Princeton council gets update on hospital audit

PRINCETON — Princeton City Council on Monday got a more in-depth look at Perry Memorial Hospital’s fiscal year 2019 audit, which uncovered a $3.4 million loss for the city-owned hospital.

The loss led to last week’s elimination of 10 positions, seven of which had been unfilled, and other planned cost savings that will continue to be implemented over the next several months.

During a presentation to the council, Perry President and CEO Annette Schnabel said the hospital got a late start on making changes because of “inappropriate reporting” that went undiscovered until the audit process began this year.

The hope is that the cuts will bring expenses in line with revenues.

Perry’s net revenue for fiscal year 2019 ended with $42 million, and net expenses were at $45 million.

While the trend in expenses didn’t change much from the previous year, it’s the income side of the budget that led to a loss.

One of the challenges the hospital faces is a shift in more procedures being labeled as outpatient care. In fiscal year 2018, the hospital reported 84 percent of care as outpatient. In fiscal year 2019, it increased to 86 percent. For example, Medicaid and Medicare services now declare total knees and hip replacements as outpatient services when they were once considered inpatient services.

“It’s a major change in how we deliver care,” Schnabel said.

The issue with this is whether a patient is labeled outpatient or inpatient, they receive the same level of care through nursing staff and resources, while the hospital receives less income for outpatient care. Schnabel said this is a trend that will continue in the future.

In fiscal year 2018, Perry had 2,231 inpatient stays and 212 observation stays (can be known as outpatient stays). In fiscal year 2019, Perry had 1,988 inpatient stays and 516 observation stays.

There has also been a shift in more government payers vs. commercial insurances, which reimburses hospitals significantly less for its care on a per-patient basis.

“We do not anticipate the government payers paying us any more,” Schnabel said. “We anticipate continued difficulty with getting the revenue to come into the organization moving forward.”

Some good news about Perry’s finances is that the hospital was able to retire a good chunk of debt this past year. In fiscal year 2018, long-term debt was more than $1 million, and at the end of fiscal year 2019, it had decreased to $600,000. In May, the hospital paid off its 2006 emergency room expansion project.

There’s a lot of talk about the hospital’s current construction of its family health care clinic, which will not be impacted by any future changes. Schnabel said the clinic will expand the hospital’s service size by 40 percent and provide a location for tele-health services. The new clinic will also relieve space issues inside the hospital and allow more efficiency in staffing.

“We’re pleased to have the opportunity to build the family health clinic,” Schnabel said.

The clinic is on track to open on Feb. 1, 2020.

Perry is currently in discussions with OSF HealthCare regarding partnership options.