Loading...
1991-06-05 Regular Meeting/D 3 -o?- m -L KODIAK ISLAND HOSPITAL ADVISORY BOARD MEETING JUNE S, 1991 PRESENT: Ben Ardinger, Gil Bane, William Brewer, Gordon Gould, Gretchen Saupe, Betty Springhill, Wayne Stevens, Jeannie Volker, Ed Myers, Administrator, Keith Vorachek, Finance Manager, Kate Fitzgerald, Patient Care Administrator, Corlene Hogg, Director of Ancillary & Patient Information Services, Joe Smith, LHS Management Company, Representa- tive Cliff Davidson, and Borough Mayor Jerome Selby ABSENT: Lorne White With a quorum present, the meeting was called to order at 7:05 P.M. ACCEPTANCE OF AGENDA: Moved, seconded and carried to accept the agenda. APPEARANCES AND COMMUNICATIONS Ms. Springhill welcomed Representative Davidson and read a portion of the previous meeting's minutes regarding a conversation she had with Representative Davidson. Representative Davidson concurred with that portion of the minutes. He reported that although the hospital con- struction bill did not pass, he felt that there were positives. Both funding bills successfully made it to Finance Committee. SB 67 and HB 214 relating to state aid for nonprofit health facilities ended the session in the House Rules Committee. He felt that some factors which were pertinent to the bills not passing were strategic errors made by lobbyists and sponsors of the bills being involved with other issues. He felt the lobbyists did not work together as was needed, and that legislators were presented conflicting priorities. He stated that he felt that Humana and Providence need to recognize the needs of the small hospitals and work with them. Rep. Davidson stated that he feels SB 67 will pass early in the next session of the Legislature and that he will continue to work on funding through bonds. He also stated that he is optimistic about the passage of the funding bills. He stated that it was important that Secretary Mala be informed about the urgent need of the facilities, so that he better understands the issues. He stated that there was a perception on the part of the larger communities that all of the health monies were going to the rural areas. He said that needs assessments performed have indicated that the rural areas have the greatest need at this time. He felt that Kodiak has done the necessary groundwork and everything is in place of funding, but other communities have not achieved the same level. Advisory Board Meeting June 5, 1991 Page Two Ms. Springhill asked Rep. Davidson if he had spoken with anyone from Providence regarding the situation. Rep. Davidson reported that he had spoken with the Providence lobbyist and that he felt it was unfortunate that the bigger hospitals had not worked out a policy which would allow funding of smaller hospitals. When asked what he felt the role of the Advisory Board should be, Rep. Davidson responded that members should make sure that the Hospital and Nursing Home Association is responsive to the issues and is pressing forward, including researching and pushing bonding. Ms. Springhill asked how effective the legislative teleconferences were. Rep. Davidson responded that they are important in that the legislators hear what their constituents have to say. Mr. Bane asked if the facility was going to have to wait a number of years for funding if the level continues to be at $1 to $3 million per year. Rep. Davidson said that this is a possibility. Rep. Davidson stated that in another matter, Kodiak had been placed on the list for consideration of a Veterans Home. Rep. Davidson was thanked for his appearance and he departed. Ms. Springhill welcomed Mayor Selby to the meeting. Mayor Selby stated that he had kept in close contact with Rep. Davidson and Senator Zharoff throughout the session and would be working with them and the Governor's office throughout recess to have the funding bills introduced by the Governor as part of the capital budget bill. He stated that partial funding through the capital budget would make it easer for legislators to add additional funds. He spoke of the need for a statewide health care system and of the need to educate Secretary Mala to the needs of the facility. He said Secretary Mala should be invited to tour the facility anytime he was in Kodiak. Mr. Myers stated that strategy sessions to further the possibility of funding are planned at the August meeting of the Alaska State Hospital and Nursing Home Association, which he will be attending. Ms. Springhill asked Mayor Selby about the status of the Care Center Solarium. Mayor Selby stated that although the solarium is on the Borough's list of capital projects, that higher priority was being given to other projects. Ms. Springhill stated that Ben Hancock had indicated that if the Lions could obtain the plans for the solarium, that the Lions might be willing to adopt the solarium as one of their projects. Mayor Selby indicated that he would contact Ben Hancock. Advisory Board Meeting June 5, 1991 Page Three MEETING NIINUTES The meeting minutes of May 22, 1991 were amended as follows: 1) Page Four, New Business: B. Ambulance Situation Amend fifth sentence to read: "Mr. Myers reported that the ambu- lance in question was now defunct and that Requests for Proposals to sell the vehicle had been issued." 