September 6, 2017 11:26:22 AM
OCH Regional Medical Center reported an approximate $5.1 million loss after the first 10 months of the current fiscal year, and that loss could affect potential bids for the public health care facility, said consultant Ted Woodrell.
Hospital Chief Executive Officer Richard Hilton cushioned the loss Tuesday, saying its true total was about $606,000, a figure he reached by subtracting about $4.5 million in depreciation and amortization -- traditionally noncash losses -- from the amount.
While revenues from inpatient and outpatient services have grown almost $7 million from July 31, 2016, to July 31 of this year, a reduction in third-party insurance payments for covered services, as well as a $2.3 million increase in operating expenses, led to a decrease of the hospital's bottom line, Hilton said.
In a press release issued after The Dispatch contacted OCH administrators about the deficit, Hilton said many other Mississippi hospitals are feeling the same financial crunch created with changes to insurance company payment policies.
"The same story of gross revenues and deductions from revenue increasing, while insurance reimbursement is decreasing, has been shared with me numerous times (by other hospital administrators)," he said in the release. "Some hospitals have already started to downsize their operations by eliminating non-profitable services, as well as reducing staffing positions, as a way to reduce expenses immediately. As we finish out the last two months of this fiscal year, our staff will work together to look at ways to decrease cost. These actions will be discussed with the OCH Board of Trustees and the department directors of the hospital."
Documents The Dispatch obtained show OCH reported approximately $170.3 million in total revenue from the first 10 months of the current fiscal year -- Oct. 1, 2016, to July 31 -- but that income was reduced by $113.3 million in deductions, leaving the hospital's adjusted gross revenue at approximately $57 million.
Administrators originally budgeted for the adjusted gross revenue to reach about $63.5 million by July 31, documents show.
The hospital's expenses through the same timeframe totaled $61.9 million for salaries, wages and benefits ($35.3 million); medical and surgical supplies ($11.2 million), depreciation and amortization ($4.5 million) and other line items.
Those expenses mirrored what hospital administrators expected by July 31, documents show.
District 4 Supervisor Bricklee Miller said she was shocked when she learned of OCH's financial standing, as the hospital had not brought the information to supervisors' or the public's attention first before the county requested an update.
"These are national trends, but successful hospitals are finding ways to generate more (patient) volumes or revenue through service line expansion," she said.
Impact on RFP
Woodrell, whom the Oktibbeha County Board of Supervisors hired in 2016 to help oversee a process that could eventually sell or lease the hospital to a private firm, said the overall loss "shouldn't scare off potential purchasers" but could affect how much they offer for OCH.
Last year, analysts with Stroudwater and Associates suggested Oktibbeha County could receive between $20 million and $60 million for the facility and recommended supervisors complete a request for proposals process to seek bids while hospital officials continued to improve OCH's financial sustainability.
Supervisors previously set Sept. 15 as the deadline for interested suitors to submit bids for the hospital.
While Woodrell said no official offers for OCH have been submitted, Hilton previously confirmed representatives of two entities had toured the hospital ahead of a possible submission.
"At some point, you have to reinvest -- that's what the Stroudwater report said the hospital would have financial trouble doing -- to help grow revenue. I'd be trying to capture (patients who leave the market) by looking at services we could be providing that we could be doing for a reasonable cost, because there are certain things you can't afford to spend money on that take many years for a return on investment," Woodrell, a former hospital administrator, said. "They also have to be as efficient as possible with their staff. The short-term is salaries and wages, and that's what a lot of mergers are going after -- cutting down on administrative and controllable expenses."
Supervisors will use a number of criteria in their evaluation of OCH bids, the county's RFP states, including an entity's "demonstration of short- and long-term strategies that promote OCH employee retention and stability."
Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch
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