GVH implementing sweeping changes

Cost reduction measures include CEO change

Like many valley businesses affected by this year’s slow winter season, Gunnison Valley Health is facing some tough financial realities this year—including a year-to-date net loss of $632,000 at the hospital. The GVH Board of Trustees is implementing a series of changes to correct that loss and ensure that GVH is well-poised to respond to national healthcare reform. Chief among those strategies are cost-reduction measures that will affect employees, and the appointment of an interim Chief Executive Officer, Scott Landrum. Outgoing CEO Randy Phelps is stepping down ahead of his contract’s scheduled expiration on July 1, 2012.

“We’ve got our feet simultaneously in two worlds: one is to fix the immediate problem and reduce costs, and the other is to reengineer how we do things to prepare for healthcare reform,” said GVH chief marketing and business development officer Michelle Campbell.
The primary goal, she continued, is to continue providing quality, accessible care in the valley and invest in the future. GVH still plans to hire two new primary care physicians, and will still ask voters to approve a new senior care facility in this fall’s election. But GVH will also look for ways to become more efficient at the hospital, and reduce the cost of operations.
“If we’re going to afford those changes, we have to change how we do things and simultaneously cut our monthly expenses,” Campbell said. “What we found at the hospital is that departmental expenses increased from 2011 to 2012, physician’s fees increased and the volumes we projected did not materialize.”
As of the first quarter, a positive net margin of $74,000 for Senior Services and $379,000 for the Foundation has helped offset the loss at the hospital: the combined financial result was a net margin of negative $179,000. But taken within the context of the larger picture, GVH can’t ignore the significance of that loss. The number of uninsured receiving care at the hospital has increased by 130 percent over the last five years, now accounting for about 10 percent of the hospital’s volume, and reimbursements have continued to go down.
In a series of recent meetings with GVH employees, Dr. Robert Brickman, chair of the Board of Trustees, pointed out that hospital earnings have gone from a $500,000 positive margin to a $600,000 loss.
“We must turn hospital performance upward,” Brickman said. It was out of deference to that reality that Phelps made his decision to step down after seven years as GVH CEO.
“The health system has had several positive years and has made great progress. However, the industry is changing dramatically and the economy remains weak. To ensure continued success, we must fundamentally redesign operations, and in this environment, I believe the system needs a different kind of leadership,” Phelps said in a statement.
“It is time for me to take a new path and I am grateful for the support of employees, physicians and community leaders for contributing to the successes of the system during my tenure,” Phelps said.
“We thank Randy for his years of service,” said Brickman. “He guided the health system to improvements in quality, physician recruitment, and patient safety. Under his leadership the nursing home, hospice and home care, emergency medical services, and the hospital were integrated into a more unified health system. Gunnison Valley Hospital achieved full accreditation by the Joint Commission. Both the hospital and the Senior Care Center have been recipients of numerous awards from Medicare and industry organizations, including the Best Performer award from Avatar and a Top 100 Critical Access Hospital designation from the Rural Health Association.”
It is under the leadership of interim CEO Landrum that GVH hopes to build on those successes and improve financial performance. Landrum comes to GVH from Quorum Health Resources, a nationally recognized hospital and health system management firm that has arrangements with 13 hospitals in Colorado. He will be employed by Quorum, but report to the Board of Trustees while they begin their search for a permanent CEO.
“[Landrum] brings over thirty years’ experience in leading hospitals and health systems, serving as the CEO of more than six hospitals in rural and metropolitan communities in Florida, Texas, and Ohio. Over the next several months I will be working with Scott, health system leaders, and physicians in evaluating how best to align the talent and resources of Gunnison Valley Health to restore the financial health of the institution and continue to meet the growing needs of the community,” Brickman said.
At the same time, employees will be asked to absorb cost-cutting measures. According to Campbell, employee wages and benefits account for roughly 50 percent of all hospital expenses. By reducing those expenses, GVH will be able to reduce operating costs while it re-engineers and improves internal processes under Landrum’s leadership. In May, hospital employees—including executives—will see 2011 wage increases rolled back temporarily.
“At the end of the year, or when we get back on plan, we’ll reinstate those increases and give the amount held back as a bonus,” Campbell said.
The trustees are also making changes to employee retirement plans that will ultimately reduce employer contributions from a 5 percent match of employee contributions to 3 percent, the new industry standard according to Campbell. Other measures include a freeze on employees’ ability to cash out PTO, a new overtime approval policy and a hiring freeze. Collectively, these measures are projected to save GVH more than $70,000 per month plus savings identified elsewhere in the system.
Campbell emphasized that while the Trustees are implementing these changes now, the health system is still well-poised for the future.
“We still have over 100 days cash on hand and that’s unusually strong, and we’re still making debt payment on the new building, so this is not dire,” Campbell said. “Rome’s not burning, but we’ve got some brush fires.”