Erlanger's disappointing financial report puts pressure on management to recover by end of year

Erlanger Health System is located at 979 E. 3rd Street in Chattanooga.
Erlanger Health System is located at 979 E. 3rd Street in Chattanooga.

Erlanger Health System has lost nearly $16 million in nine months as new financial reports show the hospital ended the second quarter of fiscal year 2020 with a $5.4 million loss from operations and a total net loss of $6.9 million.

The second quarter financial report was released at the Erlanger Board of Trustees' budget and finance committee meeting Monday evening and summarizes the hospital's performance from Oct. 1 through Dec. 31, 2019. It's the first public disclosure of Erlanger's financial health since Oct. 21 - when 30 management positions were eliminated or restructured, and it was revealed the health system lost $8.9 million in six months.

Year to date, Erlanger has lost $8.6 million from operations and sits $11.4 million in the hole once accounting for interest and other non-operating expenses. Erlanger officials had budgeted for a $5.3 million net loss at this point, which is halfway through the hospital's fiscal year that began July 1 and ends June 30.

"[Management has] a sense of urgency that they have money to make up to get back to budget, and they have six months to accomplish that,"said Jim Coleman, an Erlanger trustee and the new chairman of the board's budget and finance committee. "They have actions in place to address the areas that they see as opportunities, so at this point in time I'm supportive and feel good about the direction they're heading."

Britt Tabor, Erlanger's chief financial officer, said during Monday's meeting that six new task forces are focused on high-priority areas, including expense reduction, revenue cycle and identifying specific issues driving recent volume decline.

"We have staffed these particular task forces with leaders - hand picked - that we believe are able to deliver," Tabor said. "As these tactics get implemented, you should see significant impact between now and June."

December volumes showed a "noted improvement" from the rest of the quarter, and January is off to a strong start, Tabor said. Other positives include over budget emergency room visits at Erlanger East, and outpatient surgeries did "extremely well," he said.

Erlanger had budgeted a $2.9 million net loss for the second quarter but exceeded that projection due to high costs and lower than expected volumes in several key profitable service areas such as inpatient heart surgeries, neurosurgery and orthopedic surgery. Although revenue and the overall number of patients coming to Erlanger was consistent with the prior year, fewer patients needing higher levels of care are being transferred to Erlanger from other hospitals throughout the region.

Erlanger's new CEO Will Jackson said the decline in transfers is due in part to "noise" outside the hospital during the transition, but he's also making sure Erlanger is giving its partners and frontline staff what they need to take care of patients.

"I personally have visited about 10 hospitals around our region, just essentially telling them we want to make sure we're taking high quality care of your patients, we're available for tertiary care services and to listen to where they might have had issues with us," Jackson said.

Some financial metrics that had shown improvement through the last fiscal year also took a hit this quarter. Days of cash on hand - a calculation of how many days Erlanger could fund its operating expenses without bringing in additional revenue - fell from 74 at the end of last year to 58. Net days in accounts receivable - how many days pass from when a bill leaves until payment arrives - also rose from 55 to 61.

Although he expects those metrics to rebound, Tabor said Erlanger's amount of bad debt from unpaid medical bills is outpacing what was originally projected.

The full board will convene for its regular monthly meeting on Thursday at 5 p.m.

Contact Elizabeth Fite at or 423-757-6673.

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