The South Central Kansas Medical Center Board of Trustees met Tuesday morning to discuss a set of strategic plans for the next few years.
The meeting was a continuation of the trustees’ regular meeting in January, which was never adjourned.
This set of strategic plans was presented by an independent consultant working for the hospital, Carmine Di Palo.
“We have spent the last two months analyzing the last 10 years of our performance to identify the issues, (and identify) the measures and corrective actions that can be and have been put into place,” said SCKMC Chief Executive Officer Virgil Watson.
The strategic presentation was a combined effort by the hospital’s administrative staff and Di Palo.
“Without his expertise and advice, it would have taken us much longer to complete this assessment,” Watson said of Di Palo.
“He has helped us gain increasing confidence in the potential of our hospital and the ability to achieve long-term financial (stability).”
Carmine Di Palo
Di Palo is the chief executive officer of Revere Healthcare Solutions (RHS) — the company that has established, with SCKMC, the Cowley HealthWoRX Direct Primary Care clinic.
He also has been retained by SCKMC to perform strategic “analysis and provide recommendations with regards to operational efficiencies, revenues increase, and capital structure and refinancing options,” according to a contract that outlines his consulting involvement with SCKMC.
This document also states Di Palo’s contract began Dec. 1, 2017, and the monthly fee charged to SCKMC for his services is $3,000, to be paid on the first day of each month.
“I want to say this — I read it in a book somewhere — asking for help isn’t a sign of weakness,” Watson said. “It’s the process for becoming stronger.”
Ongoing strategic planning
The hospital hasn’t been inactive in trying to right its financial situation, Watson added.
In the last two years, his administration has implemented several programs, such as the 340B pharmacy program, the incorporation of telehospitalist medicine, the acquisition of a second primary care clinic in Winfield Medical Arts and more.
But “these efforts have not been enough,” Watson admitted.
However, the presentation provided Feb. 6 outlines a strategic plan to move forward toward financial stability.
This presentation contained similar information to that which was provided following the Quorum Health Resources report in late 2016.
“I want to give you the reassurance that this is not just a (strategic) plan on a piece of paper,” Watson said.
“I think we have a pretty good track record, when we decide something needs to be done, of getting it done.”
The strategic report presented by DiPalo consists of three separate sections.
The first outlines the last 10 years of operations at the hospital, the difference in reimbursements and the assets currently owned by SCKMC.
Construction bonds issued to pay for the construction of the hospital still are being paid for, with a balance before interest of $23 million.
A half-cent sales tax was approved by Arkansas City voters in 2008 to support the repayment of the bonds.
In 2014, SCKMC attempted to have an additional half-cent sales tax passed, but the ballot measure failed.
Shortly after, it was announced that the hospital could not pay its bond payment in the first quarter of 2016.
The City of Arkansas City, which ultimately is financially liable for repayment of the bonds, was forced to cut spending drastically that year so it could make both of the hospital’s bond payments.
However, a new one-cent sales tax was approved in a special vote during the summer of 2016.
Even with the one-cent and half-cent sales tax measures in place, the hospital still has reported a financial loss, though SCKMC at least has been able to make its bond payments using tax money.
As of last December, the hospital reported a loss of $1.7 million for 2017.
City commissioners have continued to voice concerns about the hospital’s financial outlook, as a result.
Stemming the loss
The second section of Di Palo’s strategic presentation identified several key departments within the hospital and its clinics that are losing money consistently.
Those areas include the emergency room, cafeteria and dietary departments, telemedicine, surgery and the OB/GYN department.
The largest loss seen was in the Emergency Department (ED), which showed a 2017 loss of $600,000.
Di Palo indicated the hospital could save money by utilizing more-in house staff. SCKMC currently outsources the employees in the ED.
To address the surgery and OB/GYN departments, administration “spoke to” the doctors involved.
Both of these departments also lost money in 2017 — surgery to the tune of $300,000, while OB/GYN lost $100,000.
The cafeteria and dietary department saw a loss in excess of $300,000 in 2017.
Prior to Feb. 1, SCKMC staff were paying a discounted rate for food, with prices set at rates comparable to 32 years ago, according to a release from SCKMC Marketing Director Clayton Pappan.
“In an effort to maintain costs, it is necessary for us to announce a price increase,” said Holly Harper, SCKMC’s chief financial officer.
“We are using 1986 pricing for the (employee) meals we serve out of the cafeteria and losing $1,000 a day in that department,” Watson said.
“We cannot take to the citizens of Ark City, our Board of Trustees, and all who oversee us and say that we are losing $365,000 a year in that area.”
Changes within the cafeteria include across-the-board pricing for all staff and guests, streamlined menus, and limiting the specialty bar to one visit per week, the release states.
Watson indicated these changes were delayed for so long as a sort of employee benefit to offset the lack of wage increases during a five-year period.
“I know our employees have sacrificed over the years, and up until now, I felt like it was a benefit to allow the employees to pay very little for their meals,” he said in the release.
“We really had nothing else that we could offer as a benefit improvement to replace it. By offering Direct Primary Care at no charge to all our employees, spouses and children, I felt like we are offsetting the increased expense that you will see in the cafeteria.”
The third section of the strategic presentation by Di Palo showed extended efforts into 2019 and 2020.
One of the departments that currently is making money at SCKMC is the Senior Health Unit.
In an effort to continue seeing that revenue grow, Di Palo suggested increasing marketing efforts to raise the usage of the unit.
This plan would continue into 2020, according to his presentation.