Hospital Adopts Budget Showing $21.5 Million in Revenue
By Amy Polk

Mackinac Straits Hospital Authority adopted its 2008-2009 budget, showing $19,528,000 in planned spending and $21,575,000 in projected revenues. The budget went into effect Tuesday, April 1.

Before the budget was adopted Monday, March 24, authority members, Chief Financial Officer Jason Anderson, and Chief Executive Officer Rod Nelson explained the budget projections and fielded questions during the public budget hearing.

"Next year should be pretty much the same as this year, and everything should be fairly similar," Mr. Anderson said regarding expenses and revenues. "Overall, it's a break-even budget."

Revenue is expected to increase by $1.5 million this year. Mr. Anderson said the 2008 outpatient volume was good, and predicted it will remain the same next year. Acute care and clinic charges will be increased by 3% starting April 1, which should bring additional revenue, but a 3% projected increase in operating costs and a 3% increase in employee wages should consume much of that. Union contracts have not been negotiated, yet, Mr. Anderson added, which also could impact expenses.

The revenues also reflect the same number of Long Term Care residents (74) as last year, and the same number of swing bed and inpatients as last year. The anticipated Long Term Care revenues are $5.9 million, while acute care is projected to generate $15 million. Both departments' revenues increased in 2007-2008, and are projected to increase this year, although Long Term Care is expected to end the year with a $150,000 deficit. Acute care will subsidize the deficit with $150,000 in anticipated revenues over expenses.

Mackinac Island Medical Center's revenues are expected to remain $600,000, the same as last year. That includes $350,000 the Mackinac Island community raises each year to fill an expected $350,000 hole in the budget. The center costs $830,000 to run, while it should bring in only $480,000.

During the hearing, Brian Schoenborn of St. Ignace, an X-ray technician at the Mackinac Island Medical Center, questioned the projected deficit. He asked whether, in the last two years, a strategic plan to balance the center's budget has been made or proposed.

"Our main concern is that it ends up balanced," Chair Ron Mitchell said, noting that island residents have always raised enough money to balance the budget.

"It's been incumbent upon the island community, to basically, through their fundraising efforts, to offset any deficits, so we've tried to minimize the amount of expenditures as much as possible so we can minimize the amount they have to raise," authority member Walt North said.

"So there have been no directives in any meetings that anyone knows, to balance the Mackinac Island Center's budget," Mr. Schoenborn said.

"Our line on that has been that's up to the Mackinac Island board, and if they're willing to subsidize their loss so that the Mackinac Straits Hospital can break even, it's been our policy to let them handle that over there," Vice Chair Richard Smith said.

Mr. North noted later in the meeting that the Mackinac Island Community Foundation has also established a fund dedicated to subsidizing operations at the medical center.

Continuing budget projections, Mr. Anderson said the hospital is not planning on any state or federal reimbursement cuts, and does not plan to offer additional services through 2009, "although we are actively exploring additional services," Mr. Anderson said.

In addition to employee raises, other expense projections include a 10% increase in employee health insurance costs. Asked by the hospital authority what the typical increase is, Mr. Anderson said between 5% and 10%. Last year, it was 15%.

The county millage, which has raised about $900,000 in previous years, should bring in a projected $950,000 in 2008-2009. Authority member Jim Farero asked if the millage collection increases each year with rising property values. Mr. Anderson said it does, by about $20,000 to $25,000 a year. The 1.2 mills levied against all Mackinac County properties for hospital operations was approved by voters in 2005 and will expire in 2009.

The authority briefly discussed the impact rising utility costs will have on the future budget.

Kathleen Boynton of St. Ignace, a registered nurse, asked if more than $40,000 in wages, benefits, and interest she contends she is owed by the hospital have been included as a separate line item in the budget, and if it will be transferred to Mackinac Straits Health System.

The amount would be included in the employee wages line, Mr. Anderson said, and whatever assets and liabilities the hospital has will also go with the new private corporation.

Later in the meeting, Mr. Schoenborn suggested the hospital authority publicize financial reports and a contingency plan to help the public understand how a newer, larger facility will be supported.

"The community is seeing a structure now that is posting some losses, and is being subsidized. This is obviously going to be a larger and a much more expensive structure," Mr. Schoenborn said. "Who is going to fund any potential operational shortfalls at this new facility?"

Mr. Mitchell said a feasibility study on the area and services supports this project, and suggests a larger facility is needed. The United States Department of Agriculture (USDA) approved the $37 million in loans for the new facility based on the feasibility study.

"And we're going to be offering a lot more services. You know, it's not all on the expense side, that it's going to be more expensive, it will be an increase in revenue because of the variety of services that will be offered," Mr. North said, adding the Sault Ste. Marie Tribe of Chippewa Indians will lease space from the hospital.

"And the hospital is currently making money, it's the Long Term Care that's not," said Sally Hazen of Pine River Road near Hessel, who was seated in the audience.

Mr. Schoenborn acknowledged the tribal involvement, new services, and potential new income, but asked several more times if the authority has a contingency plan in place to cover shortfalls, if the facility cannot raise the projected revenues and develop the projected services.

Mr. Mitchell answered that there is no contingency plan "for failure."

"We would have to change the way we do business," Mr. Anderson said, if revenue projections fail to meet expenditures. "Because we're critical access and 40% Medicare, Medicare is going to pay 40% of the hospital construction costs."

"I would like nothing more than to see a new hospital built, but there's going to be questions like the one I just asked, that are going to be asked by a lot of people," Mr. Schoenborn said.

Mr. Anderson said the new facility will be managed just like the hospital is now, and like any business, if costs exceed revenues, the hospital would have to cut costs and seek ways to find more revenue.

CEO Rod Nelson noted that the USDA has guaranteed loans for the new facility, "and there's a huge upside to this.

"That is, if anything were to happen to the hospital, where it got into trouble, this is the best situation the hospital can be in, to negotiate with the USDA," Mr. Nelson said, adding the USDA and banks financing the project do not want to see it fail.

"Information just like I got is going to be critical to the success of the approval process," Mr. Schoenborn said.

Mr. Nelson said additional information, advertisements, and informational question and answer sheets will be distributed to by the hospital.