In a Sept. 19 update to the City Commission of Arkansas City, South Central Kansas Medical Center officials reported the hospital would be scaling back its laboratory outreach program.

South Central Kansas Medical Center sign

Photo by Jeni McGee

“That’s probably not something we’re going to do going forward,” said SKCMC chief executive officer Virgil Watson.

To date in 2017, this program has generated more than $1 million of revenue for the hospital.

A contract was signed in January, but the program technically began in February.

Million-dollar profit

The revenue to date for the lab outreach program is in excess of $1.1 million.

“If that’s a national program and you’re getting $1.1 million, and you’re (talking about) going statewide…” said City Manager Nick Hernandez.

“I’m really concerned because that is where your revenue is. That’s what’s keeping the hospital in the black — that one single line item.”

While the hospital operation itself and South Central Kansas Clinic are losing money overall, that has been offset by profits from the recently added lab outreach program and Senior Health Unit.

“We have other projects we’re working on,” Watson added. “We wanted to try it for six months … it’s just not been consistent for us.”

“How can it not be successful with a $1.1 million dollar profit?” asked Commissioner Dan Jurkovich.

Harper indicated there was some difficulty in receiving payment for the lab services.

“We’re still working on that,” Watson said.

Winfield Medical Arts

The decision to discontinue the outreach stood in contrast to the recent announcement of SCKMC’s acquisition of Winfield Medical Arts (WMA).

The Sept. 19 meeting was the first time the commissioners had heard from SCKMC since the WMA purchase was announced.

“I kind of hate to see a million-dollar profit go by the wayside,” said Mayor Duane Oestmann.

“How do you expect to pay (for the purchase) of Winfield Medical Arts?”

“It will come directly out of (WMA’s) operations,” said SCKMC chief financial officer Holly Harper.

The additional revenue from WMA is anticipated to be somewhere around $500,000 a year, she added.

“Why would anyone sell half a million dollars a year?” Jurkovich asked.

“Because they don’t get half a million dollars a year (now),” Harper said. “They will get more for being (a) hospital-based (Rural Health Clinic).”

“You become a provider-based Rural Health Clinic and your reimbursement doubles,” Watson said.

Oestmann asked if the $500,000 would be split between WMA and SCKMC. “No, that’s the hospital’s (revenue),” Harper said.

Of that amount, about $250,000 is expected to come from clinic operations and the other $250,000 from starting the 340B pharmacy program at WMA — but that program would not start until early 2018. WMA comes online as a component unit of hospital starting Oct. 1.

Lab outreach variations

The topic of the lab came up during Harper’s financial update.

“What’s that lab outreach?” asked Commissioner Jay Warren.

“That’s our lab outreach that we’ve been working with since February,” Harper said.

Watson said the payors do not necessarily like the way the outreach program works. “So we’re pulling the reins back in,” he said.

Under the program, SCKMC has been acting as a go-between for the lab and a facility that is in need of lab tests to be completed.

“We have bought new lab equipment and we think with our addition of Winfield Medical Arts, we should see our lab market increase anyway,” Watson said.

He said the outreach only would be a regional or state-level effort, as opposed to the current setup, in which SCKMC partners with a lab in another state.

“We tried — it didn’t really work for us. So we’ll move on to something else,” Watson said.

“Virgil, what’s the area we could concentrate on?” asked Commissioner Charles Tweedy III.

“We need to stick with Kansas — we were partnering all over the country. We’re going to try and monetize our lab. … It’s something we can market,” Watson said.

“The lab is one of the stars of our hospital.”

“How do we get the word out?” Tweedy asked. “We’ll be doing some marketing,” Watson said.