By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- The organization that runs St. Elizabeth and St. Joseph health centers made $5.1 million on care services last year after losing $2.3 million the year before.
Key to the turnaround was an increase in patients at St. Elizabeth's, probably because of the closing of Youngstown Osteopathic Hospital, said Al Mansfield, senior vice president for finance at Humility of Mary Health Partners.
Having more patients boosted operating revenue 18 percent to $313 million at Humility of Mary, which operates the Catholic hospitals in Youngstown and Warren.
Expenses: The large increase in revenue was coupled with more expenses, however. Expenses climbed 15 percent last year to nearly $307.9 million as the hospitals added more workers. Humility of Mary has the equivalent of 3,600 full-time workers, about 500 more than a year ago. It has 5,500 full- and part-time employees.
The difference between the operating revenues and operating expenses, which is called operating income, was $5.1 million last year.
Mansfield said the system's budget for this year calls for operating income of nearly $9 million, or about 2.5 percent of operating revenue. He said the industry typically looks for this number, called the net operating margin, to be 3 percent or more so a hospital has money to improve its buildings and equipment, Mansfield said.
Humility of Mary's rival, Forum Health, has had operational losses the past three years. Like Humility of Mary, Forum has a large investment portfolio that usually allows it to cover losses.
Investments: Humility of Mary broke even on its investments last year. As of Dec. 31, it had cash and other investments totaling $262 million.
Its operational loss in 1999 was covered with a $41.1 million gain on investments.
Mansfield said it would be bad business to rely on income from these investments to balance out operational losses. Hospital leaders owe it to the next generation to keep that money intact, he said.
The system may need that money for long-term expenses, such as replacing or renovating its aging buildings, he said.
Humility of Mary spent nearly $30 million last year on capital improvements, including renovations and new buildings and equipment.
Forecast: Mansfield, who came from Chicago a year ago to take the job here, described Humility of Mary as strong financially, but he said it will continue to face budget pressures.
For the next five years, Humility of Mary officials expect operating expenses to increase by at least 3 percent a year, while revenue from government programs and insurance companies is expected to increase by about 2 percent a year.
That projection was a factor in the recent difficult negotiations with service and maintenance workers at St. Elizabeth, he said. Officials must be sure to match expenses with expected revenues because the viability of the system depends on it, he said.
Members of Teamsters Local 377 ended a 12-day strike Thursday by approving a new contract that includes pay raises as well as increases in employee contributions for health care.
The hospital system will try to improve its financial situation by increasing market share, becoming more efficient and increasing revenues, Mansfield said.
Keeping clients: As for market share, both Forum and Humility of Mary need to keep more people from going to Cleveland or Pittsburgh for services, he said.
That work must be more intensive than just placing ads or conducting a direct-mail campaign, he said. The hospitals must work with physicians to enhance people's perception of the care given locally, he said.
Employees also have to understand that what they do affects the public's perception, he said.
Becoming more efficient includes everything from watching the buying and use of supplies to increasing labor productivity, he said.
The best way to improve the system's finances, however, is by focusing on increasing revenues, he said.
Officials are negotiating with managed-care companies to make sure the system is being reimbursed fairly for care it provides, and it is providing data in support of lobbying to increase payments from Medicare and Medicaid, he said.
Hospitals can't plan on higher reimbursement rates, however, although there will be some increases for inflation, he said. Pressures on government budgets and increasing numbers of older people needing expensive treatments will hold down the reimbursement rates, he said.