Contract labor expenses make up a significant portion of Delta Health’s $1.1 million operating deficit.
The local hospital budgeted $153,000 in losses for the first three months of 2022, according to CEO Matt Heyn.
He explained that the hospital is “running a little bit of a greater deficit” compared to this time last year due to approximately $758,000 in contract labor expenses to date.
The hospital didn’t employ contract labor this time last year, a problem the CEO attributed to the national shortage of health care employees.
Although the hospital wouldn’t run at a positive margin without the added expense, Heyn said the hospital would be running positive compared to this time last year.
“Unless you’re a really big hospital, COVID was detrimental to the health system,” Heyn told the DCI on Monday.
An annual survey by the American College of Healthcare Executives found that personnel shortages ranked first on the list of hospital CEO’s top concerns in 2021. Financial challenges, which topped the list since 2004, now ranks second on the survey’s findings.
The primary issue listed under financial challenges found that 87% of survey respondents’ top concern were increasing costs for staff and supplies, while 53% were concerned about reducing operational costs.
In response to its own financial challenges, Delta Health has laid out three plans for securing financial independence:
Plan A, achieved in March, was to secure Sole Community Hospital status and Plan B is to pass the sales tax initiative placed on the special district election ballot.
If voters don’t pass the 0.8% sales tax on May 3, the hospital plans to pursue a “strategic partnership” with a larger health system, according to Heyn.
“We’ve always had plans in place in order to mitigate some of the financial losses that the organization has experienced,” Heyn explained. “It’s fair to say that health care is necessary to take care of a community, and the community–we need them to help us back that necessity to take care of the health care.”
Upon discussing solutions to its financial losses, Heyn said that the hospital found that a 0.8% increase, similar to the “Back the Badge” tax, would be enough to “shore up the financial ship” of the health organization.
The tax would equate to eight cents on every $10, he added, and would bring in approximately $2.7 million a year until the eight-year sunset provision expires.
Heyn said staff employment remains secure regardless of whether the tax initiative is passed.
“We will always look after our employees first, they’re our number one asset,” Heyn said, noting that hospital employees are Delta Health’s first priority. He added that 600 employees consider the hospital their primary location for work.
“We’ll look at other things like infrastructure and technology, but we can’t take care of our patients without our human resources.”
Plan C: a strategic partnership
Delta Health is in a position to negotiate terms of a partnership agreement if the hospital’s Plan B falls through, according to Heyn.
“The best time to look for a partner is when you’re in the strongest position possible,” Heyn said of the hospital’s financial position. “We’ve got a little debt on the books. We’ve got cash in the bank that we could use to offset all the debt that we currently carry on the books.”
The 2021 Delta Health audit is still in draft format, the CEO reported, noting that the document will be finalized and publicly available once completed.
An audit update was presented by the hospital’s audit firm Eide Bailly during the hospital’s board of directors meeting on Monday, April 18.
Ashley Brandt-Duda, a partner with the audit firm, reported a negative operating margin for 2021, a finding she noted was “probably not a surprise given the last couple of years within the industry and all the fluctuation we’ve seen.”
Heyn said that it’s always a concern when an audit firm shows a negative operating margin.
The hospital’s dwindling days of cash on hand is concerning as well for the CEO, who said they’re having to use their savings in order to bolster operations, “which is something that we don’t want to get in the habit of doing very frequently,” he said. “On occasion, it’s okay to do that, but if we’re going to do that month in and month out, then that just depletes our cash reserves and puts us in a terrible cash position as an organization or health system.”
The hospital is continuing to seek ways to bolster financial performance, such as approximately $650,000 in USDA grant money. The grant’s arrival is yet to be determined, according to Heyn.
Delta Health has spent approximately $20,000 to date on its rebranding, Heyn confirmed.
The process is on hold until the hospital determines if Plans A and B pan out. The hospital will then need to re-evaluate what costs will look like to update its main signage.
The American College of Healthcare Executives study can be read at https://bit.ly/topissuesstudy
Cassie Knust is a staff writer for the Delta County Independent and Montrose Daily Press. Follow her on Twitter, @CassieKnust
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