Report: Cost-Saving Strategies to Slash County Hospital’s Shortfall 60 Percent

RIVERSIDE – Riverside County Regional Medical Center’s budget picture is beginning to brighten as consultants implement cost-saving measures expected to largely erase the hospital’s deficit by the end of the next fiscal year, according to a report to be reviewed tomorrow by the Board of Supervisors.

In November, the board retained Chicago-based Huron Consulting Inc. and veteran healthcare strategist Lowell Johnson to devise a rescue plan for RCRMC, which was then losing about $1 million a week.

The 18-month Huron contract is costing the county just under $26 million. Johnson’s compensation and benefits are about $1.2 million.

The consultants and Johnson, who is functioning as the hospital’s operations chief, will deliver their first progress report to the board on Tuesday afternoon.

During the 1:30 p.m. hearing, the supervisors are also slated to approve memoranda of understanding between RCRMC and Loma Linda University Medical Center, the UC Riverside School of Medicine and Pomona-based Western University of Health Sciences. The facilities are interested in partnering with the hospital to develop various programs.

According to the Huron report, RCRMC is projected to end the 2013-14 fiscal year with a $49 million deficit. However, thanks to what the consultants described as the ”Huron effect,” the hospital may end up $36 million in the red.

The consultants said the hospital will net around $13 million in savings in the current fiscal year from implementation of a purchasing program that has cut the cost of buying drugs and blood products.

According to the report, RCRMC has established ”productivity management training” for supervisors to make them more efficient at aligning ”staffing levels with variable demand” for services.

The report noted that, to keep labor costs down, the hospital has instituted a ”position review process” intended to ensure all hiring decisions are based on objective criteria and can be fully justified.

Meantime, the hospital’s accountants have improved billing practices to expedite the processing of insurance claims and collect outstanding debts, according to the report.

About 40 percent of RCRMC’s revenue comes from patients paying out of pocket or through private insurance, while 54 percent comes from the state, in the form of Medi-Cal and other reimbursements, according to the report.

The largest expense is salaries and benefits at 43 percent of hospital outlays.

According to the report, the ”Huron effect” of 2014-15 should net roughly $48 million in savings, bringing the hospital’s total shortfall down to $14 million by June 2015. That compares to a deficit of $83 million last August.

Then-RCRMC CEO Doug Bagley attributed the gaping hole to mandatory budget cuts imposed on the hospital and other county agencies as part of the county’s five-year deficit reduction strategy that began in 2009.

Further exacerbating the situation was the rising cost of operating an infirmary for a growing number of jail inmates — an expense for which the hospital had not been adequately compensated, according to Bagley.

He said treating patients under the care of the county Department of Mental Health was another largely unreimbursed expense, while treating uninsured patients who rarely pay their bills had also added to the drain, Bagely said.

It was not immediately known whether the agreements to be executed between the county, Loma Linda, UCR and Western University would result in long- term savings.

According to the proposed compacts, the general idea is to provide training opportunities for up-and-coming medical professionals and increase the knowledge base available to the hospital. The agreements call for ”shared optimized health outcomes,” and in the case of Loma Linda, open the door to establishing a new pediatric care unit at the hospital.

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