Erlanger Health System, regrettably, has climbed back on the financial roller coaster.
After a half decade of positive net income from operations, Chattanooga's public hospital reported Monday that it ended fiscal 2019 with a $4.4 million loss and incurred a $4.5 million loss in the first quarter of fiscal 2020.
In the half decade prior to the arrival of former CEO Kevin Spiegel in 2013, Erlanger had gone from a loss in 2008 to gains in 2009 and 2010 to losses in 2011 through 2013.
Just ahead of the revelation of the most recent financial reports, the health system eliminated or restructured 30 positions, including members of upper management. A source told this page those moves had been expected for some time.
When Dr. Will Jackson, the hospital's new chief executive officer, was hired last month, Erlanger's board gave him three main directives — to address physician relations, reorganize the hospital's management structure and reorganize the governance structure of Erlanger Medical Group.
Those apparently had become areas of concern under Spiegel, who had turned the hospital's bottom line from red to black, acquired regional facilities and shepherded the construction of a new children's hospital outpatient center.
However, a May letter from Erlanger's Medical Executive Committee to board chairman Mike Griffin said the committee — which oversees quality and safety at the facility — voted "no confidence in the structure of the current Executive Leadership to ensure quality and safety of patient care."
Under the former CEO, contract disputes with cardiology, radiology and neonatology physician groups and the campus's University of Tennessee College of Medicine also had occurred.
And perhaps tellingly, and not unlike bloated government bureaucracies, Erlanger grew from fewer than 100 employees who were considered management when Spiegel arrived to about 280 managers before Monday's layoffs.
Yes, a hospital that is growing is likely to see a growth in management, but a nearly 200% growth in five-plus years likely indicates an excess.
Fortunately, fiscal 2019's $4.4 million loss doesn't approach those of 2008 ($15.4 million), 2012 ($16.7 million) and 2013 ($14.3 million), especially considering inflation, and a number of hospital trends remain positive.
The hospital has led the state in patient growth for the past five years and showed improvements in net position, net patient revenue, admissions and physician practice outpatient visits. Further, days cash on hand (how many days the hospital could fund operating expenses without bringing in additional revenue) also increased, and net days in accounts receivable (how many days pass between when the bill leaves the hospital until payment arrives) fell.
Our worry was that the health system had bought up several regional facilities so quickly, but that didn't appear to be a concern of financial managers.
Indeed, they predicted continued growth in fiscal 2020 and attributed the large first-quarter loss to the inability to rein in expenses (especially premium overtime), to the decline in regional transfers, to fewer emergency room patients being admitted to inpatient care, to below-budget discharges of patients with commercial insurance, and to an average length of stay that was higher than budget and higher than the previous year.
Erlanger officials couldn't say how much accomplishing the two restructuring/reorganizing goals might save the hospital but said it should improve efficiency and streamline decision making.
Griffin said no more layoffs are planned and that Jackson has the board's full support.
With that said, we hope Erlanger will turn around its first-quarter loss and operate the rest of the year in the black. As the city's only public hospital, with some $135 million in uncompensated care, it doesn't have to have mammoth net income to have an impressive year.
In fact, 10 years ago, when Forbes reported the hospital had an operating profit of $121 million and called it the 12th most profitable hospital in the country, health system officials were quick to deny the figures. The hospital's own final audited financial report put its gain in fiscal 2009 at $3.1 million.
The Spiegel years, until fiscal 2019, were ones of growth and financial stability. If under Jackson physician relations improve, if quality and safety of patients can again be ensured by the Medical Executive Committee and if the financial picture is more black than red, those, too, will constitute a positive outcome.