The Central Georgia Health System approved its 2010 budget Thursday that includes a 5 percent increase in overall patient charges but still anticipates a $9 million drop in operating revenue compared to 2009.
About 95 percent of the health system’s budget is for The Medical Center of Central Georgia. The rest includes a rehabilitation hospital, an assisted living community, the hospital’s foundation and a company that employs doctors and faculty who work at the Medical Center.
The board discussed the budget in an executive session before reconvening in public to vote on it with no discussion.
The budget comes at the end of a fiscal year marked by a large-scale, cost-cutting initiative that resulted in more than 200 layoffs and many changes to hospital procedures and contracts.
Don Faulk, CEO of the hospital and health system, told the board the hospital was able to reduce its costs by $31 million in fiscal 2009, as it had anticipated. He said he expects the hospital to realize the full $43 million identified in annual savings within the fiscal 2010 budget year.
“By all measures, the past year has been a very good but a very tough year,” Faulk said, calling the cost-cutting initiative “a trial by fire.”
But he told the board that the hospital has monitored patient satisfaction surveys and quality measures all year without seeing any negative impacts from the changes.
The savings allowed the health system to achieve a 5.12 percent operating margin for 2009, up from just 0.16 percent in 2008. Hospital leaders have said the system needs to maintain at least a 4 percent operating margin to remain healthy.
But those gains aren’t expected to continue. The fiscal 2010 budget anticipates an operating margin of 3.79 percent, mostly because Medicare and Medicaid reimbursements are staying flat or dropping, Chief Financial Officer Rhonda Perry said.
A slide presentation that staff presented to the board indicated that the Medical Center has seen a continued decline in the number of patients it treats. Faulk attributed a simultaneous increase in the length of stays to sicker patients. Longer stays mean fewer total patients and less income.
Faulk also pointed to dropping local, state and federal reimbursements for treating the poor and trauma patients. For example, in fiscal 2010, the Medical Center lost almost $3 million of the funding it receives from Bibb County to pay for indigent care.
Faulk said the budget assumes some program and budget cuts will make up some of those losses, but the details haven’t been worked out. He said hospital leaders have ideas about changes to the W.T. Anderson Health Center, which offers primary care to the poor.
“But changes are going to be incremental,” Faulk said. “We’re not going to close the door on that.”
He said the particulars of the anticipated cuts probably will be worked out in October.
Although operating income is expected to drop, the health system anticipates a 3 percent growth in investment income as the financial markets recover, Perry said. Budget documents show non-operating revenue — mostly investment income — climbing from a $5.1 million loss to a $12.4 million gain.
In his year-end report to the board, Faulk said the hospital saw two huge improvements that will be “incredibly important to the success of the hospital”: better operating room scheduling, and emergency room changes that reduced wait times and increased volume by almost 20 percent.
Ellis Evans, a surgeon and hospital board chairman, praised the hospital staff’s leadership at the end of the meeting.
Evans, as well as the chairmen of the hospital authority and health system board, are all stepping down from their positions at the end of the month.
Faulk noted that the loss of longtime leadership will be a blow.
To contact writer S. Heather Duncan, call 744-4225.