Addressing HMH financials

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Editorial: July 13, 2014

ISSUE: Back-to-back losses at HMH
OUR VIEW: Other options should be considered

Not too long ago, the controversy surrounding revenue generated by Hardin Memorial Hospital focused upon how much of a “dividend” Hardin Fiscal Court might take and how it would be applied to other county needs.

After two years of multi-million dollar losses, that debate is long forgotten.

In the preceding decade, the county-owned hospital had an annual revenue surplus. Over the course of 10 years, it equals about $67 million in profit for the local operation.

The changing face of health care is quite dramatic and the sweeping financial downturn experienced locally is common. That makes it no less disturbing, however.

While exact figures are not yet available, the board of trustees was told the budget year that ended June 30 was projected to finish $5.8 million in the hole. That follows a loss of about $5.4 million in 2013.

How long can Hardin Memorial Health continue to operate with losses of that amount? With reserves of $36 million in the form of funded depreciation, the savings will hold out about seven years at this rate.

Everyone involved is working to change the trend. The budget proposal approved 8-1 by hospital trustees, who also are the elected members of Hardin Fiscal Court, anticipates a positive margin of $139,000 in the next fiscal year.

In discussing the budget and this fiscal year’s significant shortfall, Magistrate Doug Goodman said he believes the estimates are misguided. He said he considered it unrealistic considering financial troubles of the past few years and the large hole the hospital finds itself in. Finding revenue sources capable of producing a surplus when the hospital’s ratio of patients with commercial insurance is declining seems unlikely, Goodman said.

When questioned, Goodman offered no alternatives or suggestions. However, that does not make his challenge any less viable or diminish his argument.

As a trustee, he is not charged with drafting the budget. The board is responsible for protecting the community’s interests by asking appropriate questions and chartering a course for change.

Goodman’s interest in hospital finances also led him to request copies of physician contracts. That request was denied by HMH but the state attorney general has determined the hospital acted in violation of Kentucky’s open records law.

The fact that a magistrate and member of the hospital board even had to utilize the open records law to request pertinent and available documents is indicative of a breakdown in trust between hospital management and the trustee.

Regardless of any perceived political motivation, Goodman clearly is acting within the confines of his role.

On the other hand, the hospital has valid concerns about making copies of physician contracts public. It is yet another complicating aspect of operating transparently as a public hospital in a highly competitive field.

Perhaps that’s the issue which should be aggressively considered. Is it in the best interest of HMH and of Hardin County residents that the hospital remain a public entity?

For many reasons, HMH is a cherished part of our community. It provides critically needed medical services in a routinely excellent manner. Beyond any industry or retail segment, it is a massive, local employer. Over the past six decades, it has helped Elizabethtown and Hardin County to become a regional hub by attracting hundreds upon hundreds of medical professionals. As a community partner, HMH provides financial, physical and staff resources to any number of benevolent and social events across the region.

The community, in general, is proud of HMH and what it does.

In light of that view, Hardin County government should maintain ownership of the hospital. But in this national environment of change and the present financial realities, it does not necessarily make sense to maintain its operating role.

This is not to suggest the hospital should be sold to a private entity.

However, it is time to rethink the idea of contracting with a hospital management company and paying a fee for that service. Instead, HMH could be leased to an operator.

That private entity then could manage the hospital on even footing with the corporate giants with which it must compete.

In turn, the leasing agent would absorb the risk related to profitability.

And in exchange, county government would be assured a contractual-determined lease revenue as opposed to now when it instead pays a fee for operation.

It’s a different way to handle the same chores which provides for continued community ownership and ensures a revenue for the county investment. Meanwhile, it provides the hospital professionals with greater freedom and a greater financial incentive to achieve their goals.

The time has come to consider other operational options. Let’s not wait seven years for the surplus to dissipate.

This editorial reflects a consensus of The News-Enterprise editorial board.