Hospital shows net loss for year

Community Hospital ended fiscal year 2003 with a net loss. For the fiscal year ended June 30, 2003, the hospital posted an "excess of expenses over revenue (net loss)" of $661,186, according to hospital officials.

The hospital's auditors issued a clean and unqualified opinion on the financial statements noting that they "present fairly, in all material respects, the financial position of Community Hospital…" Even with these financial results, however, the hospital remains very optimistic for the future. Community Hospital continues to grow every year. As of June 30, 2003, Community Hospital assets were $14.8 million compared to $13 million as of June 30, 2002, which was an increase of 13.14 percent. The addition of the new medical office building housing the McCook Clinic was the biggest component of this increase.

"This is a bright spot for the future as a hospital that has strategic plans for a successful future is a hospital that continues to grow," Jim Ulrich, vice president finance and support, said.

Community Hospital also has a newly remodeled space for visiting specialist doctors, a general surgeon, and our growing orthopedic clinic. Community Hospital is also well into our second phase of implementation of a hospital wide computer system which will continue to enhance the information the hospital needs to provide quality and efficient care for patients. These changes along with similar investments made in previous years provide us with a great deal of optimism for the future.

As indicated on the Comparative Statement of Operations, gross patient service revenue of $29.4 million was an increase of nearly $3.7 million or 14.2 percent over fiscal year 2002. Net patient service revenue (gross patient service revenue less deductions from service revenue) increased only $1.6 million or 9.78 percent over fiscal year 2002.

The deduction from service revenue (difference between the hospital's established rates and the reimbursement rates paid by Medicare, Medicaid, and other insurance carriers) of nearly $12 million increased nearly $2.1 million or 21.36 percent over fiscal year 2002. This increase was on the heels of a 26.52 percent increase shouldered in fiscal year 2002. This increase continues to be a very unfavorable trend experienced by many other facilities throughout the hospital industry, particularly hospitals the size of Community Hospital. For fiscal year 2003, Community Hospital was limited to 40 cents of reimbursement on every dollar charged for the services provided to patients. This challenge definitely makes the hospital industry very unique.

More than 70 percent of the inpatients and nearly 58 percent of all patient treated by Community Hospital had Medicare insurance (up from 68 percent and 56 percent respectively during fiscal year 2002).

Medicare reimburses Community Hospital and other hospitals of similar size at rates less than it costs to care for these patients with Medicare insurance (The Medicaid program also reimburses the hospital at rates less than cost).

With this financial challenge, it is no wonder that hospitals of similar size across Nebraska as well as across the nation are experiencing a severe decline in operating margins, or in many cases turning operating margins into operating losses.

Community Hospital is not alone, and has teamed up with six other Nebraska hospitals (dubbed the Magnificent 7) to spread the word of our financial challenges created by the low level of Medicare reimbursement. "We have done just that in meeting with U.S. Congressman Tom Osborne, and U.S. Senators Chuck Hagel and Ben Nelson during this past year," Ulrich said. Had Community Hospital been reimbursed it's cost for its treatment of patients with Medicare insurance it would have seen more than $1.2 million in additional reimbursement. Currently, House and Senate versions of Medicare Prescription Drug legislation are being reconciled. Because of the nation-wide efforts including those by the Nebraska Magnificent 7, many very favorable provisions to benefit rural hospitals are contained in this legislation. "We continue to watch with great anticipation that a version of this legislation with cost-based reimbursement provisions will pass Congress and begin to benefit rural hospitals between 25 and 50 beds (Community Hospital has 44 beds) sometime in late 2004," Ulrich said.

Operating Expenses increased nearly $2.5 million or 15.25 percent. Several factors contributed to this increase. Increases in depreciation, supplies and other costs such as mobile service fees account for more than $1.7 million. The remainder of the increase was due primarily to the cost of providing the additional services which generated the additional patient service revenue as discussed earlier. One quick measurement of overall efficiency in providing services is the ratio-of- costs to charges or RCC for short. This RCC ratio has remained fairly constant over the past three years at 63.9 percent for 2003, 63.32 percent for 2002 and 66.69 percent for 2001.

"Given the challenges we face we are continually looking at ways to operate more efficiently and challenge the cost the hospital incurs to care for patients and remain compliant with all rules and regulations governing the healthcare industry.

"We continue to remain steadfast and true to our strategic plan by investing in our facilities and in new programs that we believe will continue to broaden and enhance the availability of healthcare services in our community and throughout Southwest Nebraska and Northwest Kansas," Ulrich said. "We feel very strongly that Community Hospital's future success goes hand in hand with our ability to continue to provide these quality healthcare services to each and every one, thus truly providing 'better care for the good life.'"