Administration Expects Turnaround
August 8,2014
Tulare Regional Medical Center will pay Fresno’s Harris Construction $7.9 million to settle a lawsuit over the construction of their new 5 story tower – as yet unfinished. The settlement, reached July 25, resolves disputes and ongoing litigation between the two parties related to the hospital expansion project and other matters.
In a statement released by TRMC, the hospital said they would pay Fresno-based Harris $3.8 million that had been retained in an escrow account. Another $500,000 was due immediately as well. The hospital will pay the remainder over a 48 month period. With the settlement Harris dismissed demands against TRMC for more monies in the dispute over construction work on a new 115,00sf tower designed to be connected to the older wing of the hospital. Work on the addition started in 2010. Both sides blamed the other for the delay and Harris had claimed in court papers they were owed nearly $18 million. As of March the long lasting dispute that put construction at a standstill, forced TRMC to end the construction contract.
The hospital has faced several year of red ink even as the long delayed tower project scheduled to be complete in 2013, sits unfinished. The community approved a bond to construct the tower but with perhaps as much as $40 million in work still needed to be done to complete it – the district has just under $2 million left out the original $85 million approved by voters.
The shortfall in construction funds coupled with the need to pay more to Harris as well as continuing losses from operations shine a light on an uncertain future for the embattled Tulare hospital. Harris had maintained in their legal filings that they feared they might not be paid for continued work on the tower project with the hospital’s “impending insolvency.”
In recent weeks the district released their June financials that seem to show improvements in net operating income even though the number of patients continue to decline compared to previous years.
Acute patient days year-to-date are 22% lower than they were in June 2013. Year-to-date operating income was $67 million compared $71.3 million the prior year.
Leaving Money On The Table
But Chief Restructuring Officer Tony Jones who has been on the job since January says a turnaround is underway.”We know the car has run in a ditch but we believe we are on the way to putting it back on the road.”
Jones says the months of April,May and June have been profitable at TRMC in part because of how the hospital now is managing the existing patient load.
“We believe we have been leaving money on table that we ought to be reimbursed for” says Jones, noting plenty of management initiatives that are already paying off in increased collections and reimbursement.
There has been improvement as losses totaled $3 million in the current fiscal year compared $8 million over the same period last year with a new team of administrators now at the helm. On a hopeful note, the district recorded a net gain in June of $2.7 million.
“It’s been a team effort“ suggests Jones. He adds that no staff pay cuts have happened – nor are they planned.
Empty Beds Remain Problem
While outpatient revenue and surgeries are up, the hospital census remains at a historic low with 38.8 patients in the 112 bed hospital in June.
Although the settlement with Harris is separate from other finances at the hospital they are tied together in that money to pay for part of the settlement will have to come from operations – hopefully future profits.
Regarding the tower the district is expected to ask a new (as yet unnamed) contractor to finish the exterior work on the tower now that Harris will no longer be involved. The TRMC settlement statement says the hospital will put the dispute behind them enabling them to ”move forward with completion of the Project.”