During a special budget meeting on Thursday (5-19-16), the Assembly had the chance to take the financial pulse of Sitka Community Hospital.
The financial picture at Sitka Community Hospital is like the tortoise: slow and steady, but determined. The city-owned hospital is still recovering from the discovery of a cash flow problem in 2014.
That crisis was brought up several times during Thursday night’s special Assembly meeting (5-19-16), devoted to the hospital budget. And while there was some disagreement on whether the hospital can make as much money as it’s budgeted for, the Assembly applauded leadership for inching back into the black.
In March of last year, Sitka Community Hospital had only 18 days of cash on hand. And this March? They have 70 days. But how good is that? Assemblyman Matthew Hunter posed that question to hospital CFO Cynthia Brandt.
Hunter: What number of days of cash on hand is a healthy number for a hospital? Is it three months? 30 days of operation?
Brandt: Well, it would be nice to have another digit.
Hunter: Yeah!
Brandt: Getting up above 100 is a good place to me.
Brandt walked Mayor Mim McConnell and the five-member Assembly (Ben Miyasato and Tristan Guevin were absent) through the FY17 budget line by line. And if the hospital was a person, recovering from a severe illness, the prognosis would be a hopeful one.
Draft of the hospital budget, approved by the Assembly: Budget Presentation – FY17
CEO Rob Allen told KCAW, “We are below budget on the expense side because we’ve been really, really paying attention to that and scrutinizing it. Our cash situation is much better, so we have a little bit more a reserve, a little bit more of a cushion. It’s just, ‘What can we do now to improve that income side?’”
To boost income, Sitka Community Hospital has increased prices by 6%. They’re budgeting for full staff in the clinic, which would allow for 11 long term care beds, instead of ten.
Recently, they’ve put more effort into marketing the hospital’s offerings, particularly for long term care and swing beds. Those are beds where physicians can adjust, or “swing” patients from one level of care to another and they can be landing pads for patients coming from other places.
Allen explained, “Somebody from Sitka goes to Harborview. They have surgery and they want to recover at home. If we have a good working relationship with them, then we get them up here in a swing bed for 3-4 days so they can finish out their recovery. People would much rather be closer to home.”
But all of this anticipated revenue depends on patients. Like any business, you need paying customers and in March, Allen says, the hospital fell behind budget because so few patients came through the door. Allen doesn’t know why. He said, “In fact, I was just talking to Raine, our Chief Nurse Officer, and she was saying, ‘You know, we had a three day period in March where we had no inpatients.’ She’s been here 7-8 years, and she’s never seen that before.”
In contrast, April and May have seen a surge in patients. During Thursday night’s meeting (5-19-16), Assemblyman Steven Eisenbeisz asked what the hospital will do if they have another empty-bed month like March.
Allen said that one month is an anomaly, but if it were hypothetically to continue, the hospital would have to adjust staff load. After all, 70% of the hospital’s budget is personnel. ”
Allen told the Assembly, “We can adjust a little bit with some low census flexing, a little bit, for when we have those slow periods, but if it goes on for month after month after month, you’re definitely going to be laying people off.”
But for now, Allen is optimistic that patient traffic will grow. It’s built into the budget, which accounts for a positive bottom line of $3.2 million, that’s $1 million than last year. And of that, the hospital plans to put $400,000 in cash towards repaying the city’s $1 million loan. That was an extension on a line of credit to bail out the hospital last year.
It all sounded good, but the Assembly wanted to know what the city’s Chief Administrative Officer Jay Sweeney thought. His main worry: What happens if the hospital doesn’t make as much money as it thinks it will? They’d hurt their cash flow or not be able to pay the city back. So, he told Mayor Mim McConnell he’d like to them set more money aside.
Sweeney: If I could raise a magic wand, we’d be seeing on page 6 on the bottom line includes an increase in working capital on top of repaying the debt and the cash investments.
McConnell: Then you know there’s a buffer.
Sweeney: Yes. But I think it’s an extraordinary budget. The turnaround is wonderful.
The Assembly agreed. It’s been an amazing turnaround. They approved the budget by a unanimous vote and told Allen they expect to hear from him again in July. That’s when Sitka Community Hospital and SEARHC will present a proposal for cooperative management, looking for overlaps and ways to combine forces.
