Whidbey General Hospital officials heard a familiar story during its Monday evening regular board meeting — the hospital needs to find a way to bring in more revenue while cutting operating costs.
The information about the hospital’s financial condition was presented by Don Hansen, a certified public accountant with Moss Adams, an Everett-based firm that conducted an independent audit of the hospital’s finances.
Hansen’s message is similar to what hospital officials have been saying for months. Hospital officials is trying to improve their financial situation by going through a series of cutbacks and layoffs that will save the hospital $135,000 a month.
The hospital had to make the cutbacks because it lost more than $700,000 in 2002. The hospital then had very poor month in May where a combination of low patient numbers and higher than budgeted writeoffs caused the hospital to lose more than $600,000.
“We didn’t wait until the audit report,” said hospital CEO Scott Rhine after the meeting. “What we’re focusing on is that we need to have and an operating margin between 3 percent and 5 percent.”
He added that the margin is needed to ensure the hospital can remain competitive by maintaining and upgrading its equipment and continue paying competitive wages.
The financial audit was first heard during the Monday evening board meeting. Originally, the board scheduled a special meeting at 5 p.m., where the board and auditor could talk about the results, but that was canceled when a member of the public insisted on being present.
According to the audit presentation, the hospital’s 2002 operating margin for 2002 was minus 4.9 percent and the hospital’s excess margin (a number the hospital administration puts more stock in) was minus 1.9 percent.
Hansen pointed out that Whidbey General Hospital is in a similar position to other hospitals in the state.
“More than half of the hospitals in the state have negative operating margins,” Hansen said.
He recommended the hospital increase its cash reserves, evaluate service lines and prioritize what it can afford and what it must provide.
He added that the hospital needs to continue updating its facility even though the hospital went through a recent remodel.
He noted that the costs to upgrade the hospital will increase in the future.
“It’s a vicious circle … the more you spend the more you have to pay to maintain it,” Hansen said.
He said that funding capital projects is one of the most significant needs facing the industry because aging facilities need to be replaced or modernized as new technology develops.
Hospitals need to continually update their facilities as the population grows and ages.
Hansen said the hospital should eliminate more employees, since Whidbey General’s staffing levels are higher than other comparable hospitals in the area. However, Rhine said during the meeting that the recent layoffs lower the hospital’s staffing levels to that of comparable hospitals.
Hansen also said the hospital has to reduce the percentage of revenue devoted to salaries and benefits.
More than 60 percent of the hospital’s revenue goes toward wages, he said. “We’d love to see you get down to the low fifties.”
The board also discussed other financial issues that are affecting the hospital such as complying with the Health Insurance Portability and Accountability Act and how to deal with staffing problems, higher insurance premiums and expenses.
