After ending the fiscal year on a high note, El Camino Hospital plans to pour millions more into programs at its Mountain View and Los Gatos hospital facilities for the 2014-15 fiscal year, including a fully electronic medical record system. The strong year also ended well for hospital CEO Tomi Ryba after the board approved a 6 percent pay raise for her.
El Camino Hospital's operating income for the 2013-14 fiscal year is $63.5 million -- over $3 million more than expected. This puts the hospital in a comfortable financial position going into the year, according to Ned Borgstrom, interim chief financial officer.
Borgstrom said the revenue boost was due in large part to the unusual amount received in reimbursements for services to Medicare patients.
Exceeding projections has been the norm lately. The hospital beat its operating margin every year since at least 2011, often because of the Medicare reimbursements, known as "cost report" settlements.
At a hospital board meeting last month, Borgstrom said accuracy in budget projections is a tough goal to meet, using as an example the difficulty in estimating patient visits in any given year.
"Likewise on expenses, we're not terribly good at that," Borgstrom said. "We sort of rest on the fact that the operating margin has been beaten every year."
Hospital spokeswoman Chris Ernst said hospital budgets are complicated and notoriously hard to predict. She said it's better to be conservative and have a windfall, like the Medicare settlements, than to overestimate.
The hospital plans to put millions of dollars into big projects this fiscal year, including a $4.92 million investment into a new electronic medical record system called iCare. Developed by Epic, a health record software company, iCare will give patients around-the-clock access to their medical records. The total cost of the iCare project will be $125 million, according to Ernst.
Other programs and "process improvement" initiatives make up another $4.95 million in projected expenditures. This includes more funding for psychiatric services, COPD care management, and expansion of the South Asian Heart Center.
The operating margin for fiscal year 2015 is expected to be $53 million, almost 12 percent less than last fiscal year. The reasons for the decrease, in addition to the cost of iCare and other program improvements, include increased costs for salaries, supplies and employee benefits.
To offset some of these big costs, the hospital will put in place a $10 million cost-reduction initiative that will include "tighter staffing ratios" in the nursing units and renegotiating costs with suppliers.
The hospital expects a 1.3 percent increase in hospital patients this fiscal year, as well as a 0.9 percent increase in prices. Borgstrom told the board that the price increase is an attempt to get some prices "back in line" with where they thought the market was.
In an email, Borgstrom explained that the hospital's goal is to provide affordable, high-quality care, and prices have gone up only 1 percent over the past three years.
The hospital projects a slight dip in outpatient revenue, due mostly to the closure of the hospital's outpatient dialysis centers. Two hospital dialysis centers, Evergreen and Oak, have already been closed. The last center, Rose Garden, is set to close mid-2015. Outpatient dialysis accounted for 13 percent of the hospital's total outpatient visits.
"Overall, we're running a loss on dialysis services. We predicted this a couple of years ago, and indeed it has diminished," Borgstrom told the board.
Dialysis centers have lost the hospital millions of dollars annually for a few years now. The losses peaked in 2013 when outpatient dialysis services went over budget by nearly $7 million.
There was a little give-and-take for the number of jobs next year. The hospital budgeted for 2,512 full-time equivalent positions, up from 2,484. The increase is the result of new hospital programs, but is somewhat counteracted by the loss of 24 positions from cost-reduction efforts and 46 positions from dialysis units that have closed.
The hospital board also approved a salary increase for CEO Ryba, increasing her base salary to $800,300, up from $755,000, with a "performance incentive" that can boost her pay up to 45 percent. The target performance incentive was set at 30 percent.
Jennifer Thrift, a hospital spokesperson, said an outside consultant was hired to give base salary recommendations, and Ryba's increased salary is consistent with the executive salary administration policy. Ryba has been the hospital's CEO and president since fall 2011.