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Gunn: ‘we need to re-win … re-earn trust’

Posted: December 19, 2013 5:39 p.m.
Updated: December 20, 2013 5:00 a.m.

KershawHealth’s new interim chief executive officer (CEO) says the healthcare organization needs to reestablish relationships with physicians and the trust of the people of Kershaw County in order to succeed in the future. Terry Gunn, who took over as interim CEO two weeks ago, made the statement as part of a report to the KershawHealth Board of Trustees during its meeting Tuesday evening.

Gunn began by officially thanking the board for the opportunity to serve as interim CEO, saying he had received a warm and gracious welcome not only from trustees, but physicians, staff and the community at large. He then went on to discuss some general impressions he has made in his first two weeks on the job.

“First and foremost, I have clearly seen an opportunity to establish and reestablish strong personal relationships in the community and with our physicians on the medical staff,” Gunn said. “Clearly, we’ve got many opportunities to communicate the vision of the hospital and the manner in which we want to deliver healthcare in Kershaw County. I would like you to know, (it’s) been very warmly received -- I’ve not come across a physician or another leader in the community that has not had the very best interest of the health system, in total, in mind, and that’s very encouraging coming in.”

Gunn said he believes there are opportunities to reconnect physician-to-physician relationships in the community in terms of referrals both to each other and to KershawHealth.

“There are varying degrees of that support. Some are highly supportive, others have other opportunities (for us) to regain their trust and repair those relationships. I’ve certainly been encouraged that there’s been a willingness to move forward with those and that’s a great sign,” Gunn said.

He called KershawHealth’s employees an “incredibly loyal group of people,” a fact he said needs to be passed along at every opportunity.

“It has been a difficult time … in healthcare. We’ve got enough things coming from the outside that make it a challenge and they are absolute troopers, doing a super job and are excited about getting on with working together,” he said.

Gunn said, however, that he is concerned about a number of things, most especially KershawHealth’s decreasing patient volumes.

“Depending on which month you look at, we’re 10 or 20 percent behind the prior year, and the prior year wasn’t that good of a year to begin with,” he said. “It is frustrating to see that. Lots of factors there -- can’t really pinpoint it on one issue or two, but, again, we’re going to have to go back and re-win a lot of those relationships and, ultimately, re-earn the trust of our community to continue coming here and seeking healthcare services when they’re in need of them. I think they will be pleasantly surprised as they come back into the KershawHealth system.”

Gunn said the rest of his time has been spent studying KershawHealth’s policies and procedures, and the structure of the services it offers. He said he is trying to make sure the organization is up to date and delivering those services with best business practices in mind.

“We’ve had a lot of early opportunities to make some adjustments here and there, and as that goes further along, I’ll be happy to give you some updates on how that’s going. We’re already seeing some opportunities for improvement -- we’re not waiting on those, as we need to tweak, we can -- but the operations are strong, a lot of good folks delivering a lot of good services -- no major issues that I’ve stumbled on that can’t be resolved or worked with,” Gunn said.

As KershawHealth administrators have mentioned before, Gunn said that the organization is having to deal with a number of external factors, most especially Medicaid.

“Clearly, a high agenda that we’ve got to, all, continue -- and I would encourage any of you that would be interested in helping to support this issue -- the Medicaid expansion is an absolutely critical issue for the hospital and the physicians as well,” he said. “That is a hot topic that we’ve got to continue to pressure to make sure our Medicaid patients are adequately funded with as many resources as we can make available to them. Not the least of those issues is making sure that we’ve got that revenue coming in that’s readily available for us.”

During a later discussion on finances, Trustee Derial Ogburn asked KershawHealth Executive Vice President and COO/CFO Mike Bunch to comment on the relationship between bad debt/charity expenses and disproportionate hospital share (DSH) compensation from the federal government. Ogburn noted that DSH payments have been “dramatically cut” during the last several years.

Bunch called Ogburn’s question a “great segue way” to the question of expanding Medicaid. He noted that DSH payments are already off by $64,000 just in the first two months of the new fiscal year alone.

“That’s on pace to be $600,000 less this year than last. This number used to be $4 million; we’re tracking to about $3 million. So, it’s down a full $1 million over the past couple of years,” Bunch said. “The intent of that money is to help us offset our cost in treating indigent patients … it’s another funding source that’s getting cut. Meanwhile, charity and bad debt continue to grow.”

Bunch said that one of the trade offs for expanding Medicaid was that DSH payments would go down as expanded Medicaid reimbursements went up.

“We’re getting DSH going down, but we’re not getting Medicaid going up and that’s a double-whammy that hospitals like ours are getting,” Bunch said.

During his report, Gunn said while it is hard to form a lot of solutions in just the two weeks he has been on board, he has formed a number of opinions.

“And my opinions are that we’ve got our best opportunities ahead of us and I think we’re definitely on our way to working collaboratively with our medical staff and call on the leadership at the hospital and the board to really get things moving on a fast track and be a premiere medical center as we should be, can be and will be,” he said.

