Business

Health insurance costs dent bottom line at Pardee

By Bill Moss, Published: September 17, 2014

Pardee Hospital plans to spend $7 million on the new cancer center at the joint health sciences building on the hospital campus, the main capital expense in a 2015 budget.

Pardee's Board of Directors approved a budget that also calls for an overall operating margin of 1.5 percent with revenue of $165 million against expenses of $162.6 million. Counting $1.75 million in non-operating income, the Pardee budget projects an overall margin of $4.2 million, or 2.6 percent.
During a meeting of the Board of Commissioners on Wednesday, Pardee CEO Kirby outlined the challenges that have led to a projected operating loss of 3 percent, or $4.48 million, for the fiscal year that ends on Sept. 30. The hospital will end the year down overall $1.8 million, or 1.2 percent, the projections said.
The FY2014 loss is attributable to skyrocketing employee health expense, a dip in inpatient admissions and federal government cuts, Kirby said.
The biggest loss resulted from a 50 percent rise in employee health expenses. This year Pardee, which is self-insured as part of the overall UNC system, spent nearly $9 million in employee health care compared to $6 million in the past.
"This year has been a hard year for us," Kirby said, "but one that we see as an improving in the coming year."
To absorb the revenue loss and cost increases, the Pardee Board of Directors has cut the budget, leaving 73 positions unfilled this year. Patient admissions were projected to drop by 10 percent for the budget year ending Sept. 30 while patient days, deliveries and physician visits also have declined.
Since affiliating with UNC Health Systems three years ago, the management fee Pardee has paid has returned more than $4 million in savings, added revenue and other gains, Kirby said.
"The bench room that UNC affords us, the credibility within the region as well as the sounding board that they help us navigate this transition within our board meeting has been tremendous," Kirby said. "Clearly, lots of good things are happening at Pardee Hospital this year. But, clearly, we're having one of the most difficult years that we've had in the past decade clearly from the unexpected 50 percent increase in employee health expenses."
The budget adopted by the Pardee Board of Director on Aug. 27 also:

• Caps an increase in patient charges at 5 percent.
• Projects a merit increase of up to 2 percent on April 1, 2015, "contingent on market conditions and financial performance."
• Authorizes borrowing of $7 million and includes FY2015 debt service of $3.7 million.
• Projects a Pardee Foundation contribution of $3.3 million on a routine and capital campaign goal of $4 million.
• Authorizes capital spending of up to $20.3 million on and off the main Hendersonville campus.
• Forecasts a $900,000 drop in non-operating revenue, which officials attribute to increased interest expense from new borrowing and conservative investment returns.

Besides $7 million for the cancer center, the hospital's FY2015 capital budget includes $2 million for phase 3 improvements at the Mission Pardee Health Campus on the county line in Fletcher , $3.6 million to buy a one-half interest in the land and $3.4 million for off-site clinic development. Other equipment and renovation costs amount to $4.3 million, for a total capital budget of $20.3 million.

The Board of Directors approved the 2015 budget after review by its physician network and urgent care board and by the Pardee board's finance committee.