Hospital finances improve: Revenue up, expenses down in first four months of 2017 over same period last year

Next month Jefferson County commissioners are expected to follow the stated will of their constituents as confirmed in the March referendum, and levy up to 3 mills of support for Jefferson Hospital. 
In the weeks leading up to the election Hospital CEO Lou Semrad spoke at nearly 20 town hall meetings across the area explaining his goal for those funds to be temporary assistance to help the facility meet its obligations while he works on plans to make it independently profitable. 
And while Semrad did make a formal presentation to the county recently requesting the full 3 mills this year, hospital financial records show what he hopes will become a climbing trend of financial improvement.
Comparing the first four months of 2016 to the first four months of 2017, gross patient revenue is up $210,874 and total revenue deductions are down $66,649, together showing a revenue increase of $307,598. In addition, total operating expenses are down $276,910 in the first four months, year over year. 
Deductions, Semrad said, are everything from contractual allowances with commercial insurance companies, bad debt, indigent care and other discounts. In the first four months of this year they are 56.5 percent of total revenue, down 2.5 percent from last year.
“Ideally, we want this number to be about 52 percent,” Semrad said. “It means, in this period last year, we were collecting 41 cents on the dollar after all those deductions. Same period this year, we were collecting 43.5 cents.”
While it may not seem like much, Semrad explained that every percentage point decreased in deductions or increased in collections actually translates into about $220,000 a year in net patient revenue.
“And net patient revenue is what goes in the bank,” Semrad said. “If we can get the deductions down to 52 percent, that 7 percentage points should be worth about $1.4 million.”
Not only has he been keeping an eye on his employment expenses, holding the number of full-time equivalent positions to 126 or 127, down from 130 plus when he started, but since breaking its ties with Pioneer last year the hospital has also taken its billing back in-house.
Despite being in just the first quarter of an 18-month cycle, Semrad feels the hospital’s new relationship with a revenue cycle audit company and the practices his employees are learning from them are already starting to show.
“There was a learning curve,” Semrad said. “It’s clear we’ve had issues in the past with billing, not getting statements out in a timely manner or getting inaccurate statements or too many. There’s still a ways to go, but we did a better job of collecting the money we billed out.”
On the expense side, the hospital has decreased expenses the first four months of this year versus the first four months of last year by almost a quarter of a million dollars.
Semrad said a big chunk of that includes the fees they are no longer paying Pioneer, the management company the authority broke ties with in July of 2016. Outside services are down $250,127.
“When you look at the revenue and expenses together, in the first four months of the year we lost $330,000 compared to over half a million for the first four months of last year. And that half million would have been significantly more but we received nearly $400,000 Meaningful Use. And that  money’s gone. That was a one-time infusion from the federal government.”
The CEO was careful to explain that it would not be accurate to take these figures for the first four months and simply multiply them out for the rest of the year as these numbers come from the winter months, which are typically the hospital’s busiest months and now they are moving into the summer, when revenue is not as generous. 
“Four months is a data point and we hope as May and June numbers come in we can start calling it a trend,” Semrad said. “I would also like to thank the medical staff because they are the ones who generate the revenue for the hospital. Very little happens in this hospital without a physician or provider order.”
None of revenue the hospital is currently collecting from the county is included in the $330,000 loss as it is currently considered a loan that has to be paid back. Come July, the 3 mills it will be collecting will be considered other revenue and the loss should drop. The tax revenue will start being booked as revenue in July and the hospital will start repaying a portion of the support it has been receiving since July of last year. They are currently working on the intergovernmental agreement that will cover the specifics of that repayment.
Even without the booked boost, Semrad said he has already begun to pursue the new revenue ideas he introduced in the pre-election town halls.
Since it is unlikely that the hospital will be able to greatly impact the commercial contracts, the hospital’s administration is working to expand Medicaid locally. 
“You can take someone who has no insurance, who is eligible for some assistance program, and get them enrolled on it,” Semrad said. “So instead of collecting 20 cents as a self pay, we are collecting about 85 cents on the dollar from Medicaid for SSI, or whatever program we get them enrolled on.”
The hospital has identified a vendor that will bring a staff person to Jefferson Hospital who will help individuals identify which programs are available to them and help get them enrolled in those medical assistance programs.
“Some of these forms can be complicated,” Semrad said. “We’ve identified that as a problem. They fill them out wrong or incompletely and they get rejected and then they become frustrated and don’t reapply for the program. We want to help manage that process with them.”
He said that he is also working with the audit team to redesign billing practices. 
“What we are looking at is the revenue cycle audit company we have a relationship with, we have shared some data with them and they are looking to see if the insurance companies are paying us our contract rate,” Semrad said. “And they will be leaving some software with us that helps us ensure their compliance with that. They never go into a hospital and find that the insurance companies are paying what they should or overpaying. They are always underpaying and you have to catch them and it takes some pretty sophisticated software to catch them.”