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Lowville hospital should improve cost-benefit analysis, study suggests

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LOWVILLE — A consultant is prescribing better cost-benefit analysis of services as one way to help Lewis County General Hospital avoid a potential $3.7 million cash shortfall in 2013.

“That information is really needed,” Donald T. Eichenauer from the Bonadio Group, Syracuse, said Thursday during a presentation to members of the county Legislature, hospital board of managers and Lewis County Health Facilities Corp.

County legislators earlier this year contracted with Bonadio for $56,400 to analyze finances at the county-owned hospital and nursing home and recommend operational changes.

Mr. Eichenauer suggested that hospital managers should first determine, with input from county legislators, a mission of what health care needs should be met at the rural hospital.

The hospital’s accounting software also should be upgraded, at a cost projected by consultants as no more than $25,000 annually, to allow administrators to track more easily the profitability of individual services and product lines, he said. That would allow officials to determine areas in which staffing adjustments and elimination of or changes in services would be warranted.

Some hospitals, particularly rural ones, choose to limit services to only the most profitable, while others wish to provide the community with a full-service facility, even if some services don’t operate at a profit, Mr. Eichenauer said.

“You have to decide on what end of the spectrum you want to be,” he said, noting the hospital is now on the full-service end.

Other suggestions include seeking critical-access designation, as hospital managers on Wednesday agreed to do, along with finding more ways to collaborate or share services with other hospitals in the region, providing financial training for departmental managers and considering changes to management of clinics.

Bonadio officials suggested the facility’s three clinics showed an operating loss in 2011 of $1.9 million, although that didn’t factor in blood work and other ancillary services performed at the hospital’s Lowville campus for the clinics.

The consultant praised the level of services and equipment at Lewis County General.

“The equipment is much more modern and in better shape than in most other rural hospitals I’ve visited,” Mr. Eichenauer said.

While that is a good selling point, it comes with a cost, he said.

And, with a fairly small and stagnant population base, expenses are growing faster than revenues, Mr. Eichenauer said.

The facility at the end of 2006 had 394 full-time equivalent workers, including 6.5 physicians, according to the report. Now, there are 534 full-time equivalent employees, including 17 doctors.

While some of that stemmed from clinic expansion, more than 100 of the 129 additional workers were created in “areas with little or no growth in services,” including administration and overhead areas, the report states.

Mr. Eichenauer acknowledged that increasingly complex regulations and training requirements have made extra positions necessary but suggested some of those duties may be shared among multiple hospitals.

Additional staff has put a particularly heavy burden on public hospitals such as Lewis County General because of skyrocketing payments for the state retirement system, he said.

While the cost for employee benefits at private hospitals is typically at 27 to 28 percent of salaries, the Lowville hospital’s benefit costs amount to nearly 50 percent of salary.

“You start the year about $4 million in the hole,” Mr. Eichenauer said, referring to the annual retirement payment that the state collects in December for the upcoming year’s coverage.

With no changes in operations and the potential loss of about $1 million in low-volume funding for hospitals with declining admissions because of changing regulations, the facility likely would see a cash-flow loss of $3.7 million next year, the study suggests. County reserves are used to cover any shortfalls.

However, Mr. Eichenauer praised hospital officials for already taking steps to lessen that potential hit. Gaining critical-access designation alone is expected to avoid a loss of the low-volume funding, as well as increase Medicare and Medicaid reimbursement by more than $2 million per year.

The hospital also is seeking state permission to remove eight administrative positions from the state retirement system.

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