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Saturday, December 14, 2019
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Health & Hospitals

Memorial Hospital Behind on Budget, But NOT in the Red

Category: Health & Hospitals

By Lou Phelps
SBJ Staff

Editors Note: After attending both the June and July 2010 meetings of the Memorial Health Medical Center’s Board of Directors, The Savannah Business Journal requested copies of the hospital’s financial information not discussed or presented in open session, and conducted an exclusive interview with Memorial President Philip Schaengold about the numbers.

In 2008, Memorial Health University Medical Center – the hospital – lost more than $29.3 million dollars. It was a top news story both locally and across Georgia that year, with pleas to the Georgia General Assembly for additional funds. Memorial is one of Georgia’s only four Level One trauma centers, and along with Grady Memorial Hospital in Atlanta, both were termed to be in serious financial trouble. In 2007, the hospital had lost a whopping $59 million.

Understanding the financial reports of “Memorial,” is not straightforward. In total, there are actually a number of corporations that roll up into the “Memorial Health, Inc.” consolidated financials. The hospital unit represents approximately 87 percent of the Memorial Health, Inc.’s total revenue annually, however, and has separate financial reports.

According to financial data provided last week by Philip Schaengold, president of Memorial Health, Inc., the huge losses the hospital reported in 2008, for example, included only a $ 6.6 million loss on regular hospital operations. Most of the hospital’s losses were actually from its investments.

“The stock market tanked,” Schaengold explained. The public was repeatedly reminded about the indigent care Memorial provides, for which it receives no reimbursement, as the reason for its financial troubles.

The 2007 and 2008 numbers were not under his watch; Schaengold was hired as of June 2009 to lead the multiple hospital corporations that reside on its 100-acre campus, and bill almost a billion dollars a year in patient revenue.

Besides Memorial Health University Medical Center, Memorial Health, Inc. also consists of a number of other businesses including Urgent One centers; Provident Health Services, Inc.; Transport One (Memorial’s ambulance service that loses about a million a year); the six residency programs that Memorial runs as an academic hospital; and the physician practices that are owned by Memorial and housed on the Waters Ave. campus. The physician practices are also losing money, according to Schaengold.

The new medical school that Mercer University has opened on the Memorial campus does not impact the hospital or Memorial Health, Inc. financially, he states. Mercer is a tenant, and revenue and expenses for their presence is “a wash,” he states.

As a teaching hospital, however, Memorial for decades has maintained six residency programs, training future doctors in various practice areas including pediatrics and trauma care that have nothing to do with the new Mercer program. Those residencies give Memorial an edge, he believes, as they insure that patients are provided care by the newest and brightest, using the latest in treatment methodologies.

“Always find a university medical center, no matter where you are, when seeking medical care,” Schaengold believes.

So far this year, through June 30, the hospital itself has lost only $550,000 on operations, and has shown improvements in the performance of its investment portfolio, for a small profit of $492,000. Unfortunately, the hospital’s budget had called for a profit of $10.158 million. (See Financial information at end of story.)

The total company Memorial Health, Inc. is still losing significantly. As of 6/30/2010, it is reporting a loss of $12.279 million, against a budget that had called for the consolidated corporate to be at breakeven point. The non-hospital operating units have lost $13 million as of 6/30/2010 with no improving trends in sight.

Memorial hospital saw growth in 2009 versus 2008. Admissions were up 5.3 percent; inpatient days were up 7.2 percent; emergency visits were up 10.0 percent; and surgery was up 3.1 percent. In total, Memorial’s net patient revenue grew $24.3 million in 2009 over 2008, and the hospital reported an operating profit of $3,736,000 for 2009 before investments.

For 2010, the hospital board planned on an additional 3.0 percent in growth, but it hasn’t materialized due to the economy, according to Schaengold. Admissions are 3.0 percent lower than budgeted and surgeries are 4.7 percent lower than budget. Overall, 2010 will come out flat to 2009 performance numbers, he estimates.

And the impact of the huge financial losses of 2007 and 2008 are still being felt in 2010. Memorial Health, Inc. has been unable to fund its annual capital program of reinvesting in the hospital’s physical plant and equipment at appropriate levels.

In 2009, the hospital made a $19 million profit and is now sitting on a lot of cash – $27.1 million as of 6/30/2010 on its balance sheet. To boost patient numbers, the hospital is spending about $1 million of that cash on an advertising campaign over an 18 month period.

Schaengold points out that that level of cash is grossly insufficient. Memorial Health Inc. should be spending about $25 million a year on capital improvements. Instead, this year, Memorial will only spend about $12 million.

For this reason, the hospital is supporting the $10 fee proposed as an addition to motor vehicle tag fees, to help fund Georgia’s four Level One Trauma centers.

And, as of 2012, Memorial’s debt covenants will require the hospital to have 90 days cash on hand from the current requirement of 75. In March, Schaengold told the Chatham County Hospital Authority (CCHA) that Memorial was considering refinancing its long term debt of about $190 million which is currently insured by AMBAC. At that meeting, CCHA’s attorney, Steve Scheer, “noted that there would be issues if the hospital’s original footprint were required as collateral,” according to the minutes of the March 9 CCHA board meeting.

Transparency at Memorial
Understanding Memorial hospital has always been a challenge for the public, and a number of misconceptions continue to exist. To aid in transparency with the community, the Memorial Health board has now agreed to post its meeting notices, agendas and approved minutes on its Web site.

But more needs to be done. At both the June 17 and July 28 board meetings, little business was conducted in public. And the hospital’s operating budget was not on either agenda.

At the June board meeting it was announced that the Memorial Hospital Foundation will undertake to raise $25 million for a new state-of-the-art 58-bed children’s hospital using the top three floors of the hospital’s Heart & Vascular Tower on the Memorial campus that are not in use. There are no public minutes about discussions regarding this decision.

