Hospital budget approved; rates rise by 6.3 percent
By Phyllis Moore
Published in News on August 10, 2004 2:02 PM
A $147.7 million expense budget was passed today by Wayne Memorial Hospital's board of directors for the fiscal year that begins Oct. 1. The budget reflects a rate increase of 6.3 percent. That is a smaller raise than the 10 percent hike that was needed in 2003 last year to finance $139 million in expenses during the current year.
Hospital officials say the increase compares favorably with other hospitals similar in size.
The hospital's chief financial officer, Micheal Lucas, said the budget reflects the competing needs of the hospital. He said requests for salaries, care of patients, equipment and future construction projects were among the priorities, coupled with maintaining the hospital's financial position and credit standing.
"Last year, in 2003, we barely broke even," he said. "We're doing fairly well this year and it's going to be important for us to keep that up."
William Paugh, president and CEO of the hospital, said Wayne Memorial stacks up well against other hospitals.
"According to publicly released data, in 2003 Wayne Memorial's average charge per discharge, taking into account the complexity of the treatment provided, ranked 20 percent below the state median and 46th out of the 51 hospitals in eastern North Carolina," he said.
"Our charges are about 80 percent of what they would expect to find for a hospital of this complexity."
He called the rate increase a balancing act, dictated by the necessity to make adjustments for salaries and benefits for staff. More than half of the budget, 52 percent or $77.5 million, is designated for that.
Modest growth in the volume of patients is also predicted for next year, necessitating the need for additional staff. The average daily census of 189 patients is four more than the current year's anticipated level. Admissions are expected to increase by 234 patients, or 1.7 percent, to 13,840. The average length of stay remains at 5 days.
The hospital's capital budget of $8.5 million includes $5 million for upgrading and replacing medical equipment.
In looking at the capital needs for the next 10 years, Paugh said the hospital must position itself well to have the ability borrow money for upgrades. He said anticipated projects over the next decade are estimated to cost over $80 million.
Two big projects for the coming year, he said, are to purchase another CT scanner that will cost about $1.5 million and another $2 million to replace all the patient cardiac monitors throughout the hospital.
Overall, expenses at the hospital are forecasted to increase $8.7 million, or 6 percent.
At the same time, financial write-offs, bad debts and charity care continue to absorb a lot of the costs.
"Financial write-offs continue to be a challenge to the hospital," said Jean Lee, board vice-chairman and finance committee chairman. She said money that will not be collected is expected to count for $117.3 million or 46 percent of the hospital's gross revenues.
The biggest source of write-offs is contractual adjustments from government and insurance programs that pay substantially less than hospitals charge. In the budget year, those adjustments are projected to be $111 million or nearly 40 percent of the gross revenues.
The largest government programs, Medicare, Medicaid and Tricare, account for nearly 85 percent of the write-offs. Other insurance and managed care programs make up another 6 percent of revenues in this category, or over $15 million.
Bad debts, or bills owed to the hospital by those who can't or don't pay, are expected to be up 15 percent, at $14 million. Free care or charity services for the indigent without insurance or means to pay, are estimated to be almost $2.4 million.
It's a narrow margin, Paugh said, but the circumstances are dire.
"When we say we're writing off revenues," he said, "it's not that we're not trying to collect them.
"They're really destitute. We declare them as not having the ability to pay before we even begin the billing process."
The new budget also reflects a net operating income of 4.5 percent of collectible operating revenues, or almost $7 million. Income on investments and other non-operating revenue is estimated at almost $3.5 million, but cannot be relied upon due to the volatility of the finance markets.