Redwood Area Hospital

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FOR IMMEDIATE RELEASE FROM: Shelly Pauling,             Education & Communications Manager RE: 2007 Hospital Audit Results DATE: April 16, 2008 Despite rising costs and a dip in patient revenue, Redwood Area Hospital (RAH) remained financially strong in 2007. That is what auditors from the firm of LarsonAllen, LLP, reported to the Redwood Falls City Council at a regular meeting held Tuesday, April 15, 2008. As one of the country’s top performing small, rural hospitals in 2006, RAH was able to withstand the disruptions and additional costs of a major remodeling project started in 2007 and still have a good financial year. Jim Schulte, hospital administrator, is quick to point out the continued financial strength of RAH is a credit to all the great physicians, staff and others associated with the city-owned facility. “It is a huge team effort,” says Schulte. “It involves the many residents of the service area who use their local physicians and hospital, the hospital staff, volunteers, hospital commission, hospital foundation, city council and mayor. Everyone can be proud of the high-quality care that continues to be provided even during the inconvenient disruptions and temporary relocations of the construction and remodeling which will be completed later this year.” Income from combined operations of the hospital and hospital foundation was $1,152,703 in 2007. This represented a margin of 6.9% on revenue of $16,668,262. When non-operating revenue is included, the total excess of revenue over expenses was $2,093,555 for the year. This was a significant decline from what was reported for 2006; but the hospital was not really expected to sustain the financial performance of 2006 while going through the construction and remodeling. A year ago, auditors reported it appeared financial results for 2006 might place RAH in their Gold Standard category of critical access hospitals for that year. Gold Standard is a designation given by LarsonAllen to the top 35 Critical Access Hospitals in the nation from an analysis of over 1,100 hospital reports. Critical Access Hospital designation is extended by Medicare to hospitals with 25, or fewer, beds that are reimbursed on the basis of an annual cost report. Now that all the national data is available for 2006, the auditors report RAH was, in fact, number six on their list of the country’s top performing critical access hospitals for that year. Pete Smith, hospital commission chairman, says that he and the other commission members are pleased for the people of the area that this community-owned and operated hospital has remained financially strong over its long history. “This has allowed the hospital to add programs and services and to upgrade equipment and facilities that benefit area residents,” says Smith. “In just the past twelve months the hospital has implemented a LevelOne heart attack program, significantly upgraded our CT scanner, purchased High Definition endoscopy equipment, added full-body pulmonary function testing, upgraded cardiac stress testing equipment, expanded to full-time physician coverage in the emergency department, purchased a c-arm fluoroscopy unit for speech pathology swallow studies, and implemented a tele-stroke program that links possible stroke patients and emergency room staff with neurologists in the Twin Cities. All that is in addition to the major building remodel,” he says. As a non-profit, community-owned hospital, current revenues that exceed expenses are retained to provide future health services to people of the area. Schulte points out that the financial position of the hospital also allows RAH to offer competitive pay and benefits that help attract, retain and provide continuing training for the workforce needed to give care and treatment 24 hours a day, seven days a week, 365 days per year. “Fully 60% of the hospital budget supports the wonderful staff that have dedicated their careers to the mission of helping others who are sick or injured,” he says. “Only about 10% of the operating budget goes to technology, equipment and facilities. Hospitals truly are about people taking care of people.” According to John Peyerl, chief financial officer for the hospital, 2007 was the third year in a row that RAH had a strong financial performance. But the end result has come about in different ways. Income from operations was less in 2007 than the previous two years, with more of a dependency on non-operating revenue in 2007. Non-operating revenue consists mostly of investment income and equity earnings from joint venture activity with Affiliated Community Medical Centers. “With increasing depreciation, interest and other operating expenses it will be a challenge over the next several years to reduce the dependency on non-operating revenue and regain a stronger level of income from operations,” says Peyerl. “As we reduce our reserves to help pay for remodeling and new equipment, we will have fewer funds to invest; and that, combined with current low interest rates, will also reduce our non-operating revenue.” But the strong financial starting point has for now allowed RAH to upgrade equipment and facilities, and absorb increased costs, without placing the hospital in financial jeopardy. The hospital’s equity (the difference between assets, what is owned, and liabilities, what is owed) grew by almost $2.1 million in 2007. Most of the growth in equity came from operating income results. Cash generated by this growth in equity is being used to help partially pay for the expanded scope of remodeling, such as the new emergency department.

Copyright © 2006 Redwood Area Hospital. All rights reserved.
100 Fallwood Road ~ Redwood Falls, MN 56283
507-637-4500/507-637-4999ER