ROCK SPRINGS — Memorial Hospital of Sweetwater County CEO Irene Richardson says maintaining a BB+ credit rating from Standard and Poor’s would be “a win” for the hospital in FY19 and FY20.
Richardson, and CFO Tami Love presented the Board of Trustees a budget plan this afternoon during a special workshop meeting that sets the FY20 budget process in motion.
The hospital’s credit rating had steadily declined each year since 2013, and Richardson said her staff is working to reverse that trend.
She said the hospital’s budget philosophy strives to provide the best possible healthcare to the community while maintaining a positive cash.
“We want to make sure that we first and foremost set our budget with goals that will allow us to meet the needs of our community,” she told the board. “And the reason we want positive cash flow is so that we can invest money back into the facility.”
Strategic Plan
In the strategic plan laid out to the board, the short-term goal is to maintain the S&P BB+ credit rating for FY19 and FY20, and in the long term improve that credit rating to BBB- by FY21.
Currently, the hospital has a 1.87% operating margin compared to 1.90% in the budget. The hospital’s total profit margin to date is 1.11% compared to 0.76% in the budget.
MHSC has 120 days “cash on hand” through December compared to 129 days in the budget. Richardson said the hospital will strive to reach the BBB- benchmark of 132 days by the end of the fiscal year in June. Bond covenants require the hospital to have at least 75 days cash on hand.
Accounts receivable is currently at 56 days, and the hospital’s goal is bring that down to 50 by the end of the fiscal year in order to maintain the S&P BB+ rating.
“That’s through six months. Hopefully, we’ll meet the budget by the end of the year,” Richardson said.
Paying the Bills
The hospital’s debt service coverage ratio (the cash flow available to pay current debt obligations) currently stands at 3.75 and has shown steady growth since a low mark of 1.3 in 2017, according to the report. Love recommended the hospital’s goal should be to maintain a DSCR greater than 3.0, but alway strive to improve that number.
“(S&P) do focus on how you’re meeting your budget, so we’re kind of excited this year because we are ahead of budget,” said Love. “One of the things they show as being a challenge is us being a rural hospital, affected by booms and busts, and those are things we can’t change.”
“I think the head winds have lessened,” said board member Marty Kelsey. “I really think the way you presented this we have a decent chance at stabilization.”
Richardson said the hospital would eventually like to establish a separate maintenance fund that would be used strictly for upkeep on the facilities.
Budget Assumptions
Even though an overall room rate increase of 2% was approved for FY19, the rates were not implemented according to the report. Richardson said a 1% rate increase in FY20 would result in a $1.6 million gross revenue increase to the hospital.
A wage increase of 1% equates to an increase in salary and benefits of $280,000. Wyoming’s cost of living increase in the second quarter of last year was 3.3% according to statistics from the Wyoming Hospital Association and CompData wage surveys.
Provider Clinic
Richardson said the hospital’s provider clinic is projecting a budget of about $16.2M. This is a down from $18.1M in FY17. But she says that’s not necessarily a bad thing.
“Our expenses have really decreased, but we’ve maintained our revenue,” she said. The clinic did about $16M in revenue in FY18.
Richardson said the hospital plans to increase overall revenue by providing more services like dermatology and aesthetics, and physician recruitment in orthopedics, pediatrics and pulmonology. The hospital is also bringing on a neurologist, Dr. Prachi Kale, on July 1.
The hospital also plans to ask the county commissioners at the beginning of next year to place a 6 cent tax project on the 2020 election ballot.
Board Approval
The Board of Trustees expressed its overwhelming approval of the efforts Richardson, Love and their staffs made in producing the FY20 budget projections.
“This isn’t the end of the discussions, but its a really good start to the budget process,” said Kesley, who brought the idea of the workshop to the administration.
“This has been a good meeting in that we’re being very transparent to the public,” said trustee Ed Tardoni.” A copy of the PowerPoint presentation is available in the administration office at MHSC.
“Just as the finances have gone up, so have the quality indicators gone up,” said trustee Barbara Sowada. “Last month Irene and her staff were given the heads up by (Centers for Medicare and Medicaid Services) that they should be getting a fourth star (out of five) in the star rating.”
Today’s workshop will replace the boards regularly schedule meeting in February. The board will meet again on March 6 at 2 p.m.
