Methodist Hospitals completes $76 million financial turnaround in one year 

Feb 15

MERRILLVILLE, IN February 15, 2010 | In just one year, Methodist Hospitals has reversed 6 years of operating losses and posted a surplus of approximately $3.4 million in 2009. While an operating surplus is always good news, it is a remarkable achievement after experiencing approximately $73 million in losses in 2008.

The hospital’s exceptionally rapid turnaround is, in large part, due to vigorous and ongoing analyses and control of hospital expenses.  Also, under the leadership of its President  & CEO, Ian McFadden, a senior leadership team was assembled with the expertise and experience to make immediate bottom line impact.

“The success of this turnaround was all about execution and speed,” said McFadden. “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 were previously 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,” said McFadden. “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 comprised 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. While inpatient admissions at Methodist decreased slightly from 2008, consistent with other northwest Indiana healthcare institutions, outpatient services and procedures increased form previous years.

Methodist Hospitals lives its mission through providing services at several campuses. Its Northlake campus in Gary serves as an urban safety-net hospital, providing care to many low-income, uninsured and 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 (DSH) payments from the State of Indiana. For filling its role as a safety-net institution, Methodist received $40 million in 2009, similar to the payments it received in the 2 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.”

This 1st. Phase financial turnaround is the beginning of Methodist’s return to prominence; the improved financial performance is enabling the hospital to undertake a multi-million dollar investment on both hospital campuses, which will include facility enhancements and new technologies. Methodist is also embarking on the expansion of physician practice sites and concentrating its growth strategy on the unique specialty services it provides.

“I am very encouraged by these results,” said McFadden. “They are evidence that our operational improvement strategies are generating needed financial performance to continually improve the quality of care and service we provide to our patients. While the hard work of our dedicated staff and physicians is making a significant difference, we still have opportunities for further improvement and we will remain focused on ensuring that Methodist will be a leader in health services in Northwest Indiana and beyond for decades to come.”

For more information or to interview/photograph Methodist Hospital employees, please contact me, my contact information is located below.

Evelyn Morrison
Marketing and Corporate Communications
P: 219.886.4412

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