TR Health board accepts Service Demand Analysis

Budgetary issues were in the spotlight during the Three Rivers Health Authority Board discussed a “Service Demand Analysis” being used to develop the Three Rivers Health budget for 2010.

The analysis forecasts an increase of 205 admissions over 2009, a number that represents a 12 percent increase over the current year.

Steve Andrews, Vice-President of Finance, said, “These are the initial budget projections that we are working with. They could change when the final budget is presented, but this is what we are starting with.”

“Transfers” are a key factor in the projected increase in “acute admissions.” In the words of the analysis, “We expected to increase admissions by 137 next year, due to reducing the transfer north. We fully expected the ER Group, and the hospitalist to work together to accomplish this. … The projected increase due to reduced transfers (137) is 15 percent of the total projected transfers for 2009.”

The analysis also forecasts increases in the areas of obstetrics, inpatient surgeries, rehab admissions, and outpatient utilization.

Regarding labor cost, the analysis says, “We project labor costs to reduce as compared to volumes for 2010. We expect to add two new positions in 2010, one in Sales for Rehab and Homecare, and one in Information Systems. This may change after the budget process is complete, but as of today, that is our goal. We will see reduced man-hours in 2010, as the IS conversion hours will be eliminated. The remaining man-hour reductions will be from the reduction of overtime, as well as through attrition of positions.”

Regarding “financial class mix,” the analysis says, “The hospital has seen a payer shift over the last two years, thought the shift has somewhat stabilized. This ultimately means that we will continue to have higher self-pay, and lower Commercial utilization that we did a year ago.”

Board member Andy Goldberger expressed concern about the projections. He said, “We are projecting a number of areas of increased numbers that would ultimately increase our revenue, even though we’re going to take an eight percent hit in Medicaid shortly. I have a lot of issues with projecting more people coming through that front door and staying in this hospital in 2010 than we had in 2009 or event 2008.”

Goldberger said, “The 2010-11 year statewide is going to be worse than it is now.”

Board Chairman Larry Clark said he understands the concerns raised by Goldberger, but said, “We’ve hired Mr. Russell (new CEO Bill Russell) to do some turnaround things and I think, that being the case, we should have certain expectations in terms of market share, issues of physician retention and improvement. I think the budget ought to reflect some our expectations in terms of success issues related to those subjects.” Clark added, “I understand what you’re saying and I think the budget ought to be realistic, but I think, to some degree, there ought to be some carrots in the budget in terms of what our expectations are.”

Russell said, “We’re seen erosion the last two or three years, erosion of our market share.” Regarding that erosion, Russell said, “We’re just not capturing them, partly because of transfers, partly because of simple outmigration. What we’re proposing is that we respond to that and start fulfilling our mission, which is to serve the health care needs of people in our primary service area.”

Russell noted his news on the scene and said, “This is the first budget in this organization. I’m not going to overstretch. I’d rather under promise and over perform than the other way around. Let me be candid. This volume is here – it’s already here. We’re just not capturing it. Given the current state of St. Joseph County’s economy, this work is being done, here and elsewhere. What we’re proposing here is not to gain new share. It’s to recapture old share.”

The end point of the conversation was board acceptance of the “Service Demand Analysis” – with a dissenting vote from Goldberger.

It’s anticipated that the 2010 budget will be an agenda item for the next Three Rivers Health Authority Board meeting on December 17th.