Computer virus, moving expenses behind hospital’s money troubles
CARSON CITY – The financial turmoil that spurred the layoff of up to 50 Carson Tahoe Regional Healthcare employees and the elimination of several hospital programs came from several factors, including a hospital move that cost more than expected, the chief executive officer said.
Ed Epperson said financial problems started in December, when patients and staff made the much anticipated move from the downtown Carson-Tahoe Hospital to the expansive 80-acre campus of the Carson Tahoe Regional Medical Center in north Carson City.
“We knew that we were going to lose money that month,” the regional healthcare president and chief executive officer said. “Yes, we knew we had a lot of expenses. But we gained more expenses than we expected.”
Among them: The medical center caught a virus, and it cost millions to cure, Epperson said.
The computer viruses invaded the hospital’s various computerized programs through outside systems and created minor sniffles, such as switches that turned on and off, and a major snafu that affected patient billing.
Extra staff members were assigned to solve the problems and computer vendors were brought in.
High patient counts the first month of operation would’ve been considered good news, except that the viruses affected patient billing, which wasn’t sorted out until mid-January.
When the hospital moved, many part-time staff were working full-time. It’s a hard pill to swallow when the number of full-time employees increases by 142 to 882 in one month, which Epperson said was “clearly not sustainable.”
The hospital hired a consultant just to plan the move to the 352,000-square-foot medical center, but a team of experts couldn’t anticipate what would happen next.
It lost money in December and January, Epperson said. Finances began to look up in February.
For the next three months the nonprofit, private healthcare system broke even.
But then a water main broke in May, which stopped surgeries and was not covered by insurance. The hospital lost income in May, a month they were expecting to make a substantial profit.
“Spring came and it was clear we had to lay off to make up for earlier losses,” Epperson said.
Local business leaders praised the opening of the $132 million regional medical center at 1600 Medical Parkway as a vital economic force for North Carson City.
Cost-cutting measures, such as employee layoffs, are one factor in doing business, said Ronni Hannaman, executive director of the Carson City Area Chamber of Commerce.
“The hospital is a business and needs to operate as a business so that it can continue to benefit the community at large,” she said.
This reasoning is lost on some area residents who see the programs run by the hospital as community necessities.
Carolyn Tyzbir, of Carson City, said she was appalled to hear about the program cuts soon after the new multi-million dollar medical center was completed. Her grandson was a patient at the outpatient Behavioral Health Services, one of the programs that was recently saved from the chopping block after a large public outcry.
“They should’ve had BHS included in the funding,” she said. “That’s a big facility and mental health is one thing you don’t want to start cutting out. Look at our prisons. They are full of people that never received any help like this.”
The help that the hospital provides the community comes in several forms. In the last two years, the hospital has paid for $20 million in indigent care, said regional medical center Chairman Caleb Mills. Since becoming a private entity in 2002, the hospital took over indigent care costs from the city.
Carson Tahoe Regional Medical Center receives $1 million to compensate for indigent-health-care costs, according to the state Medicaid office. The remaining cost is not reimbursed from the government, so that means it comes out of profits, which could otherwise be invested back into operations. The chamber of commerce executive said emergency care for the uninsured takes its toll on the bottom line, to the extent that non-essentials need to be cut back. In many cases, staff are the first to go.
The hospital has a staff of about 1,200, which makes it the second largest employer in Carson City. The dilemma inherent with the health-care industry is that it has no control over patient influx. After December, patient counts dropped. The medical center was consistently averaging six to eight patients less than its projected business plan, the CEO said.
Fewer patients means less staff is needed.
Several top managers took severance packages and left immediately, their duties taken by those remaining.
Epperson characterized this as his hardest professional decision. The number of managers in the board room went from 75 to 60. About 27 others were laid off, five of them transferred to other departments.
“Meeting financial goals is crucial,” he said. “If we don’t meet those there’s repercussions.”
The medical center project was financed primarily by US Bank.
“They want to see income and if it doesn’t meet expectations, they can choose to send in an efficiency expert,” Epperson said.
So the cost-cutting reorganization began. The cuts are expected to reduce expenses by up to $3 million, he said. Many program cuts came quickly, and patients were given a month’s notice to find other resources.
“You don’t want to trigger anything and cause them to send in an adviser,” he said.
The healthcare system eliminated outpatient Behavioral Health Service, which prompted the greatest outcry from parents of adolescents with mental-health and substance-abuse problems. The hospital gave the program a reprieve until December. A hospital spokeswoman said other funding sources were identified and more reimbursement will come from Medicaid.
The program’s eight employees feel secure, said psychologist Dr. Duane Runyan.
“We have a business plan, we have the clinicians in place, we have the support of the administration,” he said. “I am optimistic that our program will continue long after 2006.”
Any time services are taken away there will be people to complain. The adult outpatient program will be discontinued June 30.
About 50 area residents signed a petition urging the hospital to keep the mental-health program open. Dave White, of Carson City, who signed the petition, used the program to overcome smoking and alcohol abuse.
“The adolescents are important, but I question closing the adult program,” he said.
The healthcare system subsidized the outpatient mental health program for $350,000 in 2005.
The Lifeline program for the disabled and the elderly was cut from the hospital’s services as of Friday and passed to the Lifeline company. Lifeline allows home-bound patients to call for assistance by pressing a button on a piece of jewelry.
All wellness fairs through July have been canceled. The restructured program, which will hold the fairs less often, will start up again in August. Last year it was subsidized at a cost of $175,000.
Epperson said he doesn’t expect to make more cuts, but the health-care industry depends on payments it receives from insurance and patients.