Hospitals finances improved in 2008 despite economy

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Southampton Hospital’s financial situation improved in 2008, but the forecast does not look so bright for the coming year.

“I’m nervous about this year, and I don’t have trouble saying that,” President and CEO Robert Chaloner said Friday in his hospital office as he reviewed 2008 and looked ahead to the remainder of 2009.

The same recession that is putting a squeeze on the hospital’s books is also further delaying a long-awaited decision on whether the hospital will renovate its aging facility on Meeting House Lane in Southampton Village or build a new one, perhaps on County Road 39 next to the Southampton Elks Lodge.

“It was an interesting year, I think, is probably the best way to describe it,” Mr. Chaloner said of 2008. According to preliminary figures, at midyear the hospital was on target to reduce its operating deficit by $1 million, he said. That would have brought the operating deficit down to just $770,000, on a budget of about $90 million.

But Mr. Chaloner said the number of patients coming through the hospital’s doors declined starting in August. With the resultant drop in income, he said, the hospital managed to close its operating gap, but only by $500,000.

The hospital chief said the dip in patient volume that started toward the end of the summer and continued through the end of the year was linked to the faltering economy, which meant less construction and other work being done on the South Fork.

“The drop in the trade parade means fewer patients in the hospital,” Mr. Chaloner said. “That was the major factor contributing to the drop off in our bottom line.”

Before the decline, the hospital’s wound care business took off in 2008, Mr. Chaloner said, adding that the volume of laboratory tests the hospital performs skyrocketed.

As for the hospital’s future plans, Mr. Chaloner said he had hoped to make an announcement this month on whether the hospital would renovate its existing facility or move to County Road 39, but, due to the slowdown of the economy, the decision is being put off for between six and 12 months,

In July, Mr. Chaloner said the estimated cost of a new facility would be approximately $225 million, including purchasing the land from the Elks and paying off approximately $34 million in outstanding debt. To help cover the cost, the hospital planned to start a $100 million fund-raising campaign, but the launch has been delayed.

“This is not the time to do it,” Mr. Chaloner said on Friday, explaining that the downturn in the economy has hit donors hard, and it would be inappropriate for the hospital to ask them for extra money now.

Despite the economic challenges, “we’re still better off than we were in 2007,” Mr. Chaloner pointed out. In fact, a HEAL grant for $8 million under New York’s Health Care Efficiency and Affordability Law put the hospital in the black. But Mr. Chaloner said he does not count that as successfully closing the operating gap, because it is a one-time source of income. The state has already delivered $3.6 million of the grant and the remainder is still to come, he said. The funds are for a new obstetrics facility and emergency department.

One way the hospital hopes to soldier on in 2009 is to continue negotiating for higher payments from health insurance companies, particularly Empire BlueCross BlueShield, the biggest insurance provider on the South Fork. The hospital negotiated higher rates with Empire in 2008, but the term of the contract was for just one year.

“We did pretty good last year, but that was only round one,” Mr. Chaloner said. And Southampton Hospital’s only partner in negotiations with Empire was Eastern Long Island Hospital in Greenport, he pointed out. This time around, the two hospitals will add to their strength in numbers with Riverhead’s Peconic Bay Medical Center. The three health-care providers comprise the East End Health Alliance, which was formed last year to, among other reasons, give the hospitals more clout in their negotiations with insurance companies.

Southampton Hospital’s 2008 negotiations with insurance providers brought in an additional $1 million in revenue, Mr. Chaloner said. But Empire is still behind what other insurance companies are paying, he said.

Mr. Chaloner cited other areas the hospital is targeting in 2009 to increase revenues or savings: saving $250,000 by standardizing the vendors used to supply the operating room, reducing overtime expenditures, negotiating more competitive service contracts, and rallying doctors to make sure they document everything they do for patients. “If you don’t write it in a chart, we don’t get paid for it,” he noted.

The hospital is also looking to take advantage of its new affiliation with Stony Brook University Medical Center by tapping into Stony Brook’s purchasing program, which offers cheaper, bulk prices for supplies, Mr. Chaloner added.

Mr. Chaloner said he does not want to see any of the progress Southampton Hospital has made financially or clinically reversed in 2009.

Governor David Paterson’s proposed state budget for 2009-10 would cut Southampton Hospital’s Medicaid funding by $1.4 million. Mr. Chaloner said if the cuts pass and are implemented at the start of the state’s fiscal year on July 1, they would undo the gains the hospital has made in the last two years. He said he also expects there to be more uninsured patients coming to hospitals, as workers lose their jobs in the ailing economy.

A sign of hope, Mr. Chaloner said, is the Obama administration’s talk of investing in health information technology. Southampton Hospital’s computer network is in desperate need of updating, according to Mr. Chaloner, but he said it is hard to raise funds for new computers compared to everything else a hospital needs.

The hospital is already taking a big step forward toward a paperless emergency room, Mr. Chaloner said, explaining that patient records will be kept electronically and more efficiently than paper files. He said the new system will be introduced in April at the hospital’s East Hampton Urgent Care Center and, hopefully, be online at the main facility in Southampton Village before the summer hits. Local physicians will also have computer access to patient records, Mr. Chaloner added.

Measures that are making the hospital more efficient, like the paperless system, and hiring more doctors and nurses, have improved Southampton Hospital’s quality of care and rankings, Mr. Chaloner said.

“This wasn’t the case a few years ago,” Mr. Chaloner said, showing off bar charts that demonstrate how the hospital trumps the New York State average for clinical quality in nearly every area of patient care and safety.

The hospital president said credit for the improved ratings go to the nursing staff and others who work with patients. “They’re the ones that really take care of the patients,” he said, “not me.”

“We were very successful in recruiting nurses this year,” Mr. Chaloner noted.

In 2008, 19 full-time positions were added to Southampton’s nursing roster, and there are only a couple jobs left unfilled, he said. The hospital also took on nine nursing graduate students, rather than the normal five, because there was so much interest last year, he said.

A full complement of hospitalists—doctors who are based in a hospital and do not have a practice elsewhere—has also been added to Southampton Hospital’s ranks, Mr. Chaloner said. He admitted it was a fairly significant salary expenditure, but said it is necessary to improve the quality of patient care.

A couple of the hospitalists work exclusively at night. “Nocturnists, they call them, which to me sounds like they should be vampires,” Mr. Chaloner joked.

Since the nocturnists are on shift at night and right in the building, the hospital does not need to wake local doctors and drag them out of bed for emergencies, Mr. Chaloner said. “A lot of problems happen in the middle of the night.”

Having a nocturnist on hand to jump in immediately results in better outcomes of emergencies, Mr. Chaloner said.

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