Mount Sinai Medical Center is moving forward with its expansion plans after reporting strong financial results for the first half of 2015.
The Miami Beach, Fla.-based hospital outlined its strategic priorities (PDF) for the next three years on a call with bondholders. Its plans include a new patient surgery tower and expanded emergency department, which are expected to be completed in 2018.
Mount Sinai last year issued about $180 million in bonds that will help fund the projects. The surgery tower will include 12 modern operating rooms and an intensive care unit. It also will have more than 150 private rooms—which will allow the hospital to offer all patients a private room compared to just 13% currently.
The emergency department will expand to 45,850 square feet from 16,700 square feet.
The total project is expected to cost $229.5 million, including a diagnostic imaging expansion and an observation unit. It will be funded through gifts, a grant from the city of Miami Beach, cash from operations and bond proceeds.
In its latest earnings report, Mount Sinai reported a $15 million operating surplus on $273.8 million in revenue for the first half of the year compared with an $11.9 million operating surplus on $263.7 million in revenue during the same period in 2014.
Its operating margin improved to 4.8% from 4%.
The hospital also received a reprieve when the state reached a June agreement with the Obama administration that extended low-income pool funding an additional two years. Although there will still be a cut next year, it will amount to about 3.3%—much lower than Mount Sinai had feared during the contentious fight.
“We were very anxious about the session … but you can see here that we were very successful,” CEO Steven Sonenreich told investors. “We were actually prepared for something that would have been much more challenging.”
Mount Sinai did hit a couple of bumps.
Inpatient admissions declined 0.5% but the biggest hit came from psychiatric admissions, which declined 16.6%. The hospital hopes to increase that number going forward by focusing, for instance, on partnerships with nursing homes.
“We feel we'll be able to stabilize this number in the next several quarters,” chief financial officer Alex Mendez said on the call.
But Mount Sinai also saw a 6.6% increase in emergency room visits and a 3% increase in surgery visits. Diagnostic and therapeutic cardiac procedures also increased about 9%.
Its market share gains as well as its expansion plans were factors that contributed to a one notch credit rating upgrade from Fitch Ratings in July. Its bonds are now rated BBB+.
In addition to its building projects, Mount Sinai also plans to transition to EPIC's revenue-cycle management software next year at a cost of about $16.9 million. The implementation is scheduled for May 1 unless it's derailed by a rough transition to the new ICD-10 coding system this fall.
But the hospital has been preparing for the change for the past two years, Mendez said. “We feel that we're set, but it's obviously a large transition from ICD-9 to ICD-10,” he added.
