Hospital plan has millions in cuts, new revenue

A strategic plan by WhidbeyHealth’s interim CEO stabilized the public hospital district’s finances.

A strategic plan set in motion by WhidbeyHealth’s interim CEO has stabilized the public hospital district’s finances and should result in continued improvements next year.

Yet challenges remain, including building public trust in the hospital system, increasing staff wages that remain below comparable pay and continuing to reinforce the renewed relationship between the administration and medical staff. The temporary top official also wants to find creative ways to raise $10 million to spur renewal.

Michael Layfield, who serves as interim CEO through HealthTechS3 management firm, presented the hospital board with a draft of a strategic plan at the most recent meeting. It shows a combination of expense reductions and revenue opportunities this year and next.

“With hospitals our size, there are plenty of ways to make a profit,” he said in an interview last week. “We just haven’t been working effectively and efficiently.”

Layfield came in after the medical staff voted no confidence in top management and board members fired the CEO when they realized hospital finance problems were much more serious than they had been led to believe.

Layfield wants the public to know that the hospital is not on the brink of closure, especially now that concrete steps in the strategic plan have been taken; he admits that some of the actions should have been taken years ago. He said his decades of experience, together with that of interim CFO Jim Childers, informed their course of action.

On the reduction side of the ledger, the plan calls for cutting 14 full-time equivalent employees in both the hospital and clinical settings. That includes 2.6 FTEs in the family birthplace through attrition and 4.2 FTEs in the ICU.

The estimated cost savings from the staff reduction this year is $967,000 and next year is nearly $2 million.

Patients will not see any difference in service from the cuts, Layfield said.

The hospital also saw large cost savings through the restructuring of its contract with Sound Physicians, which provides the hospital with clinician staff. The new contract transitions to a Telehealth hospitalist coverage, eliminates an ARNP and RN position and replaces an ER doctor with an ARNP. The savings this year is $884,000 and the savings next year is $2 million.

On the positive side of the ledger, the biggest fiscal impact will be in swing beds. Layfield explained that patients who had major surgery at a large hospital may want to recover close to home on Whidbey Island. That’s where swing beds at WhidbeyHealth come in. A hospital bed can be switched from acute care to skilled care status and the hospital will be compensated for the average 7-10 day stay.

Layfield’s plan shows that the expected number of swing beds will grow to an average of two a day this year and three a day next year. That would mean an extra $2.7 million this year and an extra $4 million next year.

Layfield said hospital officials started a swing bed program a couple years ago but didn’t emphasize it for some reason and so made little money. That has changed, he said. The hospital is making a big effort with brochures and regular calls to big-city hospitals that is already paying off.

Another relatively straight-forward solution was to update the Medicaid Rural Health Clinic rate by submitting updated cost reports. Compared to 2019, the clinics are now collecting $100 more a visit from Medicaid.

In addition, Childers already increased the chargemaster — the list of official rates for services prior to negotiations — which hadn’t been changed in years; the hike was estimated to bring in an extra $750,000 this year and $1.5 million next year.

Overall, the draft plan cuts an estimated $2.7 million this year and $5.1 million next year. In addition, it increases revenues by an estimated $5.5 million this year and $7.5 million next year.

“We have not adapted this hospital in some ways to modern, innovative medical practices,” Layfield said.

While working to help turn around dozens of hospitals during his long career, Layfield said he encountered unique sets of problems at each institutions. As for WhidbeyHealth, he said the administration had divided the medical staff into two groups — those who worked directly for the hospital and those who didn’t — and treated them differently in terms of communication. The latter group wasn’t even included on the hospital’s website. It’s a situation he’d never seen before that needlessly created confusion and hard feelings.

Layfield said he’s worked long hours trying to repair relationships with medical staff, who are the heart of the hospital district.

The administration is also making an effort to talk to patients, staff and department heads, which he said hasn’t always been done in the past.

One goal is to encourage more women to have their babies at WhidbeyHealth, which has modern rooms with Jacuzzi tubs, refrigerators and an extra bed. Of the 900 babies born to Whidbey women each year, only 170 babies are born at WhidbeyHealth, according to Layfield.

Women’s services loses about $1.7 million a year, he said. He recently hired a new OB/GYN doctor.

In addition, Layfield has ideas for WhidbeyHealth Foundation, the nonprofit group that raises money for the hospital. He wants to create a system of targeted giving in which donors can choose a department to support. He also wants to go after large corporations and nonprofits from the Seattle area for large donations or sponsorships.

He said he would like to raise $10 million to improve staff wages, which he said are still 10-25% below competitive wages despite recent increases, as well as other improvements.

“We’ve stopped the bleeding and we are working toward stabilizing,” he said. “We don’t want to just survive. We want to thrive.”