A financial recovery effort at Southwest Memorial Hospital is gaining momentum, officials said during a public forum Wednesday.
About 40 citizens and hospital staff attended the quarterly joint board meeting between the Montezuma County Hospital District and Southwest Health System, the nonprofit corporation that operates the hospital.
Southwest Health CEO Tony Sudduth presented a financial update on the encouraging results of an aggressive recovery effort that began after the public was notified in May that the hospital was in danger of failing.
In July, SHS hired Community Hospital Corp., which brought in a team of executives who specialize in financial recovery.
The turnaround began in August with 40 layoffs and a restructuring plan. Officials said that while painful for the community, the reduction in staff positions was needed because labor costs were far outstripping patient revenues.
Southwest was overstaffed when compared with hospitals of similar size and market, Sudduth said.
Through layoffs and attrition, staffing dropped from 461 in January 2018 to 399 today. The downsizing of staff, reduced benefit packages, and less contract labor saves the hospital $8.4 million per year, Sudduth said, and “places us back in a positive financial position.”
Sudduth said that “as promised” when permanent positions came open, laid-off workers were considered first, and 17 were hired back. A popular orthopedic surgeon who was originally let go, was also rehired under a new contract.
The financial crisis led to a severe reduction in days cash-on-hand, a measure of hospital fiscal health. The situation put SHS in violation of a bonding agreement that funded a recently completed $32 million expansion.
SHS’s cash position has improved, going from 15 days’ worth in August to 37 days this month. SHS is required to keep 81 days’ cash on hand, about $13 million. It takes $165,000 per day to operate the hospital.
Sudduth said they are on track to reach 50 days’ cash by year’s end, a target required under a forbearance agreement with lenders.
Patient revenues and profits are also on the rise. The first six months of 2018 showed a $2.5 million loss, compared with the past six months, which showed $1.2 million in net gains.
“That equals a $3.7 million improvement,” Sudduth said. “We are looking forward to 2019 maintaining operation improvements.”
Other highlightsFebruary 2019 showed a $70,000 profit, compared with February 2018’s $160,000 loss. The year-to-date profits are at $846,000, compared with the position at the same time last year of a $1.2 million loss.As part of the expansion project, Southwest built a new modern patient wing, EMS station and a three-story medical office building to consolidate medical clinics and services. They have been liquidating off-campus properties, and have buyers lined up for unneeded buildings in Cortez and Dolores, Sudduth said.Managers are embarking on a campaign to promote Southwest’s medical services to local residents. A study shows that 40 percent of medical care provided to Montezuma County residents happens outside the county. “We want to bring those patients into our system,” Sudduth said.2019 goals include increase utilization of Women’s Center, expanding the sleep program services, expanding general surgery, and improving company culture to assure “patient-first attitude.”To fill a need for family practice, internal medicine and orthopedic services, SHS hired Dr. Susan Laningham, internal medicine; Nurse Practitioner Melissa Sims, family practice; Dr. Kenneth Ness, internal medicine; and orthopedic surgeon Dr. Doug Baage.Aging infrastructure is an upcoming expense, officials said. Approximately $10 million is needed to replace and upgrade building facilities over the next five years. The MCHD board is applying for a $200,000 Department of Local Affairs grant to draw up the plans and design work. MCHD plans to match the grant, and Southwest Health System has pledged $20,000 toward the effort. SHS also intends to invest in a major overhaul of the H-VAC system.“We’re not out of the woods,” said Craig Sims, senior vice president for operations of Community Hospital Corp. “Our mission is to preserve rural hospitals for the communities they serve. We see rural hospitals struggling nationwide, and sometimes we get called in too late, but your hospital is viable.”
A finance committee has been reformed to provide oversight of hospital financials, officials said, and a facilities committee is meeting regularly to address infrastructure needs.
Sudduth said Southwest is closely watching some 40 health care-related bills in the Colorado Legislature, with many that could adversely impact rural hospitals. Gov. Jared Polis has made lowering health care costs a priority. The Western Slope has some of the highest insurance premiums in the country.
It’s important that rural southwest Colorado has a voice in the legislative process, Sudduth said.
“A lot of what we are hearing are based on what is happening around Denver, and we want to make sure there is some protection for rural providers,” he said. “We are improving, but if we took a major hit in reimbursement, things could turn around quickly.”
The SHS board is also seeing some changes. Board members Terry Cook and Steve Fusco stepped down after serving four years and seven years, respectively. Shirley Jones and Dan Valverde have joined the board and will serve with board members Tom Rice and Cody Burke.
Rice said they are seeking additional board members. The application is on the SHS website.
In response to an audience question about SHS employees serving on the board, Rice said only two are allowed to serve. He said the board recognizes it presents a conflict of interest concern and could put the board member in a difficult position at times.
But due to a “limited bench” of health-care expertise in the area, SHS believes tapping into the knowledge of employees willing to serve on the board is reasonable.