St. James Economic Outlook
February 08, 2011
The following article by Tim Trainor of The Montana Standard appeared on February 6, 2011
Management at St. James Healthcare hoped 2009 would mark the end of layoffs and the return of growth and profit. But it didn't turn out that way. St. James lost about $5 million overall in 2010, despite cutting 40 positions and trimming hours for another 50 employees back in July. Chief Executive Officer Chuck Wright and Chief Financial Officer Jay Doyle said a decrease in admissions and an increase in uncompensated care contributed to the debt.
St. James lost $14.2 million last year because of patients who either could not or did not pay their hospital bills. Doyle said about 12 percent of their customers did not have health insurance in 2010, a large percentage of whom become bad debt.
"For an organization like this (losing $14.2 million in charity care) makes it difficult to try to make some money," Doyle said. And that's the struggle for hospital management. St. James is a Sisters of Charity of Leavenworth Health System hospital, and it is a nonprofit. But Doyle said the hospital needs to make money so it can reinvest those funds in the facility.
St. James spent more than $1.5 million in new equipment last year alone, from routine capital improvements to new medical equipment. The organization received a loan for that work from headquarters, but in the future, cash will need to be raised locally.
The non-clinical layoffs in July were an attempt to cut expenditures and increase profits. "We did that about six months ago, and it went quite a long way toward getting our costs where we want them," said Wright. But compensation packages and other short-term fees were substantial, and the financial fallout from that decision will not be fully felt until the 2011 fiscal year, Wright said.
REFORM A BIG QUESTION MARK
No one is quite sure of the effect national health care reform will have on St. James in particular, and the industry in general. Wright said the March 2010 law signed by President Obama may start to impact them in 2011. In the short run, Wright believes that there will be positives, especially the new laws that allow people with pre-existing conditions to qualify for health insurance. But in the long run, Wright remains unsure.
"That's the hard part," he said. "There is a lot we just don't know, and it's hard to do any type of planning when we don't know what reform will look like."
The hospital is now concentrating on things they can control - like their own spending, recruiting new doctors, and increasing admissions. Physician recruitment was one bright spot in 2010, and Wright said he thinks St. James will be able to add more doctors in the coming year. Specialists often can help bring additional revenue to a hospital. "It's a real challenge for us," Wright said. "But I think as a community we have some great tools to bring some more docs in."
As for the low patient numbers, the economy seems to be the main culprit. Those in the health care business that believed their industry would be immune to economic pressures were mistaken. Patient loads are down in Butte as well as nationwide.
Doyle said that is bad news for St. James' bottom line and for the health of the community. When elective surgeries and preventive care is postponed, those patients are more apt to end up in the emergency room later on, costing more for both the hospital and the patient. Even last year, emergency room visits were very strong, with 15,476 visits.
Wright remains confident, however, that economic improvements can bring patients and profits back to St. James. He said employment levels are where they need to be for 2011, and that the hospital is well-positioned to bring in more income. Whether or not that translates into positive cash flow for 2011, remains to be seen.