A consultant for the South Central Kansas Medical Center presented a strategic plan to the hospital board on Tuesday, saying the medical center should continue to invest in itself and that the hospital is a huge asset for the community.
Carmine Di Palo, CEO of Revere Healthcare Solutions, Inc., presented an assessment and analysis of the last 10 years of SCKMC’s performance, identifying issues and corrective actions to provide stability to hospital finances.
CEO Virgil Watson said the presentation was the result of two months of combined effort by Di Palo and the hospital management team.
“I told the city commission we were going to have a colonoscopy of our operations and we have successfully completed that,” he said. “Now it’s down to getting to work on the things we’ve found that we must do.”
Di Palo said the objective of the plan is to improve performance enough to allow the hospital to pay its bond obligation and other obligations the hospital incurred back in 2016 before a one-percent sales tax was implemented to shore up hospital finances.
Even with the support of sales tax revenue, the medical center reported a loss of $177,715 in 2017, and city commissioners continue to voice concern about SCKMC finances, especially with a half-cent sales tax for the hospital set to expire in 2019.
Part of that plan Di Palo advocates involves a more efficient use of hospital facilities and staff. He suggested cutting back on outsourcing and bring as many of those services back in-house as possible.
“Outsourcing more services has created a under-utilization of the capacity of the employees paid by the hospital,” he said. “The first thing is to try and make sure the right balance between outsourcing and insourcing is identified in order to contain costs.”
Di Palo also identified several key areas that are performing poorly and were a primary source of loss for the hospital. Those areas included the emergency room, cafeteria/dietary, tele-medicine, surgery and OB.
“Those areas generated the entire loss,” he said. “The good news is the problems are defined to very specific areas of the operation.”
Other areas are performing well. Di Palo said the first year of the senior care unit has been extremely positive.
“What remains to do is multiply the size of this operation as much as possible by investing in development and marketing,” he said.
SCKMC has already taken steps to increase those efforts.
The hospital’s two doctors’ clinics didn’t quite break event last year, Di Palo said, but he expects both to become profitable in 2018.
He said primary and preventive health care volumes were increasing, especially in smaller communities.
“Hospitals used to be 75 percent in-patient and 25 percent out-patient just five years ago,” he said. “Now it is probably more of a 50-50 percent basis.
Di Palo said the guidelines for a 2019-2020 operational plan will need to include maintaining and adjusting the cost discipline of traditional hospital services, investing in the organization, and further investment in developing the senior care and primary care.
“Always keep focusing on patients and on quality and innovation,” he said.
Di Palo said SCKMC was a unique facility, with a an indebtedness of only $22 million dollars. He said any community wanting to open a similar facility in Kansas would be looking at a cost of more than $40 million.
“There is no hospital operation that can sustain that type of investment” he said. “The only way to do it is what you have already placed, the sales tax.”
No community today is attempting to build a facility equal to the SCKMC hospital.
“Whoever did it seven to 10 years ago was a genius,” he said. “They paid $30 million dollars for something today that is worth more than 40 million.”
But while building the hospital was a wise move, he said, the capitol structure used to finance the facility was not.
“Apart from that, the idea to build in this community a hospital of this quality, will be an advantage to this community for many generations,” he said. “This is a competitive advantage.”
Di Palo praised the hospital and Chief Financial Officer Holly Harper for the effort and detail implemented in the accounting system.
“I rarely see such a detailed analysis by department,” he said.