Hospital Board approves budget

Hospital Board approves budget

Michele Ellson
Alameda Hospital

The board that oversees Alameda Hospital approved a new budget Wednesday whose success is premised on the strength of new programs hospital managers hope will boost the financially troubled hospital’s revenues into the black.

The Alameda Health Care District Board voted 3-1 to approve the budget, with longtime hospital critic Elliott Gorelick voting against approval and Robert Deutsch not present for the early morning meeting.

The hospital’s managers expect it to earn $613,695 this year on revenues of $74.8 million and $6.1 million in parcel tax funds. Those revenue figures are powered by the addition of a new wound care program, a new orthopedic program and the hospital’s takeover of the Waters Edge nursing home.

“We’re a small acute care hospital … with a certain amount of core expense,” Chief Financial Officer Kerry J. Easthope said. “The hospital needs a certain amount of revenue base to support that expense.”

The hospital suffered estimated losses of $1.9 million for the fiscal year that closed in June, unaudited budget documents showed – $600,000 higher than estimated earlier. Hospital managers had forecast earnings of $525,000, expectations that they said were frustrated by delays in the start dates of the new programs.

Board members sought assurances that the current budget projections are accurate, with Board President Jordan Battani requesting monthly tracking of key performance indicators. The hospital suffered a loss of $262,000 in June and was on track to lose $179,000 in July, Gorelick noted.

“All of the board members are very concerned about the accuracy of our forecasting and really, the ability to meet this budget,” Battani said.

The hospital’s expenses were $588,000 above budget last year, unaudited financials showed, a number Battani attributed in part to the cost of consultants the hospital hired to effect the Waters Edge deal and to clean up its billing. Patient loads were largely steady, though the number of emergency room visits to the hospital and the average length of time patients stayed there declined.

Its net assets declined to $6.96 million – below the $7.5 million the Bank of Alameda expects the hospital to maintain as part of an existing loan agreement for the wound care center and an anticipated loan on a pair of properties the hospital owns. Easthope said he has had “a couple of discussions” with the bank on the hospital’s failure to meet that and other loan terms, and that they bank’s loan committee would discuss the new loan on August 2.

But Easthope sounded one bright note for the year, saying the hospital’s net revenues were $1.2 million higher than the year before. And he said hospital leaders’ decisions to outsource its rehabilitation services and billing are increasing revenues.

Alameda Hospital’s finances have deteriorated steadily over the past decade, taking a big hit when Kaiser Permanente opted to let a contract to use its operating rooms expire in 2010. Chief Executive Officer Deborah E. Stebbins has said the hospital needs to attract more patients in order to reverse the trend, and the new programs represent hospital managers’ efforts to do that.

The wound care program opened for business last week and the Waters Edge takeover is expected to occur on August 1. And a pair of orthopedic surgeons is slated to start an orthopedic program here in October.

They expect to pull in nearly $2 million in net revenues from the new programs, a newly approved program of goals and objectives showed, with $1.34 million expected to come from Waters Edge and another $596,000 from the new orthopedic program.

But the programs were plagued by delays that included protracted lease negotiations for the wound care center space and a lengthy wait for federal approval for the Waters Edge transfer. Those delays contributed to last year’s losses, Easthope said. They also contributed to a three-and-a-half week delay in approving the budget, he said, as hospital managers scrambled to answer board members’ questions about how they would steer the hospital through several more months of anticipated losses.

Separately, the board okayed a new contract for the outside firm that has been managing much of the hospital’s billing. HFS Consulting will earn a flat fee of $30,000 a month plus expenses, or $53,000 more for the year than keeping the service in-house would have cost.

The firm has been the hospital’s billing service since November 2011, after the hospital conducted a review of its business office and a number of its billing personnel left. Between December 2011 and this past June, average monthly collections were $400,000 greater than they had been in the previous seven months, a report drafted by Easthope said.

The board also approved a set of goals and objectives for this year 2-0, with Battani and Stewart Chen voting in favor of the plan and Gorelick abstaining. Hospital managers’ goals for this year include improving the hospital’s bottom line and other key financial indicators, meeting revenue targets for its new programs, advancing discussions with potential partners and drawing more of the Island’s Asian residents in for care.

The goals also include making “sufficient progress” on a host of upgrades needed to maintain federal Medicare funding and to be eligible for an extension on state seismic safety requirements. The board also approved a $1.9 million capital budget on Wednesday that included those fixes.

Related: Hospital board holds off on budget

Hospital leaders okay new services intended to stanch flow of red ink

Hospital managers get tentative okay to start seismic equipment fixes

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