It’s not exactly rolling in profits, but the Metropolitan Nashville Hospital Authority is looking at a rosier financial picture than in years past.
Following its mid-year budget review, the safety net health care provider is projecting revenues will rise, despite a drop in its subsidy from the city, and expenses will fall compared with 2009. Authority leadership, encouraged by the progress, is taking steps to solidify the trend for the future.
The authority, which includes Nashville General Hospital at Meharry, Bordeaux Long Term Care and Knowles Home Assisted Living and Adult Day Care, expects about $132 million in revenue and $126 million in expenses in 2010. Two years ago the authority was $2 million in debt.
Jason Boyd, the authority’s interim CEO, said improvement comes in several ways.
The authority has reduced its full-time staff by 27 since last year, contributing to a roughly $600,000 drop in salaries. It has also consolidated some shared services, like information technology and human resources, to save another half-million dollars.
On the top line, it’s expecting a $10 million increase in net patient revenues this year. About 10 percent of that comes from an incentive program to bring Metro employees (and their commercial insurance) to authority facilities. Renegotiated payor agreements have netted about $3 million revenue, and 10 percent volume growth in revenue-heavy cardiac and surgical service lines also have provided a bump.
But Boyd, 33, doesn’t ask for the credit. He took a seat in the authority’s big chair just a month ago, after about a year and a half as the organization’s chief operating officer. He said his predecessor, Dr. Reginald Coopwood, deserves much of the praise.
“Dr. Coopwood initiated a lot of these activities and saw a lot of them come to fruition,” Boyd said.
Coopwood became the authority’s CEO in 2005, a year its expenses outstripped revenue by about $10 million. In December, he accepted the chief executive role at The Regional Medical Center at Memphis, another cash-strapped safety net hospital. As he exited, Coopwood called his nearly five years at the authority the best job he’s ever had.
City money disappearing
One catalyst for Coopwood and the authority to improve its financial standing has been the steady reduction in the city’s subsidy over the last few years.
In 2008, the first year of Mayor Karl Dean’s administration, the city provided $49.8 million to cover operations. In 2009, that figure fell to $47.3 million, and for 2010 it’s $41.7 million.
Metro Finance Director Richard Riebeling said the city has stressed it could not continue to have “an open checkbook” with the hospital authority, asking it to focus on improving revenue and expenses. Though Riebeling said the authority has done a good job in both areas, it may still need a $1.49 million infusion from the city to cover its projected cash shortfall this year.
“We gave an appropriation of $41.7 million, and we knew it was probably going to be short, but we wanted them to work hard, and at the end of the year they have worked hard,” Riebeling said.
Robert Stillwell, the authority’s CFO, said the organization is trying to avoid asking the city to cover the shortfall.
“The city took the initiative to force less resources … and in part if that had to do with us having less expense, then that’s a good thing,” Stillwell said. “But it’s not the only reason. We took it upon ourselves to do it because a lot of us have been in other hospitals and understand how they should operate.”
Prior to joining the authority in 2008, Stillwell served as vice president of finance for Renal Care Group and senior VP for Fresenius Medical Care. Boyd was chief operating officer of a Mississippi health center for four years.
Looking to the future, Boyd said he would like to see the authority become as self-sufficient as possible.
“The dollars they give us are really to help subsidize for Nashville’s indigent patients, so the more we can grow services and revenues and attract a patient base that has a payor source, the less dependent we have to be on the city, and that’s best for both parties,” he said.
The hospital authority should provide about $67.2 million in uncompensated care in the current fiscal year, up from $51.5 million in 2007.
The city subsidy accounts for about 33 percent of the authority’s revenue in 2010, down from 40 percent in 2008. Commercial payors account for 20 percent, up from 15 percent in ’08, and Medicare accounts for 15 percent compared with 10 percent.
Of course, one element of that increased self-sufficiency will be forced: The 2011 fiscal year will come with another reduction to the authority’s city subsidy. This time, the 7.5 percent drop will amount to a $3.1 million reduction for a total of about $38.6 million, more than $10 million less than it received in 2008.
On top of that, Stillwell expects the city will ask it to contribute an extra $1.5 million in pension funding.
“So next year in our budget, we’re obviously worried about that. We’ll do everything we can to mitigate it,” Stillwell said.
Boyd has cited continued growth to its specialty service lines, like orthopedics and women’s health, among the authority’s plans for continued top-line growth.
“I know a lot of focus is around being efficient and saving money,” Boyd said. “But to offset that, you have to focus on growing revenue and services, and being sure you can compete with any one of these great hospitals we have in the city.”