Chattanooga: Erlanger Health System losses mount

Chattanooga: Erlanger Health System losses mount

February 21st, 2012 by Mariann Martin in News

Erlanger Hospital in Chattanooga

Photo by Dan Henry/Times Free Press.

Donnie Hutcherson is seen in this file photo.

Photo by Juliette Coughlin

Despite seeing some improvement in outpatient surgical figures, Erlanger Health System lost another $2.1 million in January, bringing operating losses in the first seven months of the fiscal year to $12.5 million.

Erlanger executives presented their January financial report during a budget and finance committee meeting Monday evening. Last month, they warned trustees that they do not expect the hospital will begin making money until April.

"There are a lot of things that are actually happening, but volumes are still not back to where we had hoped they would be for the month of January," said Britt Tabor, Erlanger's chief financial officer.

The losses have strained cash flow at the hospital; cash on hand is now down to 75 days, Tabor said.

The hospital will not be in compliance with its bond covenants by the end of June if its finances do not improve, according to the financial report.

Despite making several severance payments to outgoing executives in January, labor costs were below budget. The hospital has asked certain employees to take days off before March 1 and has cut six executive positions and 23 to 30 midlevel managers or directors since the beginning of January.

Executives also have said they will implement voluntary and possibly involuntary staff reductions before April to reduce overhead expenses even further.

In another attempt to improve their strains on cash flow, Erlanger officials said they are working to lower how long it takes for the hospital to get bills paid.

Net days in accounts receivable are now about 68 days, while the national best practices figure is below 55 days.

Erlanger hopes to lower its number to at least 58 days by the end of the fiscal year in June.

Committee Chairman Donnie Hutcherson noted Erlanger has seen "the perfect storm" in the last six months, with four elements straining hospital finances.

Besides operating losses so far this year, Erlanger has about $8 million in accounts receivable and $12 million that has not been paid on Medicare accounts.

The fourth drain on cash flow has been Erlanger's extension of a $20 million line of credit to Erlanger at Hutcheson in Fort Oglethorpe, Hutcherson noted. That hospital has used $7.2 million so far.

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