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Hospital facing tough choices in the coming year

Officials are prepared to hear not-so-good news when Hutcheson Medical Center’s financial report is given during the hospital’s next monthly board of directors meeting.

After having several profitable months, the hospital lost money in October. Though substantial, losses during the first month of its 2013 fiscal year were less than budgeted and officials say occasional setbacks can be expected as the hospital’s viability improves.

“This hospital can be profitable and be turned around,” Hutcheson President and CEO Roger Forgery said recently. “Operations are OK, but the debt is another story.”

Years of ever-mounting debt, much of it the result of providing uncompensated care to those living in a 12-county region, led to the hospital’s near collapse in 2011. What no one realized when Erlanger and Hutcheson partnered in May 2011, with Erlanger providing a $20 million line of credit to keep Hutcheson open for business, was how deep and broad that debt was. In February 2012, Forgery, Erlanger’s senior vice president of regional operations and business development, was tapped to lead Hutcheson’s turnaround.

When the partnership was announced, officials publicly said restoring the hospital’s financial health — making operations profitable and dealing with its long-term debt — would be a two-year process, but privately conceded 36 months was a realistic timetable.

Eighteen months after stepping back from the brink of its own fiscal cliff, Hutcheson’s financial health has only respited, not recovered. Losses from day to day operations have slowed and business has improved, but a huge and ever-growing problem remains.

“Debt service is the dark cloud that will hamper growth,” Forgey said.

Officials have likened the situation to assuming a mortgage, then discovering the existence of a second mortgage and liens against the property.

“Obligations were greater than anticipated,” he added.

Hospital spokeswoman Stacey Kaufmann noted that small monthly losses are budgeted through May 2013 as the hospital spends money on the first upgrades to some systems in seven years — “unheard of in the medical world” — and transitions to a different billing company for outpatient clinics.

“We’re paying bills, doing what we need to do and are on the verge of being successful,” said Forgey. “Nine months in we’ve had some successes. That line of credit bought time to sort things out and rebuild our physicians and lines of service.”

Restoring orthopedic, cardiology, surgery, urology, gastroenterology and pulmonology services has been a priority during the hospital’s rebirth, something made possible by the addition of 20 new staff physicians.

Even if the hospital returns to profitability on a consistent month to month basis, there will be a tremendous shortfall in what is necessary to pay off the years of accumulated debt. It would be like trying to pay off credit card debt by only making minimum monthly payments while continuing to use the same card: indebtedness grows faster than it is being paid off.

While still dealing with revitalizing the hospital and its daily operations, the hospital’s board of directors and administrators face a daunting task in the coming year. They need to find ways of expanding revenue-producing services while shrinking expenditures earmarked for debt service.

If the hospital were a trauma patient its condition might be described as transitioning from one triage stage to another — it has stopped hemorrhaging cash and operations have stabilized.

For 2013, attention will shift to treatment that can result in full recovery.

“Debt is something that can be dealt with,” Forgey said.

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