Cleveland-area safety net hospital system MetroHealth System reported operating income of nearly $24 million for 2010, a 37 percent tumble from the prior year.
It was the third consecutive year in the black for the once-struggling health system. CEO Mark Moran told the Plain Dealer the drop in operating income had more to do with what happened in 2009 than 2010. Last year, the hospital was working to “clean up” its finances and implemented a number of one-time cost-saving measures.
“We collected a bunch of old cost reports and we cleaned up a bunch of really one-time balance sheet improvements, which we don’t have anymore,” Moran said. “The clean-up work, I would say, is largely done and now we’re operating as an ongoing concern.”
The health system eliminated 400 positions in 2009, which resulted in about 270 layoffs.
Operating income for the year was 16 percent below the amount Metro had budgeted for, according to financial documents provided by MetroHealth.
Total revenues rose 6 percent to $763 million. That amount was slightly above budget.
MetroHealth’s board apparently likes what it sees, because it announced its decision to renew Moran’s contract. The board will vote on whether to give Moran a one- or two-year extension. The 55-year-old Moran receives an annual salary of $550,000 and is eligible for an incentive bonus of $150,000, the Plain Dealer reported.
“I think he’s done an amazing job,” Board Chairman Ronald Fountain said of Moran. “He’s a strategic thinker and we need a strategic thinker.”
Moran was brought on as interim CEO in 2008 and assumed the permanent post a year later. He’s widely credited with turning around the hospital’s finances. As recently as 2007, MetroHealth was in the red, losing $2.2 million that year.
Moran stressed that even as Metro’s subsidy from Cuyahoga County is declining in 2011, the hospital increased the amount of charity care it provided in 2010. Charity care grew 9 percent to $109 million last year. Metro’s county subsidy will decline nearly 10 percent to $36.1 million in 2011.
Moran wouldn’t rule out layoffs in 2011, but said if they happen, they won’t be as severe as 2009. “We’re just going to look in every department and see if we’re sized properly,” he said.
Despite the positive financials, Fountain warned that lots of work remains. “There is much yet for us to do … The future ain’t what it used to be, so there can be no turning back,” he said in an internal memo to employees.
Moran, in the internal memo, outlined MetroHealth’s challenges: an industry-wide shift from inpatient to outpatient care, a continuing decline in inpatient volumes, rising charity care, and “significant pressure” on funding sources including Medicare and Medicaid.