The July 28 meeting was posted for 5:00 p.m. and began at 5:05 p.m. There were an announcement and applause that Darcy Davis has been promoted to CFO of the hospital, and an update by Schaengold about Memorial’s participation with the Premier Healthcare Alliance, the hospital purchasing consortium Memorial belongs to. That was the end of the public session.

At 5:18, the board voted to go into executive session for the reasons of “personnel, real estate and legal matters.” They emerged at 6:40 p.m. Each subcommittee then reported that they had held a meeting during the past month, and that the public had been properly notified, but there were no reports by any subcommittee chairmen or members on issues, recommendations or votes.

The full board held no decisions on hospital policies, staffing levels or other issues, and they did not review the operating budget. There was no report on the key statistics of hospital operations during the prior month, such as the number of admissions, inpatient days, occupied bed statistics, numbers of surgeries or the number of emergency visits – the realities that drive hospital revenue and expenses.

The Memorial Health Board of Directors establishes operational policies for the Memorial Health system, according to the hospital’s website. “It also ensures that the long-range strategic planning, budget, resource allocation, and policies are consistent with the mission of the organization,” the site states.

Current board members include William “Bill” Daniel Jr. (chairman), Helen Downing, J. Curtis Lewis III, Marilyn Buck, Kay A. Ford, J. Harry Haslam, Michael A. Kaigler, John Kane, Mark Moore, Gus H. Bell, William L.D. Lyght, Charles F. McMillan, Ira Berman, Robert F. Brown Jr., Christopher L. Wixon and Mark E. Murphy, M.D.

The public must be notified 24 hours in advance that a meeting of the hospital board will be held, and the agenda of that meeting must also be available to the public. Based on a request by Coastal Empire News, publishers of The Savannah Business Journal, that information will now be available on the hospital’s Web site, along with all approved minutes for access by the media and the public. This is in keeping with the practices of the City of Savannah, Savannah-Chatham Public Schools and the Chatham County Commissioners.

The Memorial Board conducts it work through a series of seven sub-committees; each of those subcommittees must also comply with the Georgia Open Meeting Law requirements, informing the public of when and where the subcommittees will meet, at least 24 hours in advance, plus the agenda of what will be discussed. One of the subcommittees is known as the Finance Subcommittee.

After the July 29 board meeting, when the SBJ reporter asked Chairman Bill Daniels and President Schaengold why, again, the operating budget was not on the agenda., and when did board members have an opportunity to find out what was going on financially, Daniels’ answer was the same:

“Board members can attend the Finance Subcommittee meetings any time they like,” he said.

As to why other matters relating to the operations of the hospital were not conducted in front of the full board, or in public, Daniels repeated statements he has made over the past two months to the SBJ: “We have a competitor in this town; there are only two hospitals in this town.”

To date, Daniels and Schaengold have taken the position that most of the information about the hospital is “strategic” in nature, and therefore can be conducted in executive session.

Under Georgia law, the only reason for an executive session to be held by a hospital board or subcommittee is for personnel matters, real estate, legal and strategic planning. But minutes of every executive session must be kept. And, once the reason for the executive session has passed, the minutes must be release. This is not currently taking place.

The public – including the doctors and staff at Memorial – have no idea which of the board members support operating decisions or have questions about priorities. Nor does the public.

The Chatham County Hospital Authority
There’s another entity that comes into play in understanding Memorial’s financial operations. The Chatham County Hospital Authority (CCHA), formed in the early 1950s, actually owns the facilities used by Memorial Health University Medical Center and Memorial Health, Inc.

The Authority is comprised of nine board members appointed by the Chatham County Commission. Retired physician Dr. Gerald E. Caplan is the current chairman. The other members are E.G. Miller (vice-chair), Don L. Waters (treasurer), Dr.Cecil Bendush, Dr. Manning M. Goldsmith, James Buchman, Donald E. Harwood, Charles McMillan, and W. Rex Templeton.

The Authority meets quarterly; its next regular board meeting is this Weds, Aug. 4 at 5:30 p.m. at the hospital. Minutes of that group are extensive, with significant discussion on the open record from which information on Memorial hospital can be gleaned.

Memorial’s “Strategic Plan”
Minutes from the CCHA Board Meeting of March 9 provide answers on the strategic plan of Memorial hospital’s board under Schaengold’s leadership. He told the CCHA body that the plan he was intending to present to the Memorial Health board in March includes six strategic “imperatives:”

• Sustain and expand Memorial’s differentiation on quality outcomes and patient safety.

• Transform physician relationships

• Adopt a “Patient and Family Centered Care Culture. “ Schaengold explained that “designating visiting hours have been eliminated and family members are encouraged to be a part of the patient’s hospital experience equipping them with the information to care for the patient after discharge.”

• Achieve growth in strategic clinical lines, which are most surgical in nature, but also includes pediatrics.

• Become a destination, regional academic health system anchored by a major teaching hospital. “Mr. Schaengold emphasized this is the Mercer relationship. He reported they now have 120 medical students on the Memorial campus and project to have 240 within 5 years. He reported the goal is to have Mercer build a signature building on Memorial’s campus. He added that Mercer has already submitted a grant request for stimulus money to renovate the Hoskins Center into research labs,” according to the minutes.

• And finally, to improve the health of the region, with possible partnerships with FQHC’s (Federal Qualified Health Center) such as Union Mission to build additional primary care points of access for patients.

The minutes of the Strategic subcommittee of Memorial Health regarding that March discussion, and whether or not the Memorial board approved the strategic plan, have not been released to the public. (See financial chart above)


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