Memorial’s loss of income during July and August hasn’t deterred interest from for-profit hospital HealthOne.
The group’s representative here in the Springs, Kevin Walker, said HealthOne is waiting on the final Request for Proposals from the city.
“They’re still interested,” he said. “We’re all just waiting for the details of the RFP. Depending on what that says, then they’ll decide whether to bid or not.”
Memorial’s CEO Dr. Larry McEvoy delievered grim financial news at Monday’s informal city council meeting: the hospital system has four months to clean up its balance sheet, or it could face a management takeover from a company chosen by bondholders.
Memorial lost $14.5 million in revenue during July, and thanks to a floundering stock market, an additional $9.3 million in August. Overall, it’s net income is down 88 percent from last year.
Those losses put Memorial at risk of violating its bond covenants, which require it to have a certain amount of profits.
The hospital’s administration is responding by cutting hours, halting construction projects and requiring purchases over $1,000 to receive approval at the vice presidential level.
At first glance, Memorial’s situation doesn’t seem dire, McEvoy said.
“We have plenty of cash on hand,” said Dr. Larry McEvoy, CEO of the hospital system. “But our revenue, our cash flow, isn’t where it should be, and this time period from July 1 to Dec. 31 puts us on the hook.”
McEvoy says Memorial is on the hook to the holders of its $240 million in bonds because bond holders take a six-month look at the financial health of institutions. That gives them until the end of the year to come up with a solution.
“We’ve been here before, in 2008, and we took steps,” he said. “We can get out of this again.”
McEvoy alluded to a plan to fix the financial health of the system, which has faced monthly decreases in patient volume and the resulting loss of revenue since the beginning of the year.
“We can’t control some things – we can’t control the debate over governance and ownership,” he said. “But we are going to focus on the things we can control: building relationships with physicians and focusing internally on changes that need to be made.”
As to what management company might take over the municipally owned hospital system, McEvoy said it was up to the bond holders.
“And they are going to take a look at the fiscal issues, and take steps – not at what’s best for patients,” he said. “That’s why we have to fix this before then, and we will.”
When pressed, McEvoy said the problem could be fixed immediately by laying off 300 of its 4,100-member workforce.
“But then you’d have to wonder if you had fired someone today that you need to work tomorrow,” he said. “If you do this the wrong way, you’ll end up with a financially solvent organization that’s going to die anyway.”
McEvoy blamed both the uncertainty surrounding the hospital’s future and the tumultuous stock market for the hospital’s financial woes.
“We’re getting beaten by sentiment,” he said. “That’s just the way it is. It’s affected morale, it’s affected recruitment and it’s affected patient volume.”
Memorial is seeing fewer patients, he said, because doctors are sending patients to other hospitals in light of Memorial’s political climate.
“We have to build those relationships with physicians,” he said. “That’s one way we’re going to dig ourselves out of this. I don’t like this mess, but as an ER doctor, I’ve been in messes that I didn’t like before – and gotten out of them.”
In many ways, McEvoy’s presentation echoed what doctors had told the city council just two weeks before – Memorial is suffering. It also was a replay of Mike Schialdone’s fianancial update earlier this year: uncertainty and political games are undermining the financial health of the system.
“Our strategy is to build a regional hospital with regional partners, headquartered in the Springs,” McEvoy told them. “Until the decision on the future is made, our strategy has become very short term.”
McEvoy’s plan to cut costs:
- N o new job postings or hires – unless they are mission critical. All current open positions will be put on hold or filled only if they are mission critical.
- Full time and part time staff will have the option of reducinghours without losing benefits.
- Employees can take up to four months off without losing benefits. Paid Time Off can be used during the leave or it can be taken unpaid.
- Retirement eligible staff will be abile to retire with payment of health benefits for several months.
- Policies for on-call staff are being reviewed.
- All areas must meet or surpass the 50th percile proeudtiveity standard.
- The Stewardship Committee is focusing on cutting supply costs.
- No new contracts or consulting arrangements without vice president review and all existing contracts and consultants willb e reviewed for reduction or termination.
- All expenses more than $1,000 will be reviewed by a vice president.
- All new construction or renovation projects will cease unless mission-critical.
- No travel expenses.
- No relocation expenses, unless it’s for a physician recruit.