On firmer foot­ing

Methodist Hos­pi­tals sees first profit in six years

Modern Healthcare - - Regional News - Gregg Blesch

Leaders of Methodist Hos­pi­tals, based in Gary, Ind., are herald­ing signs that their res­cue ef­forts have paid off. Unau­dited fi­nan­cial re­sults for the fis­cal year ended Dec. 31, 2009, show an op­er­at­ing mar­gin of $3.4 mil­lion com­pared with an op­er­at­ing loss of $40.5 mil­lion in 2008. It’s the first profit in six years for the two-cam­pus hospi­tal, which has its main fa­cil­ity in Gary and a sec­ond in nearby Mer­ril­lville, Ind.

Pres­i­dent and CEO Ian McFad­den said the turn­around was largely driven by ag­gres­sive cost con­trol. “The ma­jor­ity was ex­pense re­duc­tion, with the sup­port of doc­tors con­tin­u­ing to put busi­ness in the hospi­tal as we did the turn­around,” said McFad­den, who joined the strug­gling 484-bed not-for-profit hospi­tal in Septem­ber 2008.

McFad­den was joined later that month by new Chief Fi­nan­cial Of­fi­cer Loren Chan­dler, and they hired five other ex­ec­u­tives, start­ing with a clean slate af­ter the de­par­ture of man­age­ment un­der con­tract with turn­around firm FTI Cam­bio.

Specif­i­cally, Chan­dler said, $8.7 mil­lion was saved by re­plac­ing con­tract nurses with staff nurses; $8.4 mil­lion was found with the im­ple­men­ta­tion of bench­mark­ing and ac­count­abil­ity sys­tems; $2.3 mil­lion was cut with the clos­ing of a 47-bed skilled-nurs­ing unit; and an­other $3.7 mil­lion was saved by de­fer­ring re­pairs and main­te­nance and en­sur­ing the or­ga­ni­za­tion was get­ting the most out of its group-pur­chas­ing con­tracts.

Methodist’s op­er­at­ing per­for­mance, mean­while, im­proved to $275.3 mil­lion in 2009 from $268.4 mil­lion in 2008, a gain at­trib­uted in part to rene­go­ti­ated man­aged-care con­tracts and a slight bump in out­pa­tient vol­ume. Fac­tor­ing in re­cov­er­ing in­vest­ments with the im­proved con­di­tion of the fi­nan­cial mar­kets, Chan­dler said he ex­pects an over­all $15 mil­lion sur­plus com­pared with a $73 mil­lion loss in 2008.

The new fi­nan­cial foot­ing will al­low the hospi­tal to plan $26 mil­lion in cap­i­tal im­prove­ments in 2010 that will in­clude re­plac­ing beds that are 15 to 20 years old and ren­o­vat­ing pa­tient rooms. “The one thing we re­ally have to face is th­ese fa­cil­i­ties re­ally need to be up­dated in many re­spects,” McFad­den said. “It’s a very com­pet­i­tive mar­ket, with 12 hos­pi­tals in the two-county area we serve.”

Cap­i­tal im­prove­ments are planned at Methodist Hos­pi­tals’ Gary cam­pus.

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