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Henry Medical stays afloat with new budget

By Johnny Jackson

jjackson@henryherald.com

Henry Medical Center is in the black, for now.

The hospital is struggling financially, as most other hospitals are, but remains in the fight to keep its cash flowing.

"From a cash-flow standpoint, we projected this year to be a break-even year," said Charlie Scott, president and CEO of Henry Medical Center.

Seven months into Fiscal Year 2009 (FY09), however, the hospital is expecting to see shortfalls from income it receives in market investments.

"There's not a whole lot businesses can do to offset, or avoid, the decline in the marketplace," Scott said. "The thing that has upset our budget is the deterioration of the investment income. It was doing pretty good up to the recent decline in the market."

The hospital saw reasonable returns on its investments prior to the downturn in the global economy. Last May, officials projected that the hospital could earn $1.8 million in additional income from investments. That amount, however, could be significantly less by fiscal year's end. "That is our challenge, as all hospitals are faced with how to offset a deficit or shortfall," Scott said.

Henry Medical has an FY09 budget of about $155 million, but plans to spend only about $150 million to coincide with its $150 million in expected revenue.

More than $12 million in the budget was devoted to the depreciation and amortization of the hospital's property and equipment. But only about half of that amount will be spent on the upkeep and purchase of property and equipment this year.

The move effectively frees up about $6 million in actual (cash) expenses, which puts the hospital at about a balanced budget, so far, for the year.

Tough economic times, though, will require more conservative measures. Scott said it will need to continue the attempt at increasing its revenue as it cuts back on its expenses. "One thing is to do our best to generate additional revenue by expanding services."

For instance, the hospital recently opened a "wound healing center." The center, which requires specialized treatment and equipment, is a comprehensive program for people with chronic wounds. "It is a great treatment for people, and it is a source of revenue," Scott said.

"On the expense side, we've been diligent about maintaining our costs," he said. "We cut back on labor, supplies, contracted services, and utility costs."

The hospital has yet to cut any of its positions, but has reduced the amount of contract labor - additional nurses and laboratory personnel contracted to supplement the existing hospital staff.

"Many hospitals, because of staff shortages, have contracted with agencies to supply manpower," Scott said. "We have cut back on our use of outside agencies significantly."

Henry Medical Center is able to stay afloat, in part, because of its volunteer auxiliary organization. The organization provides services to the hospital, and conducts fund-raisers throughout the year to help pay for needed equipment.

Still, fewer paying patients could undo the organization's efforts to take some of the cost burden off the hospital.

The hospital receives about $8 million from the Henry County Board of Commissioners as provided through the county's ad valorem taxes. The amount is 1 mill in taxes to help pay for the hospital's uninsured and indigent care services.

There are no plans to raise the hospital's millage rate, nor has the hospital asked to increase the rate, said District IV Commissioner Reid Bowman.

"The taxpayers simply cannot afford to increase the millage rate," said Bowman, who added that some Henry County residents may even see decreases in the amount they pay in ad valorem taxes over the next year.

Bowman said he empathizes with the hospital's concerns about providing quality service with increasingly fewer resources. "It's pretty difficult to actually break even," he said. "In today's economy, there's absolutely no way everybody can break even. We've had to make some pretty drastic cuts, and we're still doing things on a weekly basis."

About 52 percent of Henry Medical Center's budget is spent on salaries and benefits. The remaining 48 percent includes expenditures on supplies and drugs, professional fees, day-to-day expenses, and bond interest.

The hospital pays about $6 million in interest each year on $60 million owed in bonds used to complete its North Tower Expansion Project in 2006.

Southern Regional Medical Center in Riverdale - a not-for-profit, acute care, medical-surgical, community hospital similar to Henry Medical Center in Stockbridge - is presently under stress over $40 million it owes in bonds that are coming due.

"We don't have to face what Southern Region is facing," said Scott. "We don't have any bonds coming due for the next several years. I'm fairly confident that they're not going to close, though. One way or another, the community and the county will find a way to keep the hospital open. And I think that's what everybody wants.

"If the worst case scenario were to come about, that would create a major problem for Henry Medical Center and other major hospitals in the area," he said. "I believe they are taking the actions that they believe are necessary to improve their economic environment. All hospitals are hurting during these economic times. But they are doing whatever they can to try to reverse their situation. And I wish them success. I think their challenge is to come up with a means of refinancing those bonds."