Moose Lake Star Gazette - Serving Carlton and Pine Counties Since 1895

By Mercy CEO Michael Delfs
Moose Lake Star Gazette 

Mercy begins work on financial picture

 


As many of you will recall, last summer, Mercy Hospital’s Board of Directors began discussing the potential for a tax levy due to the downturn in financial performance of the hospital. I, along with each member of the board, attended every township and town meeting within the hospital district to explain the current financial situation and the proposed levy as well as to answer questions.

Despite some public perceptions, the issue driving the decline in the hospital’s finances is not the new building. Instead, the financial performance can be mostly attributed to two factors: 1) fewer patients choosing Mercy for care and 2) drastic changes with insurance contracts, in particular Blue Cross Blue Shield lowering reimbursement in the double digits in a single year. While there are other contributing factors, the two listed above account for the largest portion of Mercy’s financial decline.

One of the promises made when the hospital board approved a tax levy for 2015 was that Mercy would significantly reduce the costs within the hospital during the year. It is important taxpayers can see the hospital is making good-faith efforts to balance our expenses and our revenue, so the hospital has begun making adjustments by decreasing costs while simultaneously focusing on increasing patient utilization and bringing in new services.

All of this sounds reasonable, but the unfortunate truth is that cost reductions cover the spectrum from reducing supplies, to reducing employee benefits, to reducing staff. The approach to these reductions has been for the hospital to look at two to four services each month and determine how Mercy’s structure of that service may be different from other hospitals. As the service is redesigned closer to an industry standard, the new structure may dictate a reduction in staff, along with changes in supplies, space and even the total scope of services.

I want to be sure to convey that neither the board nor I take staff reductions lightly. These are real people who are friends and neighbors to many of us. Any potential layoffs will only be made after careful analysis. Unfortunately, the harsh reality is the hospital needs to remain a vibrant health care provider for our region and needs to become self-sufficient once again. The only way to accomplish this financial turnaround of over $1 million in 2015 is through a combination of reducing expenses and increasing utilization.

Lastly, it is important to understand the sense of urgency in making significant changes within the hospital. The construction funding through the USDA requires the hospital to have a specific amount of cash reserves by the end of 2015. The challenge is for Mercy to build up those reserves before September 30, 2015, so the hospital has approximately 10 months to reduce our expenses by an additional $800,000.

This is an achievable goal, but it won’t be without challenges. While working on these financial issues, the hospital will continue providing the highest quality patient care with the most technologically advanced care. We have a strong team that is committed to our patients and I’m confident they will continue to be partners in working through our many changes.

 

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