2013. In July, Bunch reported to the board that KershawHealth could lose $32 million by 2018. FY 2013’s $3.6 million loss is well above projections, which estimated the healthcare organization would only lose $1.5 million.

“We need to focus on those things that can improve the performance,” he said.

In September, Bunch reported, KershawHealth experienced an operating loss of $902,000 and a similar decrease in net assets of $901,000. For many months, surgical cases declined. They rose in September, but only by a single case over September 2012. Inpatient admissions -- as they have been for some time -- decreased by 13 cases compared to a year ago. Bunch reported that cash and investments at the end of September totaled $36.2 million, with 108 days of cash on hand, a reduction from 112 days of cash on hand at the end of August.

“September was fairly symbolic of the prior months that we’ve been experiencing,” Bunch said, noting that the month’s 352 admissions created “one of the lowest months of inpatient admissions we’ve had in the past four or five years. It’s a really low number of admissions.”

Trustee Derial Ogburn reminded Bunch that he had asked during a previous meeting about a rise in observation patients -- those patients placed in hospital beds, but only needing treatment for 24 or fewer hours. Such patients are considered to be receiving outpatient, not inpatient, services; hospitals receive lower or providing outpatient versus inpatient services.

In August, Bunch reported that the number of observation patients had risen 7.2 percent from that point in FY 2012. In September, there were 107 observation patients at KershawHealth, compared to 64 in September 2012. That brought the year-end total to 1,055 versus 947 in FY 2012, an increase of 11.4 percent.

Bunch told Ogburn and the board that staff looked at the cases “patient by patient” and found that it was a “natural number,” meaning there were none that should not have been in the observation category.

He also reported that KershawHealth’s case mix of Medicare patients decreased again in September.

“If case mix is lower, which is an indication of acuity (severity), you would expect length of stay to be lower,” Bunch said, which he reported was the case in September, “but it’s also a recognition that our revenue per inpatient will be down. Because the acuity of the patient’s down, the revenue we’re going to get is going to be down.”

Bunch went on with September’s financials, noting that KershawHealth managed to keep operating expenses, excluding interest and depreciation, 6.8 percent below September 2012; salaries and benefits were below prior year by 1.2 percent. Other operating expenses were below September 2012’s by 8 percent.

He then focused on the FY 2013-end numbers. He noted that admissions decreased by 7.3 percent compared to FY 2012 and surgeries by 9.6 percent, contributing to a 4.2 percent decrease in net patient revenue. Bunch said bad debt and charity rose to 12.3 percent of gross patient revenue, compared to FY 2012’s ratio of 11.2 percent.

Bunch then skipped down to a pair of charts showing decreases since FY 2010 in total inpatient admissions and total surgeries (both inpatient and outpatient). Inpatient admissions peaked in FY 2011, but then decreased 8.6 percent and the 7.3 percent he already reported for FY 2013. Total surgeries stood at more than 5,000 in FY 2010 and have fallen steadily since then to 3,728 in FY 2013. Bunch called those drops “very significant.”

“These volume drops are the main contributors to the sharp decline in operating income in FY 2013 and also ’12,” Bunch said. “If we want to put our fingers on the main -- not the only, but the main contributors -- these two are the drivers.”

In addition, he said federal government sequestration cuts and other reimbursement reductions have pushed operating income lower. Bunch said looking at the admission and surgical volumes put what is driving KershawHealth’s losses into perspective for him. He said there is a “reciprocating … bidirectional system” with outpatient volumes being driven down by the declining admission and surgical volumes.

Trustee Paul Napper asked what is being done to turn around that erosion.

“A number of things need to happen,” Bunch said. “I think the heart of at least stopping it will correlate to our strategic planning moving forward; I think that’s a key. We’re doing a number of things, such as reviewing contracts, and we are in the process of rolling out the GPO (a group purchasing agreement) that rolled out Nov. 1 and we’re already seeing positive results from it.”

In addition, Bunch said there are revenue initiatives underway, including KershawHealth’s bad debt process, patient accounting and its charity policy. He also said a few positions in the healthcare organization have been eliminated through attrition.

“I wish there were a silver bullet. There’s not that I’m aware of. However, there are -- maybe I should call them bullets in this case -- to help stop the losses,” Bunch said.

He also said KershawHealth has engaged Quorum Health Resources to review the healthcare organization’s labor levels. Bunch said Quorum should provide a report soon to ensure KershawHealth employs the right number of staff per department based on volumes in those departments.

“I wish I could tell you that November’s going to be better, but November’s admissions are (already) off from prior year. I’d like to give you some optimism on November, but I just don’t see it,” he said.

Trustee Eric Boland asked why surgeries have continued to drop. Bunch noted that, three years ago, KershawHealth had three general surgeons and now has only two. Furthermore, he said that a couple of years ago, KershawHealth had four OB/GYN physicians where today there are only two.

“There’s been some medical staff members who have left, for whatever reasons and we’re starting to see that erosion,” Bunch said, adding that the two general surgeons can “only do so much.” He agreed with Boland that the surgical decline is a staffing issue, but said strategic planning regarding various specialties in the future will also help.

Trustee Dr. Tallulah Holmstrom asked whether or not KershawHealth is doing everything it can to capture all the volume it can.

“Are there structural issues that are allowing volume to go elsewhere?” Holmstrom asked. “Do we lose, out of our own facility, out of our own ER? Do we lose volume out of our ER?”

