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Surgical cases up again at KershawHealth

But uses $1 million of cash on hand to pay bills

Posted: January 28, 2014 12:18 p.m.
Updated: January 29, 2014 5:00 a.m.

As interim CEO Terry Gunn predicted two weeks ago, surgical volumes are up again in comparison to a year ago at KershawHealth. Surgical cases have been dropping at KershawHealth -- comparing year-to-date figures from fiscal year to fiscal year -- for some time.

According to information Gunn and KershawHealth Executive Vice President and COO/CFO Mike Bunch presented at the KershawHealth Board of Trustees meeting Monday, Fiscal Year 2014 to date, total surgical cases are up 2.7 percent over the same period a year ago. The rise in raw numbers is slight -- 25, moving the total number of cases from 928 to 953 -- but is seen as a small sign that some things might be improving in the county’s public healthcare system. The fiscal year to date figure reflects the first quarter of the fiscal year.

For the month of December, admissions were down 9.1 percent from December 2012, a drop of 39 cases from 427 to 388. However, the total number of surgical cases for the month was up by 38, from 270 to 308.

“So, almost what we gave up on the overall admission side, we did see a little bit of growth on the general surgery side,” Gunn said during his CEO report to the board. “That’s encouraging to see that come back, and we have seen even some additional loggings in the month of January that we’ll talk about next month. It’s slowly coming back -- it’s not as quick as we’d hoped and not as much as we’d hoped -- but it is trending favorably for us on the surgical side.”

Later in the meeting, Bunch provided his CFO report which focused on both the first quarter’s numbers and December’s alone. He said the additional surgical cases came primarily in the ENT and orthopedic specialties as well as in general surgery.

Bunch started his report by noting that while KershawHealth suffered another operating loss, it was not quite as severe as in past months. The healthcare system saw an operating loss of $344,000 in December and a decrease in net assets of $560,000. Fiscal year to date, KershawHealth has suffered a $2.3 million loss and a $2.4 million decrease in net assets. Admissions are 9.8 percent below the prior year.

Those losses came not only from reduced inpatient volumes, but an 8.4 percent uptick in observation patients, for which the hospital receives lower reimbursements than for actual inpatients. Emergency department visits were also off by 15.2 percent from the previous year. Fiscal year to date, emergency department visits are off by 15.5 percent from the previous fiscal year’s first quarter.

While five more babies were born at KershawHealth in December compared to December 2012 (a 23.8 percent increase), deliveries are down for the fiscal year to date by 15, or 18.3 percent.

One piece of news Bunch shared with the board that was not in materials attached to Monday night’s agenda dealt with the amount of cash on hand at the end of December. As of Dec. 30, 2013, KershawHealth had approximately $33.9 million in cash and investments on hand. That reduced the number of days of cash on hand from 101.4 days in November to 100.9 in December.

The real news, however, was that the reduction came in part from moving $1 million out of the cash on hand fund to the general fund in order to pay KershawHealth’s bills.

“I do want to mention that, in order to, certainly, maintain payments  -- we’re paying all of our bills, we want to make sure everyone understands that -- we did have to take $1 million out of our investments in the month of December and move it to operating cash in order to cover some of the bills,” Bunch said.

In a phone interview Tuesday, Bunch said while the hospital may move cash back and forth on occasion, it doesn’t happen often.

“This is the first time in the past few years -- to my recollection, it’s been several years since we’ve had to do that,” he said.

Bad debt and charity were 13.5 percent above December 2012’s numbers, something that -- while it maintains KershawHealth’s mission to provide quality healthcare to all citizens of Kershaw County regardless of economic means -- has negatively impacted its financials.

In addition, the healthcare system’s Medicare case mix -- the percentage of cases covered by Medicare -- continues to rise. That is a positive for KershawHealth, as Bunch put it, since “small movements” in case mixes can have positive cash flow implications.

Bunch also noted that KershawHealth’s gross patient revenues were up by $2.04 million compared to December 2012. However, he said that rise includes revenues generated a 5 percent rate increase for services enacted in 2012.

“We are seeing a slight increase in revenue above the rate increase, and that’s a good sign,” Bunch said, attributing much of the increase to the increase in surgical cases. “Nonetheless, it was a relatively strong month of gross revenue for the month of December and, of course, that helped when you look at our operating income -- it helped … to push this a little more toward break-even.”

Another positive Bunch mentioned was savings realized from entering into a group purchasing agreement with Palmetto Health and Greenville Health system. He said KershawHealth had expected to, conservatively, save about $250,000 on an annualized basis.

“So far, we are committed already through this change, if you annualize out from Nov. 1 (and) project forward a year, we’re already signed up for $215,000 of annualized savings. We have a lot of other things that are rolling out … this is going pretty well so far. I’m not sure where the ceiling is, but we’re going to push it as far as we can get it,” Bunch said.

The group purchasing agreement in among many strategies KershawHealth is using to try to stem its cash outflow. Bunch told trustees last year that KershawHealth could lose $32 million by 2018 thanks to continuing shifts in the healthcare industry and Gov. Nikki Haley’s decision not to expand Medicaid in South Carolina.

Since then, the board has been working on coming up with a strategic plan with which to face its challenges.

Earlier Monday, the board met for a four-hour retreat, including a two-hour executive session lead by Jeanne Born, an attorney from Nexsen Pruet who serves as KershawHealth’s legal counsel.

Also appearing in that executive session were Julian R. Head and Eb LeMaster of Ponder & Co., a Chicago-based firm that specializes exclusively in providing financial services to healthcare companies. In a series of phone calls Friday, Saturday and Tuesday and publically in Monday night’s regular meeting, Gunn said Head and LeMaster worked with Born to present legal advice and different options relating to the board’s strategic plan. That advice, he said, is based on activities at similar hospitals across the country, region and state. One of the areas Ponder & Co. consults on is mergers and acquisitions, but does not act as a broker itself.

According to the company’s website, in South Carolina Ponder & Co. has provided financial advisory services to Roper St. Francis Healthcare in Charleston.

“They advise mission-driven not-for-profit hospitals on everything from gaining access to bond markets to structuring debt, financing with banks,” Gunn said, in addition to assessing the full value of ventures hospitals are thinking of entering.

Since the specific information Born, Head and LeMaster provided is privileged due to the executive session, Gunn could not speak to the exact nature of the advice the board received. He did say, however, that when it comes to thoughts of selling the hospital, there are no thoughts of doing so at this time.

“I don’t think that’s a direction county council wants to go in, or a direction that the board wants to go, and it’s not what I’m recommending,” Gunn said.

Gunn said the session was strictly informational, no decisions were made and that the board’s strategic planning committee, headed by Trustee Susan Outen, hopes to bring the plan to the full board at the end of March.

During the open part of the retreat, S.C. Press Association Executive Director Bill Rogers spoke to the board about the S.C. Freedom of Information Act. During the regular meeting, most trustees said they enjoyed the retreat and thought both presentations were helpful.

Among other business during the regular meeting, Trustee Eric Boland reported that the CEO search committee decided not to make any recommendations at this time concerning the hiring of a third party to assist with that search. Boland said the committee may be ready to make a recommendation about 60 days from now after the strategic plan is completed.

The board also entered executive session to discuss and vote on the medical staff report, and to discuss a contractual matter involving general surgery and for an undisclosed legal review. The board took no action following the executive session.

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