On firmer footing
Methodist Hospitals sees first profit in six years
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.