At the end of the meeting, and following a nearly two-hour executive session, Board Chair Karen Eckford announced that the board had formed a new committee in regards to searching for a permanent CEO. The committee is made of Board Vice Chair Dr. Tallulah Holmstrom and trustees Eric Boland and Paul Napper. Eckford said the committee is charged with evaluating firms to engage to assist with that search.

In a Dec. 11 interview with the C-I, Gunn said that -- for the moment -- he is not looking at becoming KershawHealth’s permanent CEO, but did not take himself out of the running completely.

During the executive session, the board also discussed a medical staff report; reviewed feasibility, planning, marketing information/evaluation/materials containing references to competitive information or evaluation; two contractual matters on general surgery and the emergency department; two personnel matters, including the CEO search and results of information from Quorum Health Resources, which offers a range of services to non-profit healthcare organizations; and a legal review.

$2 million in two months

As of Nov. 30 -- just two months into the new fiscal year -- Bunch reported that KershawHealth has already experienced a year-to-date operating loss of nearly $2 million with a corresponding $1.81 million decrease in net assets. KershawHealth suffered a $3.62 million operating loss and $4.75 million decrease in net assets in Fiscal Year (FY) 2013. November contributed an operating loss of $572,000 and a decrease in net assets of $396,000, meaning most of the FY 2014 year-to-date losses came in October.

As has been the case for some time, most of November’s losses are a result of continued downward trends in admissions (-16.1 percent from Nov. 2012), total surgical cases (-14.9 percent) and emergency department visits (-17.9 percent).

Later in the discussion, Ogburn said that -- based on charts provided to trustees Tuesday night -- the drop in admissions and surgeries could be traced back to October 2008.

“We’re kind of dealing with something we inherited from a long time ago, as a board,” Ogburn said.

Bunch noted that there are actually a couple of “break lines” in those trends, where admissions and surgeries did increase at times and said a fairer place to start reporting the downward trend is from early 2011.

Going back to November’s numbers, Bunch reported emergency department visits came in at 2,033 compared to 2,475 in Nov. 2012, a difference of 442 visits. Bunch said that December is already seeing an upward trend, likely due to the flu.

However, deliveries (births) also continue to slide at 35.3 percent below Nov. 2012. As a result of all of these losses, KershawHealth’s days of cash on hand decreased from 105 to 101 as of Nov. 30.

One area Bunch said appeared positive is the average length-of-stay per patient. During the first two months of the new fiscal year, that number improved to 4.3 days.

“Which is certainly better than prior years. That’s a positive trend. Typically, if we can sustain that through the year, that’s going to have a positive financial impact,” Bunch said. “Said another way, two months does not a trend make; however, if we can carry that forward, it would definitely be a positive trend for us, not only statistically, but financially. It will help save on our costs.”

Although KershawHealth has had success in keeping costs down in an attempt to offset the lower patient volume and reimbursement trends, November saw a 2.2 percent uptick in operating costs over Nov. 2012. Furthermore, salaries and benefits were above Nov. 2012 by 6.8 percent.

Bunch said the biggest issue contributing to expenses in November were “high-dollar” employee health benefit claims.

“It was a high month for that … we’ll look at that as we move through the year. I don’t get too excited about one month; I get excited if I get a two-quarter trend on benefit costs,” he said.

Bunch noted one area in particular with an odd effect in November: oncology.

“We are seeing lower oncology revenues through a drug or two that have come off patent,” Bunch said, explaining that when that happens, the price goes down. “So, we’re seeing less cost, but the multiplier on the revenue goes down. So, we’re seeing less revenue and less cost on some of those chemotherapy drugs.”

Holmstrom asked about that later in the meeting, noting that -- according to documents attached to Tuesday’s agenda -- that gross oncology patient revenue is down 16.6 percent in the first two months of the fiscal year compared to the same time period a year ago.

“That seems out of proportion compared to flat outpatient visits,” Holmstrom said, further noting that oncology outpatient visits were down by 24 visits on a year-to-date comparison, while oncology physician visits were up by 19 during the same period. “A decrease in revenue of $600,000 seems like an awful lot for expiration of patents. Were these drugs that we were using an awful lot of?”

Bunch said he would have to get exact details from KershawHealth Pharmacist Doug Murray on exactly which drugs were involved.

“Keep in mind that when you see that 16 percent … that’s gross revenue, so it’s not what we’re paid,” Bunch explained. “There’s a multiplier on drugs, so what we charge is a multiple off the cost, and then the reimbursement is typically cost plus something. So, as that drug cost goes down off-patent, it drops our gross with it. That doesn’t necessarily mean we’ll get paid less, but, typically, the payment will follow that drug cost going down, too. All the bars go down when that happens.”

Bunch noted that such drugs are “not cheap,” so that it might not take a lot of them to equal a $600,000 reduction.

In other business, the board heard reports from the strategic planning, board compliance and board quality committees and a KershawHealth Foundation report from Eckford.

(The online version of this story has been corrected to properly identify Terry Gunn as KershawHealth's interim chief executive officer, not interim cheif financial officer as originally printed. A correction will appear in Monday's printed edition of the C-I, which regrets the error.)

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