Bunch said he did not know exactly how to answer that question.

“Are we transferring patients unnecessarily?” Holmstrom asked, to facilities outside KershawHealth.

Bunch said he didn’t know about “unnecessarily.” Board Chair Karen Eckford suggested KershawHealth likely does transfer patients to other facilities when there is not a surgeon available within the healthcare organization to perform a particular procedure. Bunch agreed that happens.

“Are they not available?” Holmstrom asked. “We see these numbers again and again and again. Are we really doing all we can to help ourselves? Are we really addressing all the issues we can address? We can’t address someone who chooses to go elsewhere. We can address someone who chooses to come into our facility. That we can address. I can’t go and convince someone and detour them off I-20 to come back to Kershaw County. But I certainly can do everything in my power, if they show up at one of our facilities -- be it urgent care, be it a private independent physician’s office, be it a hospital-owned primary care office, be it our own emergency room -- are we really, as an organization, doing everything in our power to make sure that what is appropriate to stay at KershawHealth is served at KershawHealth? And I would hope the answer is (that) we’re doing everything we can.

“If we’re going to stem this, we need to send the portion that we do control -- and it may very well be a small portion of it -- but I bet it exists. I would challenge us to control what we can control and then to encourage others to, ‘Hey, look at us, we can provide these services you might be seeking elsewhere in your hometown, friendly hospital with people that you worship with, people whose kids go to school with your own and be a part of the community.’”

Bunch confirmed that, with the exception of gastroenterology being “an issue,” most if not all specialties are covered in the emergency department through coverage agreements. Eckford agreed that gastroenterology is a specialty the board is focusing on intensely.

Bunch then moved to the October financial statements. He said that the month having three payroll periods added to KershawHealth’s losses for the month. KershawHealth experienced another $1.4 million operating loss and $1.4 million decrease in net assets. Surgical cases were up over October 2012 by 36 cases and 33 above budget. However, inpatient admissions were below prior year by 11 and under budget by 15. Even emergency department visits suffered in October, down 329 visits, or 13.5 percent, from October 2012. By the end of the month, cash on days decreased to only 105 days.

“While gross revenues were far above prior year and just below budget, several factors impacted the gross charges not translating into net revenues,” Bunch said. “First, bad debt and charity were $508,000 (16 percent) higher than prior year. As compared to prior October, the overall payer mix saw a continued shift toward governmental (Medicare and Medicaid) from 63.6 percent to 65.1 percent of gross revenues. A higher length of stay for Medicare patients as well as lower case mix index … were additional negative factors causing the net revenue deductions for October to be higher. Medicaid reimbursement for disproportionate share was also $42,000 before prior year.”

A little later in the meeting, Trustee Susan Outen, who serves as chair of the board’s strategic planning committee, said the committee met recently to discuss the location and expansion of services. Outen said the committee continued discussions on the services KershawHealth provides and how it needs to look at them in the future.

“The committee, working with administration -- sooner rather than later -- is going to get together with a group to come in and look at those -- OB being the first to look at. Also, Mike is working on some education for us … about different things hospitals can do,” Outten said.

The board received one major piece of good news Tuesday night: the Duke Endowment awarded a $500,000 grant to continue work being performed by AccessKershaw, a partnership between KershawHealth and a number of organizations to provide a link between the uninsured and local health professionals. Weeks said it was an example of KershawHealth carrying out its mission even while facing financial difficulties.

“That mission of making a difference in the lives of the people of Kershaw County,” Weeks said. “For some time now, we’ve had partners that have helped us carry out that mission.”

AccessKershaw is now in its third year, having started with an initial $750,000 Duke Endowment grant in 2010. Weeks said AccessKershaw partners include the ALPHA Center, Kershaw County Community Medical Clinic, Sandhills Medical Foundation and the S.C. departments of Health and Environmental Control and Mental Health.

“That is a wide array of organizations that have found common ground to make a difference in the lives of others,” he said.

In other business:

• Weeks also reported that, despite KershawHealth’s financial challenges, it was able to compete several facility upgrades during the last year. He said the approximately 20 projects cost about $2.4 million to complete. They included three projects at the main campus -- replacing six elevators; renovating the emergency department’s waiting area, treatment areas and nursing station; and renovations in the Karesh Long-Term Care Center.

• Bunch educated the board on KershawHealth’s work to comply with an Oct. 1, 2014, deadline to convert its use of International Classification of Diseases (ICD) codes from the existing ninth version to ICD-10. He said the total cost of the conversion process could come to $100,000. Bunch said a lot of work has already taken place and that KershawHealth is on target to train staff on the new coding system next spring. He also said KershawHealth plans to help educate physicians and other providers. He said the healthcare organization does not anticipate having to add staff to meet the goals.

• Trustee Bobby Jones reported on a recent KershawHealth Board of Visitors meeting during which the board heard a presentation on some of the worst community emergencies KershawHealth has dealt with in its first century. They included the Cleveland School Fire, Hurricane Hugo, a restaurant salmonella outbreak and a group of deer hunters -- including an 11-year-old boy -- exposed to an agricultural pesticide that also killed four dogs in Lee County.

The board’s next regular meeting will be Tuesday, Dec. 17 at 6 p.m. at the Health Resource Center. All meetings are open to the public.



Commenting not available.
Commenting is not available.

Contents of this site are © Copyright 2018 Chronicle Independent All rights reserved. Privacy policy and Terms of service

Powered by
Morris Technology
Please wait ...