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KershawHealth estimates $3.5 million loss for FY 2014

Duke LifePoint to present partnership proposal Tuesday

Posted: October 31, 2014 2:47 p.m.
Updated: November 3, 2014 1:00 a.m.
Martin L. Cahn/C-I

KershawHealth Attorney David Summer of Parker Poe (left) looks over some papers as the KershawHealth Board of Trustees begins its Oct. 27 meeting in a conference room at the Elgin Outpatient/Urgent Care Center. Visible on the right side of the table are (starting from right) KershawHealth Administrative Assistant Janet Sheheen, interim CEO Terry Gunn, Executive Vice President and COO/CFO Mike Bunch, Trustee Derial Ogburn, Board Vice Chair Dr. Tallulah Holmstrom, Trustee Susan Outen, outgoing Chief of Staff Dr. Andrew Piasecki and Trustee Eric Boland.

 

During the open portion of an Oct. 27 meeting which included an executive session presentation from a possible strategic partner, the KershawHealth Board of Trustees learned it lost approximately $3.5 million during Fiscal Year (FY) 2014. The fiscal year ended Sept. 30; the unaudited $3.5 million figure was revealed in a look at September’s financial statement. The board met at its Elgin Outpatient/Urgent Care Center.

In anticipation of a two-hour long executive session to hear from Capella Healthcare of Franklin, Tenn., KershawHealth Executive Vice President and COO/CFO Mike Bunch did not spend much time going over the financial statement. On September’s summary financial report, the estimated loss is listed as exactly $3,510,049, only $15,082 higher than FY 2013’s loss of $3,525,131. Administrators only budgeted for a FY 2014 loss of $1.4 million.

In July 2013, Bunch estimated the healthcare organization could lose $32 million by 2018 due to South Carolina’s refusal to expand Medicaid. That projection, along with continued losses, is thought to have prompted the board and administration to seek strategic partners like Capella.

A number of fiscal year-end statistics show a continued downward trend for KershawHealth. Admissions are down 7.7 percent from FY 2013, while observation patients -- classified as those who stay in the hospital less than 48 hours and for whom the government and other insurers reimburse the hospital at lower rates -- increased by 26.8 percent. In what might be a reversal from the overall fiscal-year admission declines, Bunch noted that September’s admissions were up 14.2 percent over Sept. 2013’s.

Surgical cases are off 2.8 percent; emergency department visits are down 11.1 percent from the previous fiscal year.

KershawHealth did suffer a loss for the month of September, but not one as steep as a year ago. September’s operating loss was $351,129, less than half the loss of Sept. 2013’s $807,845. Part of that shallower loss, however, was due to a $415,000 “Medicare Meaningful Use” adjustment due, Bunch said, to a system error at Palmetto Government Benefits Administrators. In addition, the KershawHealth Foundation provided a $677,000 capital contribution for a new nurse call system, the KershawHealth Auxiliary provided $30,000 for renovations to the front lobby and the S.C. Department of Health and Human Services (SCDHHS) provided $333,000 for planning and first quarter implementation of a LiveWell grant.

 “The gross revenue was 9.5 percent above prior year, so we did have a stronger gross revenue month,” Bunch said.

That was despite 7.4 percent and 3.8 percent declines over Sept. 2013 in births and emergency department visits, respectively. Bunch reported surgical cases rose by 29, or 10 percent, from Sept. 2013. Another piece of good news involved bad debt and charity, which were 19.6 below budget.

“I went back and looked, and I think the budget -- we look at multi years and how the bad debt and charity trended during the month of September -- and for this particular year as we’ve seen all summer, the trend is significantly lower, so that’s a positive for us,” Bunch said.

However, he said September’s bad debt and charity is the same for Sept. 2013, at approximately $3.6 million.

On a more positive note, Bunch said length-of-stays decreased in September, both overall and among Medicare patients, by 12 percent and 14.8 percent, respectively. The shorter the time a patient is in the hospital, the lower the healthcare organization’s costs to treat that patient.

“That’s certainly a good trend that carries into the fiscal year we’re now in,” he said.

Operating expenses rose by 9.8 percent over Sept. 2013. Bunch said this was primarily due to an increase in health insurance claims by KershawHealth employees by “several hundred thousand dollars.” Supplies were also up, he said, attributed to the increase in surgical cases and a $43,000 year-end inventory variance. Bunch said that variance only represents 1.3 percent of KershawHealth’s entire inventory.

In regards to the surgical expenses, Bunch said, “We did have more inpatient surgeries this year than last year, certainly on a year-to-date basis. Those cases do generate a lot of revenue with a lot of fixed costs, but with that, they have some high supply costs as well.”

In other financial news, the number of full-time equivalent (FTE) positions continues to fall. Fiscal year to date, they stand at 814.9, a 27.4 drop from this time a year ago when there were 842.3 FTEs. Also, the number of days of cash on hand at the end of September and, therefore, the fiscal year, declined from 99.8 to 99.7. KershawHealth currently has cash and investments totaling $33.1 million.

The fiscal year-end financials will be audited in November.

During the Oct. 27 meeting, interim CEO Terry Gunn announced a change to how KershawHealth is offering pediatric services at the hospital, specifically in terms of the labor and delivery department, commonly referred to as the Women’s Center. In December 2013, Pediatric Associates decided to stop seeing patients in the KershawHealth nursery. In January, Gunn said, the hospital put together a program where locum tenens, or temporary, physicians to provide those services.

“We have continued to provide that service, day in and day out, since that time,” Gunn said. “I’ve been notified that the group would like us to consider taking on all inpatient admissions for pediatrics using that program.”

Gunn said the program should have begun Saturday and will, essentially, involve pediatric hospitalists that would serve pediatric inpatient admissions but the nursery as well.

Also at the Oct. 27 meeting, Board Vice Chair Dr. Talullah Holmstrom provided the board’s quality committee report. Holmstrom noted that, in July, KershawHealth scored 100 percent on six quality core measures for the third month in a row. She said some, but not all, of those measures have continued to score 100 percent.

“Next month, we’ll be able to reconcile September and tell you … but at least four of those core measures are going to be 100 percent for six months,” Holmstrom said. “That’s really a tremendous achievement for any institution, but particularly for ours.”

Holmstrom said KershawHealth recognized its most recent “Thoroughbreds”-- Richard Jackson, Libby Catoe and Sarah Wilkes -- employees and leaders awarded for going above and beyond in demonstrating the hospital’s mission and vision through exceptional service to patients, visitors and fellow employees.

Holmstrom also reported the KershawHealth lab, sleep center, cardiac rehab center and cardiology department all recently received accreditation or certifications. She also reported nursing turnover has increased due to increased competition.

“We are making a very aggressive attempt, internally, to identify how we can attract nurses and keep nurses,” Holmstrom said.

She also reported on patient satisfaction scores and other metrics.

Following Capella’s closed-door presentation, the board continued to meet in executive session for a period of time before adjourning for the night. It announced Thursday that Duke LifePoint will make its strategic partnership proposal beginning at 11:30 a.m. Tuesday. Duke LifePoint’s presentation will also be made in executive session. It is unknown whether the board will take any action afterward or if it will want to hear from another potential partner.

 

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