AVH financial outlook: A picture of good health
Aspen Valley Hospital’s financial condition continues to improve.
In a recent report to the hospital board of directors, Chief Financial Officer Terry Collins said this year is on track for higher revenues and greater accumulations of capital over 2005, which in turn were better than in 2004.
The facility’s financial picture is a marked contrast to three years ago, when the hospital was in dire straits as a result of several years of mismanagement. The crisis ultimately led to the dismissal of the hospital’s two top executives, election of a new board of directors and the hiring of a new executive staff.
Chief Executive Officer David Ressler and Collins in February reported that higher revenues and trimming costs in 2005 led to a “profit” of roughly $4.2 million in a budget of about $52 million. Because AVH is a nonprofit hospital, excess revenues go to improvements rather than dividends to investors.
In 2004, the hospital lost approximately $1.2 million in a budget of about $49 million, according to Ressler and Collins.
A significant portion of the AVH “profit” in 2005 was from a reduction in salaries, from nearly $19.7 million in 2004 to about $17.6 million in 2005. Nearly 8 percent of the hospital’s work force, or 34 employees, was laid off in April 2004. In addition, certain clerical and administrative functions were outsourced, raising that line item from zero in 2004 to $2.6 million in 2005, but saving money overall.
So far in 2006, the hospital has accrued nearly $10.4 million in patient service revenues, compared to just shy of $9.6 million in 2005. Overall, operating revenues as of April stand at nearly $21 million, against just under $19.8 million for the same period last year.
Collins’ report reflected salaries of $5.93 million thus far this year, compared to salaries of $5.81 million for the same period in 2005. He said the hospital’s staffing level is roughly the same as it was last year, with a moderate increase in the bottom line because of inflation.
Operating expenses as of April were just in excess of $17 million, leaving an operating margin of nearly $4 million. Last year at this time, the hospital had spent just over $16 million, yielding an operating margin of some $3.7 million.
Another indication of the hospital’s improving financial health, according to Collins, is growth in the reserve funds account, which essentially is the hospital’s cash balance on hand. He said a healthy reserve is an amount that could keep the hospital running for 120 to 200 days without any income.
AVH ended 2004 with about $6.7 million, the equivalent of 55 days worth of operating funds, according to Collins. That increased to $9.2 million, or 83 days worth, in 2005. By April of this year, the hospital’s cash account had risen to more than $13.2 million. Collins said that as of the end of last month, the hospital could operate for 141 days without revenues.
Aside from providing the hospital with a financial cushion against hard times, a healthy reserve balance can translate into higher bond ratings and improve the outlook for borrowing money for expansions and improvements.
AVH currently is going through the early stages of a planning process to expand the facility.
John Colson’s e-mail address is email@example.com
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