HMH budget outlines surge in revenue, patient growth

Hardin Memorial Hospital adopted its 2013 budget Wednesday expecting revenues nearly $20 million greater than last year’s budget and eclipsing 2011 by $43 million.

With the surge in revenue comes a $21 million increase in expenses, HMH President and CEO Dennis Johnson said.

Cost increases are fueled by multiple factors, including an expansion of staff and expenses attached to the first phase of a federally mandated electronic medical record.

HMH has projected $243.4 million in revenues, including $82.9 million in acute services and $157.3 million in outpatient services. If the hospital meets expectations, outpatient revenue would grow more than 20 percent from last year.

The budget includes an across-the-board rate increase of 3.27 percent for patient services. Johnson said it is needed to keep pace with the market and health-care costs. The hospital routinely approves rate increases between 3 and 4 percent, he said.

Johnson said HMH expects an uptick in the number of patient days and discharges as well as moderate increases in emergency room visits, surgery patients and laboratory procedures, which are estimated to exceed 975,000.

The hospital expects growth, he said, because of a future hospitalist program, in which physicians are versed specifically in hospital medicine, and pulmonology services, which focus on respiratory care.

“This is a conservative budget,” Johnson said of the estimated increases. “We want to be conservative.”

The hospital also predicted a 203 percent increase in off-site radiology procedures, which is tied to the acquisition of Elizabethtown Diagnostic Imaging, Johnson said.

HMH also projected $241.7 million in expenses this year, led by $125.8 million in salaries and benefits, a 17.2 increase from last year’s total of $110.8 million. Johnson said the acquisition of multiple practices, their physicians and staff is the reason for the dramatic jump.

A small increase in hospital supplies is outlined at $44 million and $16.9 million has been set aside to cover bad debt, which is accrued when patients refuse to pay their bills. Charity care, which is utilized when patients cannot afford to pay, will make up about 4.9 percent of gross revenue at $26.7 million, according to the budget. Charity care partially is offset by the Disproportionate Share Hospital program, a federal allotment provided to hospitals that treat low-income or indigent patients.

Officials also budgeted roughly $3 million for the first phase of the electronic health record system, which HMH is implementing across its network. HMH will use a single system to access data including laboratory and radiology reports. Physicians will be equipped to sign patient charts and place orders electronically once it is fully implemented.

“It’s going to take spending money to get that money,” Johnson said.

The move to an electronic health record system is part of a federal mandate included in the Health Information Technology for Economic and Clinical Health Act of 2009 that was part of the American Recovery and Reinvestment Act.

The budget as approved indicates an expected surplus of $1.7 million from operations paired with $750,000 in non-operating gains that will push the total to $2.5 million, giving the hospital an operating margin of 0.7 percent.

Judge-Executive Harry Berry said the numbers outlined in the budget shows HMH has little room for error financially.

“That’s a pretty thin line to walk to operate a business,” he said.

Marty Finley can be reached at (270) 505-1762 or mfinley@thenewsenterprise.com.

In other news:

• The board received recommendations from Harshaw Trane for needed upgrades that would conserve energy and save the hospital money. The company recommended steam system upgrades, including the replacement of boilers and obsolete burners; and chilled water system upgrades, such as the installation of heat recovery units that can capture and reuse heat from the building and the installation of emergency chilled water taps and a electrical connection for a rental chiller. The report also suggested the hospital upgrade its control interfaces that manage energy sources and install flow meters to manage the output of chilled water, steam and hot water. Additionally, the company said the hospital could replace a 27-year-old air handling rooftop unit; repair leaking air handling doors; and upgrade the hospital, parking lot and parking garage with higher efficiency lighting. Implementing all of the suggestions would cost roughly $3.5 million but provide an annual savings of more than half a million dollars and a return on investment in little more than six years.
• The board approved a policy requiring all capital expenses $150,000 or more to be reviewed and approved by trustees. Previously, all projects that cost $100,000 and above had to be approved by the board.