Chattanooga's biggest hospital expects 10 percent growth in patient admissions

Erlanger grows revenues 51 percent in five years and looks to become a billion-dollar-a-year hospital by 2019

Kevin Spiegel, Erlanger Health System CEO, speaks at the opening of the new $50 million expansion at Erlanger East on Gunbarrel Road.
Kevin Spiegel, Erlanger Health System CEO, speaks at the opening of the new $50 million expansion at Erlanger East on Gunbarrel Road.

Aided by the expansion of Erlanger East Hospital last year and continued growth in its cardiac and other intensive care procedures, Chattanooga's biggest hospital projects it will increase its patient admissions by another 10 percent in the fiscal year starting July 1 and boost revenues to a record $976.6 million.

In a budget proposal presented to hospital trustees Monday night, Erlanger Health System officials projected the hospital system will continue a five-year growth pace in the year ahead that should boost revenues by 51 percent from 2014 to 2018. By 2019, Erlanger expects to top $1 billion in revenues for the first time.

"This is organic growth, not through mergers or acquisitions," Britt Tabor, Erlanger's chief financial officer, told the hospital's budget and finance committee. "Our top-line growth is helping us to make investments in new technology and quality improvements. It is a very challenging budget, but we think it is doable and a good investment for our future."

Henry Hoss, chairman of Erlanger's budget committee, questioned if Erlanger can and should sustain such a rapid rate of growth.

photo A putting green faces Gunbarrel Road as the Erlanger East campus opens a new $50 million expansion with a total of 107 beds, making it the fourth-largest hospital in the area.

"We're looking at 10 percent in a market that is not growing," Hoss said. "I certainly want us to continue to grow, but are we able to keep up with this growth?"

Erlanger CEO Kevin Spiegel said the hospital is drawing more patients from the region, especially those needing the highest levels of care, through its emergency response system and helicopter network, the $50 million expansion of its Erlanger East campus last year and the addition of a $16 million Heart and Lung Institute, projected to open by early 2018.

"There is a risk of growing too fast, but there is also a risk of standing still," Spiegel said.

Since 2015, Erlanger has put $216 million into capital investments, including a projected $45.8 million capital budget in its 2018 budget plan. That doesn't include most of the planned cost for the new Children's Hospital, a new 88-bed behavioral hospital and a potential purchase, lease or management of the Murphy Medical Center in North Carolina, which is still under discussion.

"Our management team has demonstrated an ability to bring these major projects on time and within budget," Spiegel said.

Erlanger continues to add to its staff, boosting its own employment above 6,000 workers. The hospital also employs through contractors and other companies nearly 1,000 other workers at its five facilities and medical offices across the region. That makes Erlanger now the largest employer in the Chattanooga region, surpassing both the Hamilton County public school system and the Tennessee Valley Authority, which were previously the area's biggest employers.

Jan Keys, senior vice president and chief nursing executive at Erlanger, said Erlanger hired 100 of the 138 nurses who recently graduated from Chattanooga State Community College and another seven of the first 17 nursing graduates from Lee University in Cleveland.

photo Erlanger Health System

"I think we're getting the majority of nurses and we're going to need them as we continue to grow," she said.

Erlanger will face more challenges as the cost of uncompensated care grows from a projected $103 million this year to $110 million in the next fiscal year, Tabor said. Hospital officials also expect a $3.9 million reduction in Medicare reimbursement.

But Spiegel said whatever changes are made by Congress in the Affordable Care Act, or Obamacare, won't have much impact until fiscal 2019 and beyond.

Erlanger plans to activate its integrated electronic health records system, or e-Chart, in November as part of a $100 million upgrade of its records system by Epic to integrate clinical documentation across Erlanger and its participating physicians. Erlanger projects it will spend another $26.3 million in the next fiscal year on implementing the new Epic system, which has already cost Erlangethe hospital more than $46.3 million over the previous two years.

Spiegel said implementing the Epic system has been a needed but costly expense for the hospital, and its completion in 2018 should free up additional money to improve the hospital's cash flow and net income. Both the current and the new system are now running at Erlanger, which requires additional staff, training and costs, he said.

Nonetheless, Erlanger projects it will have a net income of $5 million in the fiscal year that begins July 1.

Erlanger trustees will vote on the hospital budget for fiscal 2018 at their June board meeting.

Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.

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