Erlanger Health System is looking to improve efficiency, increase access and lower costs in the wake of the hospital's rapid expansion for the fiscal year that begins July 1.
The budget and finance committee of the health system's Board of Trustees on Monday approved management's proposed fiscal year 2020 budget, which focuses heavily on "throughput," or the efficient movement of patients through the hospital. Other priority areas include expanding primary care and improving infrastructure.
The full board will meet Thursday to discuss and vote on the plan.
The budget allocates $36.1 million for capital investments, about $3.7 million less than the initial capital presentation the board viewed in March.
Nearly $9 million would go toward projects that include post-anesthesia care unit expansion, an endoscopy center at Erlanger East hospital, MRI replacement and a nurse call system. These projects will help reduce overcrowding in the hospital's operating rooms and emergency department, officials said.
Overcrowding was one of the issues raised in a recent letter to the board from leading physicians on the Medical Executive Committee who said they've lost confidence in the hospital's leadership. The leadership team is headed by CEO Kevin Spiegel.
Throughout the year, Erlanger officials have spoken of the need to reduce the time patients spend in the hospital, because longer-length stays lead to higher costs, worse outcomes and lower patient satisfaction. Part of that effort included creating the vice president of patient logistics position.
The physicians' letter also asked to create a "Medical Staff Throughput Committee." Dr. Will Jackson, Erlanger's chief medical officer, said that committee is now established and doing more work on the issue.
"I think we have the right people at the table, including four members of the [Medical Executive Committee] and two of the officers, so we can start to come up with solutions and then drive performance in those areas," Jackson said. "There's no question we have to improve the length of stay."
Henry Hoss, chairman of the budget and finance committee, also expressed some concern about the hospital's old pension plan, which is now only 40% funded.
Britt Tabor, Erlanger's chief financial officer, said last year's budgeted volumes were "aggressive," and the hospital is planning for a more modest 4.4% growth in inpatient volumes compared to the 11% growth predicted in the current fiscal year. Outpatient volumes are budgeted around 5.1% for the coming year.
Although Erlanger's volumes and revenue continue to grow, the hospital's third-quarter operating income was nearly $8 million below budget at around $2.7 million, bringing its year-to-date operating income to $2.8 million and about $9 million under budget.
"This year we've backed off a little on the volume numbers to reflect what we believe is realistic and attainable," Tabor said, adding that meeting those volumes will be key for the hospital to achieve its goals.
Other aspects of the budget and possible challenges are as follows:
Continued growth
Erlanger is projecting nearly $1.1 billion in net patient revenue, which is 61% growth over six years.
"That significantly exceeds any industry standard," Tabor said.
To do that, the hospital will have to meet its projected volume of around 43,000 inpatient admissions, particularly in areas such as surgery that generate more revenue. "Payer mix" - the variety of patients' health insurance - also will need to be in Erlanger's favor, since commercial insurance pays more than Medicare and Medicaid.
Erlanger East hospital is another key area of projected growth, especially for outpatient and cancer services.
Important investments
Much of the capital budget is dedicated to infrastructure improvements, such as $1.3 million for neurosurgery renovations, $600,000 for elevator upgrades, $950,000 for new parking space, and millions toward roof, ventilator, air handler and lab upgrades.
As part of the strategic shift to expand primary care, Erlanger plans to invest more than $5 million in primary care clinics and equipment.
More than $9.8 million is allotted for technology, including about $6.8 million to ongoing expenses for the electronic medical record software Epic.
Erlanger also plans to put $3 million toward associates' salaries to account for market adjustments beginning in January.
Cost management
Erlanger needs to lower its total operating expenses from $8,903 to $8,868 per admission, officials said.
Some new drug and supply contracts are already helping in the area, as is the co-generation plant that went live on April 1. That project is expected to bring a $1.5 million annual savings in energy costs for Erlanger.
Aside from addressing "throughput" issues, the health system will need to manage productivity to volume and reduce overtime costs.
All of this must be done in the face of providing an Erlanger-record amount of uncompensated care, with costs projected to reach $135 million.
Contact Elizabeth Fite at efite@timesfreepress.com or 423-757-6673.