Hospital Reports Impressive Financial Gains for Fiscal YearJune 12, 2019
I’m pleased to report that the hospital is likely to have its best year financially in a long time. The board received a financial update at the June meeting and the indications are that we will end the current fiscal year on June 30 at, or close to, breakeven for net income (prior to restricted contributions). This result is a dramatic shift from last year, when the hospital ended the year with a net loss of more than $3.3 million on the same basis.
Credit goes to CEO Kelly Mather and her leadership team who have worked diligently this past year to implement the difficult changes needed to move the hospital toward financial sustainability. This was accomplished while transitioning responsibility for, and maintaining access to, two important services that the hospital was not able to operate profitably on its own.
Our Home Health service, which provides much needed support to those recovering at home, was transferred to another local provider who has been able to continue the service by taking advantage of synergies with their own home services. Likewise, Kelly and her team were able to find a perfect way to retain the Skilled Nursing Facility for the community by partnering with a company that operates hundreds of these types of facilities. This group takes over management on July 1st.
Unfortunately, in order to create a sustainable future for our hospital, we did end up having to close one service, Obstetrics, which we did not have the volumes necessary to sustain.
To help maintain this momentum, the board has established balance sheet and financial goals for the hospital and its leadership over the next three years. These include:
- Meeting the board-approved budget each year;
- Dramatically decreasing the hospital’s debt by almost $3 million by end of fiscal year 2022; and,
- Increasing the rolling average of Days of Cash on Hand by 20 days by end of fiscal year 2022.
By attaining these goals our hospital will be better positioned for a more secure future; better able to handle the financial uncertainties surrounding the business and government reimbursement sides of healthcare; and better able to focus attention on continuing to provide the best possible healthcare to the community.
Skilled Nursing Facility (SNF) Update
CEO Kelly Mather reported that the hospital is on track to finalize the agreement this month with The Ensign Group, a national operator of skilled nursing and rehabilitative care services, which will assume management of SNF operations July 1. She said that terms are completed and the contract will be finalized shortly.
Under the agreement, SVH will receive revenue from Ensign both through a revenue-sharing agreement and by providing medical and operations services to Ensign. SVH would not be liable for any losses if they were to occur. The SNF will remain under the hospital’s license with administration and board oversight.
This agreement will allow the community to continue to benefit from a hospital-based skilled nursing facility and provide best-in-class management for that facility, and alleviate a significant source of financial strain from our operations. The very definition of win-win-win!
A significant relationship the hospital has developed in recent years is with Canopy Health, a large and growing regional healthcare plan in which UCSF Health plays a central role. Canopy Health comprises nearly 5,000 doctors and more than a dozen hospitals spanning eight Bay Area counties. SVH joined Canopy Health as a way to help us complete with Kaiser and other large regional healthcare systems such as Sutter.
We heard an update from Jeff Burnich, MD, Canopy’s Chief Physician Enterprise Executive, who discussed regional trends in healthcare, many of which impact small hospitals like ours. He noted the shift of lower acuity procedures from hospitals to outpatient Ambulatory Surgery Centers, the increase of Medicare Advantage patients in the payer mix, and the challenge of Medi-Cal reimbursement levels continuing well below the cost of delivering services.
He said that Medicare payments continue to be a challenge for most hospitals, with the vast majority of short-term acute-care hospitals losing money treating Medicare patients. It’s worth pointing out that our hospital runs counter to that trend and is at breakeven, or close, on many Medicare patients and procedures. Our leadership team is carefully managing services and overhead so as NOT to lose money on this growing and important segment of our community. He noted that Canopy plans to offer a Medicare Advantage plan soon.
The board received a briefing from Caitlin Cornwall, Project Director of Sustainable Sonoma, an Initiative hosted by the Sonoma Ecology Center. She reported that the group is organizing community resources to tackle some of the big issues facing Sonoma Valley, with initial emphasis on affordable housing. It’s a pressing concern facing our community, and the hospital has been supportive of efforts to address this issue. For more information on this important initiative, visit sustainablesonoma.net.
Next Board Meeting
Our next regular District Board meeting will be held a week later than usual due to the July 4 holiday. We will meet on Thursday, July 11, at 6 pm in the hospital’s basement conference room, 347 Andrieux St., in Sonoma. The public is welcome to attend and public comment is always encouraged.
Chair of the SVHCD Board of Directors