Mississippi Baptist Medical Center didn't go to Yazoo City, Miss., with a bag full of money last year to bail out financially struggling King's Daughters Hospital, a rural hospital 30 miles northwest of Jackson.
All the Jackson-based hospital needed was a sack filled with ideas, executives said.
Since Mississippi Baptist signed a contract with King's Daughters and took over its management, the 55-bed county-owned hospital has bounced back from nearly closing in March 1993 to posting net income of $459,000 in the first nine months of fiscal 1994 ended June 30, said Noel Hart, King's Daughters' administrator.
"Mississippi Baptist brought a lot of expertise to help us get our feet on the ground," said Rose Quin, chairwoman of King's Daughters. "They brought a lot of hope and self-assurance and lifted the confidence of the county."
Finances had become so tight that vendors were demanding cash before delivering supplies, Mr. Hart said. Three local banks that had loaned the hospital $350,000 to meet payroll and other expenses also were demanding to be repaid.
"A lot of communities want you to take their headaches off their shoulders, do whatever it takes, bring in a truckload of money, and run the hospital however you want to," said Jerry Cotton, Mississippi Baptist's chief operating officer.
"You can look down the list of hospital closures and find the hospital that came in and wanted to create a referral pattern for (itself)," he said.
Creating a network.Mr. Cotton said Mississippi Baptist's primary goal is to work with the hospital to improve the community's health.
But Mississippi Baptist also has longer-range plans to link King's Daughters into a regional delivery network it is creating with two other Jackson-area hospitals, St. Dominic-Jackson Memorial and Rankin Medical Center, Mr. Cotton said.
The three Jackson-area hospitals formed an alliance last year called Mississippi Health Network. The network, which includes a physician-hospital organization, was formed primarily for managed-care contracting, Mr. Cotton said.
Ms. Quin said linking with the regional delivery network also will fit in with King's Daughters' long-range plans. "Stand-alone hospitals can't make it under healthcare reform," she said.
King's Daughters already is one of 26 hospitals in a 90-mile area around Jackson that are part of Mississippi Baptist's cardiac emergency network, Mr. Cotton said.
"We want to develop a strategic plan with hospitals in that group to respond to the needs of our primary- and secondary-service areas," Mr. Cotton said. "As a managed hospital, King's Daughters is an important primary-care component."
Pressing problems. Last year, Ms. Quin said King's Daughters faced two chief problems that required immediate attention by new manager Mississippi Baptist.
One, the hospital was losing thousands of dollars each month in guaranteed income payments to four physicians it had recruited to the rural county of 25,000, she said.
Those contracts were restructured and later terminated when the physicians left the hospital, Ms. Quin said. Reworking the contracts saved the hospital $240,000 in recruiting expenses, she said.
"We had two physicians retire (of a staff of three); that left us with a real doctor shortage," Ms. Quin said. "We had to recruit (four) doctors but had to assure them income. Two didn't contribute at all. In looking back, it was a lack of wisdom in having those contracts."
Two, a $3 million renovation project approved in 1990 actually cost $5 million to complete, Mr. Cotton said. Yazoo County, which owns King's Daughters, agreed to pay for the original $3 million bond issue. But the hospital was responsible for paying the remaining amount.
"We used up our reserves of $1 million to pay for those cost overruns," Ms. Quin said.
Under Mississippi Baptist management, King's Daughters worked out an arrangement with its three banks to pay the balance in $10,000 monthly payments. It also arranged payments on a $700,000 loan from the Mary Brickell Circle, a charitable organization that supports the hospital. Monthly payments of $5,000 are to begin in October for the 10-year loan.
Meanwhile, King's Daughters used Mississippi Baptist consultants to assess and improve operations, governance, strategic planning, medical staff and employee training. For example, a "buddy system" was created to link department directors of both hospitals, Mr. Hart said.
Financial improvement. Much of the turnaround during the past 18 months has been attributed to increasing revenues at the hospital, Mr. Hart said. However, participating in group purchasing contracts through Mississippi Baptist and Premier Health Alliance also has saved the hospital money, he said.
Through Mississippi Baptist, King's Daughters became an affiliate of Premier Health Alliance, a Westchester, Ill.-based hospital alliance. The affiliation saves the hospital an estimated $45,000 a year in supplies, Mr. Hart said. It purchased $1.2 million in supplies in 1993.
In 1993, King's Daughters was declared a sole community provider by HCFA, effective last Oct. 1, Mr. Hart said. The designation, which amounted to a $270,000 revenue boost in 1994, increased the hospital's Medicare payments by 10% to $2.9 million, he said.
In addition, a consultant hired by Mississippi Baptist was able to recover $75,000 in lost payments from Medicare, Mr. Cotton said.
The board also approved a 5% average price increase and restructured its emergency department charges from an itemized system to one based on acuity levels. Both changes increased revenues, Mr. Hart said.
"The board hadn't increased charges in two years," Mr. Hart said.
Census levels at the hospital have remained steady during the past several years, with the hospital capturing about 45% of the patients in its service area, Ms. Quin said. The hospital's average census is 35 patients per day, for a 64% occupancy rate.
The increased cash flow has enabled King's Daughters to repay Medicare $260,000 in deductions for capital expenditures that were disallowed in previously submitted cost reports from 1988 to 1990, Mr. Cotton said.
Mr. Hart declined to reveal monthly management fees paid to Mississippi Baptist. On top of those fees, however, King's Daughters also contracts on a fee-for-service basis with Mississippi Baptist for pathology and reference lab services, he said. Earlier this year, King's Daughters extended its contract with Mississippi Baptist until 1998.
In July, the hospital board approved, in principle, a three-year strategic plan that projects continued profitability, improved cost- containment and expansion of services, Mr. Hart said.
Financial objectives seek to achieve an average 3% to 5% profit margin compared with negative margins in the previous three years; maintain or lower its current staffing ratio of three full-time-equivalent positions per occupied bed; increase its cash reserves to 60 days from its current 30-day supply; reduce accounts receivable to 75 days from 80; and decrease accounts payable to 45 days from 49.
In the first nine months of fiscal 1994 ended June 30, King's Daughters net income was $459,109 on net revenues of $6.8 million, equalling a 6.8% total profit margin, Mr. Hart said. Earlier in the year, the hospital had projected net income of $192,585 on revenues of $8.7 million for the entire year, or a 2.2% margin.
"We are above those projections already, but there are lean months ahead," Mr. Hart said.
Expansion plans include opening a rural health clinic in 1995 and a satellite clinic by 1997, Mr. Hart said. The hospital also wants to begin an industrial medicine program and is studying the feasibility of adding obstetric services, he said.