October 12, 2013 11:33:08 PM
Carl Smith - firstname.lastname@example.org
STARKVILLE -- Oktibbeha County Board of Supervisors President Orlando Trainer says OCH Regional Medical Center's recent scale back with employee salary and work hours highlights the need to put the business through an independent financial analysis, a step required by law before a taxpayer-owned health care facility can be sold.
OCH is implementing 5 percent pay cuts for workers earning more than $8.50 an hour, and reducing two-week pay periods from 80 to 76 hours in an attempt to curb expenses as the rate of uncompensated care reimbursements continues to slide. No layoffs will occur, OCH CEO Richard Hilton told the Dispatch Wednesday.
The hospital experienced an $886,748 operating loss in Fiscal Year 2012-2013, but its new budget shows a positive $1.52 million line item for this fiscal year. Employee salaries are down almost $2 million after the maneuver, but benefits will rise 6.75 percent compared to last year. Total expenses - wages, benefits, supplies, professional fees, purchased services, depreciation, rentals, utilities and other direct costs -- are down 2.12 percent compared to FY 2012-2013.
Trainer, who pushed repeatedly in 2012 to have such an analysis completed, stopped short Friday of saying the hospital should be sold or leased. The board found traction last year to pursue proposals for an independent financial analysis but stopped short of executing such a study. A study then was estimated to cost about $35,000.
"I think this kind of gets people to see what we were previously trying to do wasn't that off base. As a community and county board of supervisors, we need to really strongly consider going through a process to see where we are. (OCH scale backs) are pretty significant," he said. "At this point I do not think there's anything to panic about, but at the same time I think we need to look at what's best for long-term county interest. That's what I've been saying the entire time."
Supervisors agreed in August to meet with Hilton and the OCH Board of Trustees to discuss the future of county health care, but no meeting dates were ever announced. Earlier this spring, Franklin, Tenn.-based Capella Healthcare offered $45 million upfront for a 50-year OCH lease while at the same time pledging to keep all active employees.
That deal is considered a moot point since a hospital analysis has not yet been performed. Also, Reuters reported in September that the Chicago-based equity firm GTCR LLC has hired Bank of America Merrill Lynch to seek a buyer for Capella, which is estimated to be worth a little less than $1 billion. The Tennessean also reported that potential buyers include LifePoint Hospitals Inc., Iasis Healthcare, both Tennessee-based entities, and the Nebraska-based Regional Care Inc.
"Capella was never really as much of a game-changer as many people made it out to be," Trainer said. "There are people still interested in partnering with our community, wanting to tell their story just to show what they can do here."
If any hospital transaction occurs, the incoming owner must first erase OCH's long-term debts and capital lease obligations. A previous audit had that figure at about $21 million.
Referring to Trainer's possible traction toward a hospital transaction after OCH's cost-saving measures were implemented, Hilton said Thursday now might not be the time many companies are interested in picking up new points of service. With many unknowns surrounding insurance and hospital futures, the market is a murky one for many investors, he said.
"Unless there's a way to increase revenue - and it looks to me like these maneuvers are trying to do that - in time, what we have is going to depreciate. The longer you keep it, the chances are if you do decide to part with it, I don't think it will net as much as before," Trainer said. "We're at a very dangerous crossroad. Salary reductions are going to have more effects than you think. It's a morale killer, it reduces spending in the community and I think it hurts recruiting.
"You never can give someone what they're truly worth but now this impacts their livelihoods," he added. "I think we have a nice county hospital. At the same time, it's obvious to me they're generating extra revenue by cutting. If you keep cutting, sooner or later you won't be able to offer the same level of services."
Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch