MORGANTOWN — After finishing fiscal year 2018 more than $26 million in the red, Mon Health System hopes a turnaround strategy can return it to break-even status during 2019, the interim president said.
Tom Senker, who also serves as CEO, acknowledged “this organization went through some difficult times.”
The Dominion Post obtained internal financial documents reflecting year-to-date figures from March and May, and reviewed those with Senker. He did not disclose the corresponding reports through the end of the fiscal year June 30, but revealed some of the numbers and explored some of the issues contributing to the difficult times.
At the end of May, the system was $26.9 million in the red, but Senker showed it had rallied somewhat in the final month to finish with a $26.5 million loss, partly due to the operations improvement plan reported by the Dominion Post in July.
The hospital itself — Mon Health Medical Center — was the only one of eight system segments to finish in the black, with $7.5 million surplus.
The biggest drain was Mon Physician Services, which had lost $19.7 million through the end of May. The end-of-year figure wasn’t available.
One internal document described the “rapid acquisition of physician services” over the past three years, and the costs associated with absorbing and integrating private practices into the hospital system.
Those investments eventually will pay off, but the acquisition created new expenses and will take time to build those practices under the wing of the hospital, Senker said.
Offering a broad view, Senker said Mon Health’s struggles aren’t unusual in the industry, where changes stemming from the Affordable Care Act have made it uneconomical to run private practices.
There’s a double-edged sword to acquiring practices. They bring along patients and revenue but also bring the costs of hiring employees and unifying technology. It’s typical industry-wide for a hospital to subsidize a practice at an average cost of $150,000 per physician.
Total patient volume fell about 9 percent to 10 percent during the past 12-18 months, Senker said. That can be seen in the net patient revenue: It climbed from $259 million in 2016 to $283.3 million in 2017. This year’s end-of-May budget projection was $282.6 million, but actual income only reached $244.3 million.
Another factor affecting the bottom line is insurers shifting patients away from more expensive inpatient care to less expensive outpatient care.
“Care is getting better. Technology is getting more advanced, and it’s wonderful. But it’s taken its toll on organizations in terms of the inpatient business,” Senker said.
Helping offset that is Mon’s joint venture with participating physicians to run the day surgery center located at its new three-building campus just off W.Va .705. (“We’re planning for the future there,” Senker said.)
Looking back, however, he added: “The growth was pretty aggressive and did stretch some of the resources over the past 18 months.”
Other factors that contributed were increased salaries and the hiring last year of four cardiologists who couldn’t start work until March because of non-compete clauses from their old employer. They’re generating revenue now but were paid for several months while biding their time.
Eroding referral sources in secondary markets where other competitors, including WVU, are expanding also hurt.
As did what one document gently refers to as “executive management changes.” That was the resignation of previous CEO Darryl Duncan in March and the brief interim CEO stint of former Chief Operating Officer Dottie Oakes the same month.
In July, Duncan was arrested and charged with one count of harassment, a misdemeanor, for allegedly sending harassing emails and letters to his replacement. (It remains unclear if that was Oakes.) A letter signed by 28 physicians in January said Duncan’s leadership style eroded employee morale and led to high-profile resignations. He was placed on a leave of absence Feb. 7.
Monongalia County Magistrate Court records show that Duncan has a bench trial scheduled for Oct. 17.
Amid the upheaval, Senker emphasized Mon Health has been recognized for its quality of care, positive patient experience and patient safety. Through the operations improvement plan, the system plans to ensure it has appropriate business practices.
As reported in July, corresponding with a Mon Health Medical Center pay freeze enacted at the time, the human resources and finance departments will review compensation programs and provide recommendations for possible revisions. Changes will be contingent on the success of the operations improvement plan. The plan will address several areas: pharmacy, revenue cycle, physician practice, clinical care practice, strategic sourcing and workforce efficiency.
Asked about possible layoffs, Senker said the workforce piece of the plan has multiple components:
“We have to make sure we’re staffed appropriately on a day-to-day basis for the volumes that we have. You can’t afford to be inefficient in the business operation.”
That means reducing management costs as well. There may be some combination of positions, he said, and perhaps selective elimination of others.
Mon Health System employs 2,393 people total, with 1,550 of them working at Mon Health Medical Center, plus doctors.
“There is no indication that there would be any kind of massive layoff.”
In view of Mon Health’s financial dip, some have worried that debt service coverage ratios would fall short and bond interest rates would go up. At the end of March, the ratio — according to one internal document — was .85, meaning it had negative cash flow and only enough income to cover 85 percent of its debt payments.
This fell short of its bond covenant figure of 1.10.
But they’ve turned that around, Senker said, and finished FY 2018 with a ratio of 1.44, well above the requirement.
Senker recently received a visit from a bondholder group and told them the story of the system’s turnaround efforts. “I was very pleased that they walked out of here very confident. I think it’s clear that we are on our way.”
Senker entered his interim role aiming to stabilize the organization through the current struggles while preparing it for a profitable future.
Along those lines, Mon Health System finished the fiscal year in a stronger position than it started, and aim to break even in FY 2019, projecting Mon Health Medical Center revenue to be about $25.5 million in the black (compared to $7.5 million this year and $26.8 million in FY 2017).
That will help offset expected continued losses in the physician practice, he said.
A third objective was to recruit a permanent CEO. That search is expected to be completed by September.
“There’s a very good spirit here,” Senker said. And a good community response, along with opportunities to further improve partnerships with WVU. “It’s all a very, very positive future for this organization.”
Morgantown Area News
'Friday, April 19, 2024'