2) Page Six, First Paragraph, Board Comments: Add: "He felt that if local physicians don't help cover the Emer- gency Room, the hospital incurs exorbitant expenses because of costs associated with locum tenens contracts, housing and vehicle expenses." Mr. Gould expressed concern regarding the process whereby the Medical Staff Bylaws Amendments were approved and forwarded to LHS at the previ- ous meeting, stating that he felt there were potential liability issues. There was much discussion regarding the roles and responsibilities of the Advisory Board, the Borough Assembly and LHS Management Company. Ms. Springhill stated the Board had made no action which it felt to be outside its role and responsibility. Joe Smith stated that the con- tracts between LHS and the Borough, and the Advisory Board and the Borough outline the responsibilities of the Advisory Board in relation to medical staff privileges and bylaws. Mr. Gould stated that, in the future, he felt that those parts of the minutes dealing with personnel issues should reflect the steps leading to the motion. Gil Bane moved that if there were a potential for imprecision in the minutes, that prefacing remarks be included in the minutes prior to motions made. Motion failed for lack of a second. After further discussion, it was determined that Joe Smith would meet with Gordon Gould to clarify the contracts. Moved, seconded and carried to approve the meeting minutes of May 22, 1991 as amended. COMMITTEE REPORTS None. OLD BUSINESS Ms. Springhill inquired as to the status of the Computer Proposals. Mr. Vorachek reported that although the bids had been narrowed down to two companies, that the present financial situation was such that the deci- sion had been placed on hold. Advisory Board Meeting June 5, 1991 Page Four He stated that he felt that LHS and Stacy Heiden had done an excellent job in procuring, researching and assembling the proposals. Ms. Springhill asked if the Advisory Board assignments to the various improvement plan committees had been determined. Mr. Myers reported that the Management Team would be sending out notices of meetings to the various committee members shortly. NEW BUSINESS A. Financial Projects Joe Smith explained how the various financial forecasts had been pre- pared by LHS. He stated that the preparers had used: * Actual Historical Data * Known Future Trends * Expected Required Changes * Factors that Cause Expense to Vary * Factors that Cause Revenue to Vary * General Expense Inflation * Various Revenue Assumptions He explained that there were three financial scenarios: Scenario 11: Least optimistic case -- maintaining the status quo Scenario 12: Most likely case. Scenario 13: Most optimistic. Examining the Patient and Resident Days graph, Mr. Smith stated that LHS had been looking for trends, i.e., what services would increase. Mr. Bane asked if the decline in surgeries had played a part in the decline in patient days and if the new surgeon and the anticipated increase in surgeries been included. Mr. Smith stated that both factors had been included in preparing the graphs. Mr. Gould asked Mayor Selby if he felt that the 1990 Census showing a decline of 2,000 in the population might also be a factor. Mayor Selby stated that although he felt the decline in population had been overstated, that he felt that some de- cline had occurred and could be a factor in the decline in patient and resident days. Reviewing the Admission scenarios, Mr. Smith stated that there had been a decline in 1987, 1988, 1989, and 1990, but they were projecting a slight increase in each of the scenarios. In a review of Revenue and Expense Comparison, Mr. Smith stated that if there are no changes (increased revenue and decreased expenses) that the loss percentage will continue to increase, with serious implications for the facility. Advisory Board Meeting June 5, 1991 Page Five In the worst case scenario of Operating & Net Gain (Loss), Mr. Smith stated that if no actions were taken to reverse the process, that it was projected that the facility could have a net loss of $1.9 million by 1994. He stated that although admissions had decreased, the number of FTE's in the facility had increased. Mr. Gould asked if this meant that the facility was becoming more labor intensive or if it meant that the facility was becoming less efficient. Mr. Smith stated that he felt the patients who were admitted to the hospital now were sicker and required a more intensive level of care than patients admitted in previous years. Mr. Myers commented that nearly all insurers require their insureds to have preadmission authorization, and that patients must meet certain sets of "screens" before being admitted. Mr. Gould asked if sicker people generate less revenue because they require more care. Mr. Smith answered in the affirmative. In a review of the Cash Analysis, Mr. Smith stated that if the facility did not institute changes to reverse the process, that the facility would be at a nearly $4 million deficit. Mr. Bane asked how this figure related to other rural facilities. Mr. Smith stated that he knew of no facility which was incurring loss at the rate this facility is. He stated that the loss was a combination of not generating enough volume, not charging enough for the services, and incurring too high a level of expense, although there was a limit as to how much expense could be cut. He reviewed the financial projections which indicate that in the best case scenario, that the facility can show a,net operating gain by 1993 by reducing the number of FTEs, decreasing the ER cost, and increasing revenue. Mr. Gould asked what percentage of the community had no insurance. Mr. Myers stated that a recent Washington state survey showed that only 37% of employees had insurance through their employer. Nationally, the