Budget Cuts Anticipated at Hospital for Next Fiscal Year

Budget Cuts Anticipated at Hospital for Next Fiscal Year

Memorial Hospital of Sweetwater County anticipates a 10% decrease in revenue for FY21 mainly due to COVID-19 related issues.

ROCK SPRINGS — Employees at Memorial Hospital of Sweetwater County won’t see a pay increase in fiscal year 2020-2021, among other budget considerations created by COVID-19 issues this year.

The MHSC Board of Trustees met for a budget workshop last week where CEO Irene Richardson outlined a number of issues the hospital will be facing in the next fiscal year beginning July 1.

She recommended an option to the board that measures three main factors when considering the new budget:

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  • A 10% discount in gross revenue due to COVID-19 issues
  • A 5% rate increase which would include a 2% increase in room rates
  • No wage adjustments

“It took a lot of going back to the drawing board, drilling down and making sure we looked at every line item,” Richardson told the board. “This is unlike any other year because of the impacts of COVID-19. It was a bit of a leap faith because everything changed in the last week of March.”

Richardson added that her team did not have great projections to work with for the new budget, and it wanted to leave room to adjust expenses if the revenue does change. Her research into other hospitals around Wyoming determined that some facilities are projecting pre-COVID-19 revenue numbers while others are projecting a 20% decrease in revenue.

Richardson says MHSC falls somewhere in the middle.

Labor Considerations

The hospital plans to budget roughly $243,000 for contract labor in FY21, a decrease from last year of $680,000. Those cuts will mainly be seen in behavioral health, ICU, the emergency room, and labor and delivery.

The physicians’ fee budget will be cut by $1.25 million, mainly by decreasing new hires in urology, hospitalist, obstetrics, and radiation oncology areas. There will be new benefits budgeted for current or new positions, and no wage increases will be budgeted.

Operating Costs

The hospital’s cash-on-hand is currently 175 days, And FY21 is budgeted for 114 days cash on hand. The operating margin has been budgeted for -5.45% with the total margin budgeted at -5.56%.

While revenue decline was anticipated because of COVID-19 issues, the hospital has seen an upward trend in the reduction of revenue since 2015. The total deduction in revenue for FY21 has been budgeted at 52%, an increase of 10% since 2015.

“This is a pretty sobering trend line,” said Trustee Marty Kelsey. “I don’t have an answer for that, but I have to tell you that it scares me.”

Patient Financial Services Director Ron Cheese said he expects self-pay revenues to grow, which will help alleviate some budget stress. He also anticipates Medicare population to eventually come back because “right now everybody is kind of afraid to come to the hospital.”

Trustee Dr. Barbara Sowada said that when out-of-pocket patient expenses grow through commercial insurance, it makes “that piece of the collection a litte more difficult for the hospital.”

CARES Act

The hospital is anticipating a $1.8 million carryover into the next fiscal year through the CARES Act. MHSC received $1.6 million in the first round of funding and $4.8M in the second round.

Richardson said there may be more CARES Act funding on the horizon, but the hospital is not going to budget for that possibility. Kelsey said that he’d never considered that additional money as “operating revenue,” but rather a carryover from the previous fiscal year.

“We need to be really careful that we don’t use non-recurring revenue like the $1.8M to fund recurring operational expense in the coming year,” Kelsey said.

The Board of Trustees will consider the new budget recommendations and vote on the FY21 budget at its monthly meeting in June.