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Methodist Hospitals makes profit for first time since '03

Times Staff Report | Posted: Saturday, February 13, 2010

MERRILLVILLE | In just one year, Methodist Hospitals has reversed six years of operating losses and posted a surplus of approximately $3.4 million in 2009. Vigorous ongoing control of hospital expenses helped reverse approximately $73 million in losses in 2008, according to hospital officials.

The hospital assembled a leadership team whose expertise and experience helped make this happen, Methodist President and CEO Ian McFadden said.

"The success of this turnaround was all about execution and speed," McFadden said.

"There was no time for a honeymoon. Our executive team had to quickly identify potential areas for improvement and make the necessary changes as fast as possible. Fortunately, we had great support from our Board, which allowed us to move quickly and efficiently in implementing change."

To achieve its goals, an operational improvement plan was put in place that yielded more than $28 million in savings. Through the team's efforts, the hospital was able to negotiate more favorable managed-care agreements and other service contracts, including a new pharmacy-services contract that saved the hospital $1 million.

The hospital also brought back for internal management seven hospital departments, such as environmental services and transportation, which previously had been outsourced to more expensive contractors, and eliminated its skilled nursing unit.

"We did not pursue any efficiencies or take any actions that could diminish the quality of care delivered to our patients," McFadden said.

"While considering any change, we evaluated our potential quality-of-care performance against accepted standards. Maintaining our quality was paramount -- and a requirement -- as we executed this financial turnaround." In fact, some cost-saving initiatives are expected to enhance patient safety and satisfaction.

"At the beginning of last year, 10 percent of our nursing staff was (composed) of nurses who were employed by outside agencies and not Methodist," said Loren Chandler, Methodist vice president and chief financial officer.

"Now, the entire nursing staff consists of Methodist nurses who share the same commitment to our patients, along with the same training and evaluation processes."

The Methodist Hospitals financial turnaround was accomplished during a period of national economic distress, which decreased patient volumes at hospitals across the nation, according to a hospital press release. While inpatient admissions at Methodist decreased slightly from 2008, consistent with other northwest Indiana healthcare institutions, outpatient services and procedures increased form previous years, according to the release.

Methodist Hospitals provides services at several campuses. Its Northlake campus in Gary serves as an urban safety-net hospital, providing care to many low-income and uninsured individuals. Its Midlake campus provides outpatient and educational services.

In Merrillville, Methodist continues its tradition as the region's leader in specialty care. For example, the hospital's nationally recognized Neuroscience Institute, its Oncology Institute, and Northwest Indiana's only Bariatric Surgery Center of Excellence are located on Methodist's Southlake campus.

The turnaround was also accomplished without a significant increase in Disproportionate Share Hospital, or DSH, payments from Indiana. For filling its role as a safety-net institution, Methodist received $40 million in 2009, similar to the payments it received in the two preceding years. DSH funding is distributed to all Indiana hospitals that meet certain criteria.

"We take our role as stewards of public funds very seriously," Chandler said. "Careful spending, transparency and accountability are not just good business operating principles that contributed to our turnaround, they are also what the state rightfully expects for the support it gives to hospitals."

Methodist's improved financial performance is enabling the hospital to undertake a multimillion-dollar investment on both hospital campuses, which will include facility enhancements and new technologies.

Methodist is also embarking on expanding its physician practice sites and concentrating its growth strategy on its unique specialty services.

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