percent of small businesses which do not provide insurance for their employees is 70%. Mr. Gould asked if this meant that over half of the community has no insurance. Mr. Smith indicated that the facility had written off $500,000 as bad debt and $250,000 in Hill -Burton funds had been exhausted. Mr. Gould said that in the turnaround scenarios, that LHS had suggested rate increases. He asked if rate increases would increase the number of people cut off from services. Mr. Smith stated that increasing rates would not serve to deny care. Dr. Brewer noted that two large communities on the island (U.S. Coast Guard and Natives) were insured and that services to these communities was anticipated to increase. The U.S.C.G. is decreasing the number of doctors at the Base clinic and KAVA is working to contract with the hospital for services. He noted that even in the Best Case Scenario that there was a period of time before the facility turned around and asked who would underwrite the facility. Mayor Selby responded that the facility may have to spend its construction money reserves. Advisory Board Meeting June 5, 1991 Page Six Mr. Smith noted that the Borough's commitment to the hospital is being met through revenue sharing monies and that the hospital is considered to be an enterprise fund, i.e., it should make it's own way without being underwritten by the Borough. He stated that the facility could turn the financial picture around if rates were raised at a faster pace. He noted that in some cases, insurance companies would not pay the full increase; that he anticipated that for every $1 of increase, that the facility would realize $.40 from insurance. In the most likely scenario, Mr. smith stated that he does not believe this facility can reduce the number of FTE's to 81 or 83 fast enough to turn the facility around. He stated that he felt that only an aggres- sive program of cost reductions, rate increases and volume increases would work. He noted that KIH is not in the upper end of health care charges for the state. He also noted that a facility can only trim costs so far before beginning to provide inferior service which will serve to decrease the volume of patients. He stated that by not funding depreciation, half of which should go into the bank, that the facility was consuming assets and would not have reserves to fall back on. He stated that the financial projections justify a sizeable rate in- crease now. Ms. Springhill asked how the new Medicare regulations would affect the facility. Mr. Smith stated that it would have an indirect effect on the facility; as the physicians lose money, they will have to begin to do their own ancillary services, such as lab and x-ray. Dr. Brewer stated that he felt it important that when an increase in services occurs, that the facility insures that the services will gener- ate revenue. An example of this is the guaranty of payment in the pro- posed KANA contract. Mr. Ardinger asked Mayor Selby what the feeling of the Borough was regarding the cost of maintenance of the facility in light of its finan- cial situation. He stated that he felt that the Borough should pick up all costs of facility maintenance. Mayor Selby stated that the Borough is the only tax payer pocket to pay for $50 million worth of Borough services. If any Borough entity runs into financial distress, they go to the Borough. The Borough does not have the funds available to fund all costs of maintenance to the facility. Mayor Selby stated that the mill rate would have to increase substantially to do so. He said that he felt the community had indicated that it wished the hospital, as an enterprise fund, to generate revenue sufficient to cover the costs of operation. He stated that the Borough has funded $100,000 to the hospi- tal this year for capital projects and is working to identify other options which would assist, such as a Borough wide maintenance depart- ment. Advisory Board Meeting 'June 5, 1991 Page Seven Mr. Stevens noted that there would tradeoffs to having a Borough wide maintenance department. Mayor Selby concurred, noting that one negative tradeoff would be that maintenance needs would be driven on an objective basis across various facilities. Mr. Myers noted that he has written to Ray Camardello asking for help with maintenance costs, in light of the cash flow deficit. He said that KIH and the Borough are working on a policy which will create a closer working relationship to jointly deter- mine the maintenance needs of the facility. B. Financial Actions and Recommendations Mr. Myers reviewed some actions which the facility has begun to imple- ment in order to reduce costs and increase services and revenue. The Improvement Plan will help identify sources of revenue, ways to decrease costs, ways to improve work methods. He stated that he is working on a staffing plan for all departments. He stated that he recommended a rate increase of 10%, noting that a review of rates had shown that the facility is low in a number of areas. He stated that the hospital needs to be on a solvent basis in order to get the programs going. He noted that a rate increase of 10% would not get the facility to parity, but would increase revenue by $350,000. Implementation of a rate optimization process will examine each individ- ual rate and adjust accordingly. This process will also determine how close to parity the facility is to other like facilities. He stated that a 10% rate increase will not place the facility in the upper eche- lon of care costs, nor