SCKMC Focuses on Future Growth

November 14, 2011

During South Central Kansas Medical Center's (SCKMC) Board of Trustees regular monthly meeting on November 17th, the Board and management will review plans to improve revenues for the coming years. As a part of the organization's budget development, strategies to recruit additional medical staff members and stimulate growth will be discussed. This is an extension of topics in prior Trustees meetings.

At the October 27th SCKMC Board of Trustees meeting, Hospital CEO Steve Perkins noted that Moody's Investors Services recently reported that hospital operating revenue growth nationally was at a 20 year low. And Perkins indicated that this is consistent with what is seen across Kansas according to Kansas Hospital Association sources. SCKMC results for 2011 reflect these industry trends.

As a part of the October Board agenda, hospital management provided updates on the operating statistics, financial results and the continuing actions to improve operational and financial performance. The impact of the departure of two popular established physicians from the community, Dr. Smith and Proctor, is apparent in the hospital's results. For the first nine months of 2011, while outpatient revenues are 7% ahead of prior year and 1% ahead of year to date budget, inpatient gross revenues year to date continue to lag behind 2010 and budgeted 2011 levels. Nine month 2011 inpatient gross revenues were 13% less than the same period of 2010 and 21% under 2011 budget. Although ahead of last year by 5%, year to date swing bed revenues are 26% below budget.

The Board's Finance Committee and senior management have been concerned of the loss of two primary care physicians in the preceding two years. It is difficult to recruit and replace physicians such as Drs. Dirk Smith and Doug Proctor, both of whom carried substantial patient loads creating admissions and procedures for the Medical Center. Unfortunately, recruiting physicians to a rural area is not an easy task. The Finance Committee and Senior Management have taken the initiative in reviewing all aspects of revenue generation, expense control and operational improvement, but any remedial actions implemented will not match revenue which has been lost by physicians leaving, making physician recruitment a priority.

During the interim, Perkins reported broad reaching efforts to enhance the Medical Center's financial position. Actions taken include the following: expenditures for resources must meet "mission essential" criteria; a freeze was imposed on hiring any new positions; review all positions that come open to look at alternatives to replacement; revise employee work schedules, reduce work time and reduce personnel expense; redesign workflow and processes; examine all programs to determine if they remain viable; cut or delay purchases of capital items; aggressively review all inventory levels; request to open renegotiation of all agreements with suppliers/vendors; consider out-sourcing or in-sourcing programs; aggressively manage all expenses and utilization of resources.

Steps have also been taken for improvement of revenues and cash collections. Across the entire organization systems have been reviewed and revised to enhance capture of charges and collection of revenues. New referral sources are being pursued. Accounts receivable is being tightly managed and all revenue processes are being examined.

"These steps and others are necessary as we continue to recruit physicians to increase revenues and expenses can come into balance," Perkins said. He noted that other hospitals and health care organizations in our region have been making reductions across the board for nearly two years; they continue to be in this mode.

At the October meeting the Board received reports on activities to grow the medical staff through collaborative recruitment efforts with the area clinics. Recruitment of physicians for family medicine and OB/GYN, to enhance future revenues, received the Board's full support.

Also presented to the October Board meeting was a report developed through the Kansas Hospital Association outlining the possible consequences of the Congressional committee charged with dealing with federal deficit reductions and the budget crisis. It appears that no matter the approach, Medicare and Medicaid reimbursements will suffer some reductions. Perkins reminded the Board of Trustees that a majority of the Medical Center's revenues are derived through Medicare and Medicaid due to our demographics. This is being followed closely by hospital management. Management's initiatives will better position the organization for the anticipated reductions that the federal and state governments take.

Senior management and the Finance Committee have been reviewing components of the 2012 budget and it would be discussed at the regular meeting of the SCKMC Board of Trustees on November 17.