Year-to-date losses at the hospital top $1 million

“Talking about institutional survival”

The financial picture at Gunnison Valley Hospital still looks grim. Operating losses year-to-date total about $1.2 million in spite of measures taken this spring and summer to reduce expenses, including cutting 10 full-time positions. It has the Gunnison Valley Health (GVH) board of trustees and staff on their toes ready to implement new changes.

Among the changes, current CFO David Freshour will step in as the second interim CEO since Randy Phelps resigned the position last April. The hospital is also implementing a new system to capture revenue, and will begin to redesign processes to eliminate unnecessary work for nurses and introduce electronic methods of managing patients. A CEO search is also under way, and the board of trustees will be considering proposals for a long-term management contract with an outside consultant.
The board of trustees met with the county commissioners on Tuesday, July 10, where the takeaway message was clear: This is about more than saving a few dollars. It’s about institutional survival.

The need for swift change
From the beginning, GVH officials stated that changes at the hospital would come in two phases: cost reduction measures, followed by a reengineering of hospital processes to be more efficient. And while they are ready to turn their attention to the second phase, it’s undeniable that more cuts could be coming.
According to board chairman  Dr. Robert Brickman, three healthcare consultants are submitting proposals for long-term management contracts, and all three have recommended the hospital reduce the number of full-time employees per occupied bed. The hospital averages seven full time employees per occupied bed, whereas the Quorum Health Resources database (the company just finishing a short-term management contract with GVH) suggests the average is about four.
“Part of that is seasonal variation. We have to staff to meet the seasonal needs, but what are staff going to do in the off seasons?” Dr. Brickman explained. The board of trustees and staff are struggling to find an answer for that, even as they begin to tackle what Dr. Brickman calls the most broken part of the organization: the revenue cycle.
He said patient volumes are above budget but revenue is under budget. That means the hospital is doing a lot of work but isn’t getting paid for it.
According to Freshour, a new database and software applications are being put in place to help doctors properly document diagnoses and patient services. Proper documentation ensures proper coding, which means that insurance companies reimburse hospitals more quickly instead of denying claims.
“It will take a little more time up front to do it right than the doctors will probably like. But patients aren’t going to come back to them, the hospital isn’t going to call for more information, and it ought make the patients happier. In the long run I think it will save the doctors time,” Freshour said.
Ideally, it will also get the hospital back on track financially—something critical if it’s going to stay in good standing with Wells Fargo, which holds the bond for the hospital expansion completed last year. According to Freshour, GVH is currently out of compliance on the debt service ratio, which banks use as an indicator of its ability to make good on payments.
Freshour said he communicates with the bank several times a week and is optimistic that they will approve a schedule to get back on track: a ratio of 1 by September (which the GVH is just above right now), 1.1 by December and on target at 1.25 by May of next year.
“I would say they certainly are watching things very closely… they want to see that we are making progress,” Freshour said.
Failing to get back in compliance could have striking consequences: Wells Fargo could bring in its own consultants to look at hospital financials and dictate which services get cut.

Waiting on a ballot initiative
In light of all the financial challenges, the board of trustees and senior services staff have decided not to pursue a ballot initiative this fall for a new senior care facility. Senior care services (hospice, home health, palliative care and the nursing home) have operated in the black this year, largely because assisted living has maintained a census of about 14 residents. But according to Dr. Brickman, that doesn’t mean the need for a new facility has gone away.
“There is greater and greater pressure to enlarge that facility. Sooner or later we have to deal with that issue, but it’s not until we get our other house in order that we really need to push hard on that. We already have issues with the community and the confidence that the community has with the board,” Dr. Brickman said.
It was also with the community in mind that the board of trustees decided to keep Crested Butte Physical Therapy open through the fall, and not to renew a contract with interim CEO Scott Landry of Quorum Health Resources. He steps down at the end of his three-month contract on Monday, July 16, and while the board appreciated his work they wanted to bring a fresh face to the organization.
 “What Scott had to do is done, and it’s time for us to start healing the organization. No matter how we do it, Scott is perceived as the hatchet man,” Dr. Brickman said.
With Freshour at the helm in the meantime, the board of trustees and human resources staff will continue to search for long-term leadership via two avenues: a CEO search, and the exploration of a long-term management firm like Quorum. According to GVH’s chief marketing and business development officer Michelle Campbell, three firms are submitting proposals and the board hopes to make a decision in executive session July 24.
In the meantime, Freshour believes more change is on the way. “I very seriously doubt we’re done with cuts. We’re going to have to look at every area of the hospital and trim expenses,” he said.

Communicating with employees
In response to all the changes, the commissioners wanted clarification on one thing: how the board of trustees intended to handle communication with staff and the community. Commissioner Paula Swenson said, “The biggest question I get hit with is how much more is there going to be, and we haven’t gotten a good explanation… it seems to me there’s a disconnect between the director level and the worker bees.”
Campbell confirmed that recent communication has been handled through department directors so it could address changes specific to that area. “My experience over the years has been there are some departments where that works well and others where they need extra support,” she said.
The board of trustees has been contemplating additional one on one meetings with staff, but worry that anger with the board could interfere with good communication. Dr. Brickman said, “Right now there is such anger, and behavior patterns are such that employees feel like they can walk in anywhere and say whatever they want to say. There’s not much to be gained from talking with people who are very angry.”
One alternative may be setting up meetings between lead medical staff and employees. Campbell explained that employees have been involved in the process of identifying cuts through an employee advisory council, and another employee group will likely be set up to help reengineer hospital processes.
Swenson and Commissioner Hap Channell were encouraged but urged the board of trustees and staff to continue trying new methods.
“Knowing that it’s not getting through should inform the path to get information out, instead of doing the same old thing,” Channell said.
But if the outgoing, interim CEO has anything to say about it, it’s about more than communication—it’s a paradigm shift.
“The culture in the hospital and the community is simply going to have to get past ‘But we’ve always done it this way in Gunnison.’ If you’re making money and the doors are open and you’re not concerned about hospital survival, that’s great,” said Landrum. “But sometimes in the life of an institution you have to have a paradigm shift.”