bring the cost of services to a level of that of Humana or Providence. Mr. Myers reviewed the actions taken thus far to reduce costs: * Reduced FTE's by 5 through attrition. Target is 10 - 15. * Drafted contract for medical staff to cover the Emergency Room. When approved, will save facility $100,000 annually. * Have defined six alternatives to current security situation. Will not eliminate room guards. Mr. Myers noted that he is working with the city to resolve inmate situation. Physical attacks on nursing staff continue; walk -around security still necessary. Working on some options which include male nurses on evening and night shift. Mr. Myers stated that the medical staff does not have to accept a inmate patient which has been released on their own recognizance by the policy and encour- aged physicians to speak with the judge. Mr. Gould stated that if an inmate is released on their own recognizance by the city, that the state then becomes responsible for providing security. Mr. Gould stated that there is a contract with the state troopers to that effect. He recommended that Mr. Myers contact John Marshall to get a clear understanding of the contract. Advisory Board Meeting June 5, 1991 Page Eight * Mr. Myers stated that the facility has begun crosstraining of various individuals, i.e., Pharmacy Tech is crosstraining to work part time in Physical Therapy. * A major effort is underway to decrease accounts receivable and increase cash flow. He stated that the facility is working with banks to establish recourse notes wherein the facility would identify self -pay patients; the bank would pay the facility the amount of the patient's bill and the facility would carry the note. If the patient defaults, the facility would assume the note. Mr. Myers noted that an individual is less likely to default on a bank loan than on a hospital account. It was recognized that this action would need approv- al from the Borough Assembly before implementation because final liability would rest with the Borough. * Electronic billing to avoid Medicare payment delays is being investigated. Currently, Medicare can hold a request for payment for 30 - 60 days before examining the request. An electronic request for payment cannot be held for examination. * A facility -wide hiring freeze is in place. No department is authorized to fill positions without the request and justifi- cation first being reviewed by the Management Team. * There is a freeze on all capital expenditure purchases with the exception of equipment which will allow new procedures and increase revenue. * Is asking physicians to provide coverage on rotating basis for contract physicians' absence. Facility would realize $70,000 savings in locum tenens cost. Dr. Brewer asked what was being done with regards to the surgeon situation, now that the facility was back to one. Mr. Myers stated that he is working with the Borough to improve two-way communications so that Dr. Mason does not have to remain so close to the facility. * A policy has been implemented which will require a six-month schedule of absences be submitted by departments so that overlap of locums can be reduced. * Working to establish relationships and sustain and improve morale throughout the facility. Mr. Stevens asked Mr. Myers what action was needed from the Board. Mr. Myers stated that he would like the Board to recommend a 10% rate in- crease to the Borough Assembly. Gil Bane moved to recommend to the Borough Assembly that an immediate 10% across the board rate increase be implemented and that a rate opti- mization program to bring the facility to the level of parity be set in motion. Wayne Stevens seconded the motion. Roll Call Vote: Ayes: Ben Ardinger, Gil Bane, Gordon Gould, Gretchen Saups, Betty Springhill, Wayne Stevens, Jeannie Volker, William Brewer Nays: None Motion Carried. Advisory Board Meeting June 5, 1991 Page Nine Dr. Brewer stated that he felt that Mr. Myers had done an exceptional job in getting the Emergency Room situation resolved. Mr. Gould stated that the Assembly would need the same financial infor- mation presented to them at the Assembly work session on the 13th before it could vote to increase the rates. Mr. Myers indicated that he would attend the work session of the Assembly. 1 U0I_IV a Y Written report as attached. Mr. Myers reviewed the ambulance situation and noted that the facility does not have the appropriate vehicle to pick up medivac crews and equipment. He stated that he has offered to work with the City to establish a more reasonable rate structure whereby they would be reim- bursed for picking up medivac crews and equipment. Mayor Selby stated that he will talk with the City Manager regarding this situation. AUDIENCE COMMENTS Mr. Vorachek reported that May was a good month financially for the facility. Ms. Fitzgerald noted that she has not yet met with Cathy Short pending the receipt of some materials. She stated that she would prepare a summarization of the survey of the LHS nursing study for the Board. tl• : 1 t ►� lu 1 ►Y `� Mr. Bane congratulated the Board on its choice of Administrator, stating that he felt Mr. Myers had gone further to alleviate the hospital's problems in the short time he has been here than was done in all of last year. Moved and seconded to recess to Executive Session to discuss personnel matters at 10:15 p.m. Motion carried. Returned to Regular Session at 10:50 p.m. ADJOURNMENT Moved, seconded and carried to adjourn at 10:50 P.M. Recorded by Debra Raper. Jeannie Volker, Secretary/Treasurer