CHATTANOOGA, TN. – “Unprecedented in Erlanger’s history.” Those were the words used to describe Erlanger’s impressive financial results Monday by Chief Financial Officer Britt Tabor during his second quarter earnings report to the Chattanooga-Hamilton County Hospital Authority’s Budget and Finance Committee.
Tabor told board members that Erlanger posted $12.7 million in gains during its second quarter, bringing the health system’s year-to-date earnings to an unprecedented $20.4 million. “Although this is one of Erlanger’s most aggressive budgets, we have exceeded our year-to-date budget by $13.6 million and the prior year by $22 million for the first six months of this fiscal year,” Tabor announced.
In citing this quarter’s earnings as truly unprecedented, Mr. Tabor said that Erlanger has posted negative second quarter earnings 10 times in the past 15 years and the next highest second quarter earnings was $5.7 million in fiscal year 2007-08, $7 million less than this quarter. And as a reminder, Tabor told trustees “we had a $26 million improvement comparing fiscal year 2013 to fiscal year 2014.”
“There is no question we have achieved this by focusing on two key areas: top line growth and bottom line cost management,” Tabor said. “This huge accomplishment represents a lot of hard work and reflects the impact of strategic business growth and cost management initiatives over the past twelve months,” he stressed. “The numbers for our second quarter clearly demonstrate the upward trend with growth in volumes and sustained positive financial performance at Erlanger. The strategic plan put in place during the last year will help Erlanger for the foreseeable future and provide the platform for Erlanger to invest in this community unlike any other time,” he noted.
Erlanger’s CFO reminded trustees that Erlanger’s earnings are even more noteworthy since the Chattanooga health system has “already provided over $43 million in uncompensated care to this community during the first six months of our fiscal year.” Erlanger’s indigent/self pay utilization was 6.6% over budget this quarter, and bad debt and charity care as a percentage of gross patient revenue was 8.23%.
Across the board growth
Tabor reported that Erlanger’s admissions the past three months were 10.4% over budget and 10.5% greater than last year. Days of cash-on-hand at the end of December 2014 was 94 days. By comparison, that number stood at 65 days cash-in-hand one year ago, he told the board. “This is the direct result of a continued focus on operating efficiencies, physician relations, top-line growth, and our cash collections,” Tabor said.
“Keep in mind it wasn’t just one area of operations that led to these impressive results,” the CFO said. “Erlanger is exceeding its projections in virtually every key area – from ER visits to admissions to inpatient and outpatient surgical procedures and air ambulance flights. Our business is up across the board. This means we are serving more residents in this community and demonstrating sustained positive financial performance,” Tabor explained.
- Surgical inpatient volume was 4.1% over budget and 8.7% higher than last year. Surgical outpatient volume was 5.8% over budget and 1.8% greater than last year.
- Emergency room visits were 11% over budget and 9.7% higher than last year.
- Tabor also drew attention to two cardiac areas that showed “astounding growth” during this reporting period. “Erlanger’s cath lab procedures were 36.7% over budget and 32% higher than last year,” he said, and “our inpatient heart/thoracic surgeries were almost 32% over budget and 19.1% greater than last year.” These huge increases “are a direct reflection on Erlanger’s strategic growth plans surrounding the health system’s cardiac center of excellence this fiscal year,” he said.
- Also impressive were volume growth figures in orthopedic and neurosurgery over the past three months. “Erlanger’s orthopedic inpatient surgeries were 15.3% over budget and almost 33% greater than last year, and our neurosurgery inpatient surgeries were 25% higher and more than 17% over budget,” Erlanger’s CFO reported.
- Air ambulance patients were 4% higher than the same period last year and 1.7% over budget.
- Tabor also reported that commercial insurance utilization was 2.4% over last year and .3% over budget this second quarter.
- An ongoing focus on cost management initiatives also paid off during Erlanger’s second quarter. “Our cost per adjusted admission was $7,530 compared to a budgeted $7,758,” Tabor pointed out.
“A Successful Journey”
Also at tonight’s meeting, Erlanger President and CEO Kevin M. Spiegel, FACHE and Tabor presented a report to trustees, outlining “A Successful Journey Leading to a Strategic Capital Plan.” In the report, the executives described their focus on both cost management and strategic growth initiatives this fiscal year, which was the cornerstone of subsequent meetings with major investors and Wall Street in November.
This focus on sustainable growth led to an infusion of $71 million in new money from bond sales, created $35 million of cash flow savings over 10 years, and enabled Erlanger to move forward with key strategic projects this year. Those expansion efforts include: $50 million in bond proceeds to fund a major expansion of the Erlanger East Hospital expansion to a 107 bed hospital; $11.5 million funding towards a new Children’s and Women’s Ambulatory Center; and $9.5 million for the construction of new vascular operating rooms and construction of a dedicated orthopedic center with inpatient beds.
Erlanger Oncology Service Line Administrator Tony Dotson presented a resolution authorizing the construction of an outpatient infusion center and medical oncology clinic at the Erlanger East Hospital campus. In keeping with strategic growth plans surrounding the Erlanger East expansion, Dotson told trustees that this project will “foster improved access to care for oncology patients within Erlanger’s entire service area, particularly those living in East Hamilton County, Bradley County and North Georgia.”
“This project represents a commitment to expand the oncology service line throughout the Erlanger Health System and to meet the needs of an increasing patient base,” Dotson said, followed by supportive comments from oncologist Dr. Larry Schlabach, with University Oncology and Hematology Associates. This plan is also consistent with Erlanger’s larger strategic initiative to develop the Erlanger East Hospital campus into a full-service community hospital with a comprehensive cancer treatment program.
The budgeted cost for this project is $1.02 million, which will be funded out of Erlanger’s current fiscal year budget.
Trustees voted unanimously to move forward with this vital recapitalization project.
Rob Brooks, Erlanger’s Executive VP and COO, sought board approval for the construction of elective orthopedic surgery suites on the hospital’s 6th floor. Brooks told trustees that this project represents the initial phase of Erlanger’s orthopedic growth strategy “addressing the needs of this patient population in an efficient, cost effective, high quality and customer friendly manner.”
“Our data research supports that the elective orthopedic and sports medicine population will continue to grow in this region for years to come,” Mr. Brooks said. “This effort allows Erlanger to continue to grow our orthopedic footprint by placing the correct technology and services at the correct location,” he added.
The project would build out 4 OR suites and supporting areas on Erlanger’s 6th floor dedicated to elective and sports medicine customers who require surgical intervention. Total cost of the expansion effort is $8 million, which will be funded through capital approved for FY 2015.
Erlanger’s Budget and Finance Committee members also voted to move forward with this $8 million recapitalization project, and will vote on the resolution during Thursday’s board meeting.