Medical board chisels out a budgetRequires dipping into endowment
At a special meeting held January 7 that appeared to re-establish cordiality between the Block Island Health Services board and the public, board members struggled to find ways to balance a budget with a deficit of $77,000. Sitting in for President Pam Hinthorn, Judith Cyronak welcomed suggestions from the audience and the board during the lengthy discussion.
Cyronak sought a way to move efficiently through the itemized list of revenues and expenditures. The group agreed to examine the budget line-by-line.
Revenues and expenditures
Anticipated operational revenues for 2013 were $388,600, with expenditures coming in at $701,100. The operational revenues are largely from patient fees, but also include income associated with visiting specialists, insurance incentives, and from the island school’s dental program.
The big ticket items in the expenditure column include salaries and projected employee health insurance benefits. Legal fees dropped from $15,000 in 2012 to $3,500 in 2013. Accounting and professional fees total $46,200. Third-party providers, such as medical, billing services and IT support total $36,400. Utility costs are expected to run at $34,900; medical supplies at $34,200; maintenance and security at $19,000.
Non-operational income includes the annual appropriation from the town ($86,800), interest income from investments and expected grants. The budget also anticipates income from donations, membership dues, the “Swing into Spring” fundraiser, the 5K Run and the “Lights of Love” fundraiser.
After all items were considered, the board faced a final deficit of $77,000. The overall sentiment of both the public and the board was to minimize the need for tapping the endowment fund as much as possible.
Recommended draw on endowment
Cyronak circulated a memo from Michael Hickey, chair of the investment committee, conveying the committee’s recommendation for spending $74,372 from the endowment for 2013. He pointed out that 2012 had been a good year for the endowment with a growth of approximately $175,000, bringing its total value on the first day of 2013 to $1,335,120.
Recognizing “the importance of successfully managing this asset base for the medical center and community,” Hickey defined “success” as “growing the endowment after inflation in perpetuity.” He said the committee had continued to do so. He also explained that “the board over many years has been very diligent in keeping within responsible spending out of the endowment.”
Hickey further pointed out that “the endowment is one of the few if not the only levers available to the board to maintain quality care for the community.” Therefore, while acknowledging the importance of reducing the levels of spending from the endowment, he said, “The endowment is, in fact, a safety net for the medical center and community of Block Island.”
While they clearly didn’t wish to, most board members agreed they would have to dip into the endowment beyond the recommended amount, short of finding other means of raising revenues. New board member Sue Hagedorn said she hoped they could find ways to increase patient revenues “perhaps by five percent,” and to raise fundraising “perhaps 10 percent.” Cyronak responded, “We have tried to increase the patient revenues line over many years. We haven’t been able to.”
From the audience, Gerry Comeau suggested sending reminders to patients that they were due for a physical as a way to both increase visits and improve care. Later, after considerable discussion about how to avoid raiding the endowment, Comeau raised the possibility of a campaign to build it up. Acknowledging that capital campaigns were usually for buildings, she said, “Couldn’t we do a capital campaign to grow the endowment?”
Approach the town?
When the suggestion arose of asking the town for expanded appropriations, McCombe said he was “strongly opposed to going to the town for more funds.” However, he thought the town might offer “in kind” support, e.g., through shared payroll management and accounting, etc. He added, “I think we are becoming a quasi-private and public agency, and I think we should sit down with the Town Council about what direction we should go. This is one of the things we should look at.”
Secretary Kay Lewis said, “I don’t hesitate to ask for more money from the town. We haven’t done so in a long while.” Cyronak agreed, suggesting if only for the “charitable care we’re providing to those who have no insurance,” it would be legitimate for the town to increase its appropriations.
In looking for ways to save money, Cindy Baute said the center needed to address its coding practices, which should be improved with the installation of an electronic medical records (EMR) system. It was generally agreed that with the new Affordable Health Care Act taking effect, more islanders would soon be insured than are currently.
Cyronak concluded: “The only way to adopt a budget [now] is to go entirely into the endowment,” Hagedorn floated a trial motion to establish a budget through utilizing the endowment with the understanding that the board would make every effort to eventually pay it back.
Audience member Ken Maxwell said: “The primary goal of the endowment is to provide a real spending stream, but it is created to last in perpetuity.” His point was “you have to increase the corpus of the endowment.”
In the end board members voted to adopt the budget, acknowledging that while they have to dip into the endowment, they would not deplete it. They committed to exhausting all other possibilities to raise revenues: cutting expenses, increasing fund-raising and increasing patient visits.
Electronic medical records
Interim Executive Director Peter Baute described his search for an appropriate vendor for the installation of an EMR system. He reported that the center had selected a local vendor, Amazing Charts, based in North Kingstown. Baute indicated the cost of licensing the system would be $2,000; support and maintenance for the first year would be $1990, with back-up charges and taxes close to $500.
Describing the process as complex and requiring considerable “outside help,” Baute said after looking into other advisory agencies he had settled on Healthcentric Advisor. He noted that their representatives have visited and consulted with BIHS staff, who “seemed to feel comfortable with them.”
Acknowledging that setting up EMR systems was expensive, Baute said Healthcentric’s initial estimate for the necessary changes would be $6,000, plus $118 an hour, without knowing how many hours would be needed.
Still, as Baute pointed out, if the Medical Center does not adopt EMR, it would be subject to a penalty from Medicare. In addition, Baute said, “We would miss out on a number of financial incentives.” These would include possible grants from Medicare (up to $39,000 over four years), from Blue Cross ($2,500), from United Health ($1,500) and from Rhode Island Quality Institute ($3,000). In the end, he said the system would reduce costs and improve medical care. He suggested they move “to get it done as soon as we could,” in order for the system to be in place for the summer interns.
Baute added that they already had $10,000 grant funding for the purpose of developing EMR capability and working toward a Patient-Centered Medical Home status.
To that end, Baute had consulted with Hinthorn, who approved his signing a contract with Healthcentric. He assured the board that the president had authorized him to do so. Lewis interjected, “I think we had received memos informing us of that. I want to thank you and your staff for all the hard work.” From investigations in 2011, Lewis said, “The group you’ve gone with was highly recommended.”
McCombe, however, found it unsettling that Baute and Hinthorn had acted without consulting the board. “I think it needs to be a collective decision. I don’t think the president has the authority [to sign a contract] without a board vote.”
Filling vacant seats
With the board seeking to fill Judy Tierney’s seat, two candidates emerged, Robert Fallon and Peter Saxon. Appointing Fallon, the group expressed its appreciation to Saxon for his interest, noting the board would send a recommendation to the Town Council that Saxon be the town’s appointee.
The board also discussed the draft of the management agreement between the town and BIHS, with McCombe objecting to a five-year contract. In the interest of more frequent reviews, he suggested a one year. With the issue on the agenda of a joint meeting between the BIHS board and the Town Council later the same day (see related story) several wanted to wait for that meeting.
However, speaking from the audience, First Warden Kim Gaffett thought it would be best for the board to figure out which time frame was preferable before attending the joint meeting. To that end the board went into closed session.