Edward-Elmhurst Health plans another round of cuts

Edward-Elmhurst Health is piling on the cuts. The west suburban hospital network is in the middle of trimming $50 million to ease financial pressure, and plans to cut an additional $35 million in the budget year that begins July 1.

Jeff Friant, interim chief financial officer at Naperville-based Edward-Elmhurst, disclosed the additional cuts today during a call with investors to explain an accounting error that caused the health system to overestimate by $92 million how much insurers and patients owe it.

Despite the cutbacks, Edward-Elmhurst CEO Mary Lou Mastro painted a picture of a health system with firm financial footing and a knack for wooing patients and doctors to treat them in a highly competitive market.

"Our cash position remains very strong," Mastro said of the $1.36 billion system.

She declined further comment to detail how Edward-Elmhurst will implement the $35 million in cuts.

Mastro revealed earlier this week that the health system discovered an accounting error this fall during a routine audit, when outside auditors recommended the health system dig deeper into accounts receivable. The $92 million overestimation was as of June 30, and it accumulated over several years.

Here's the impact. Edward-Elmhurst ended the 2017 fiscal year in June with a $15.2 million operating loss, nearly four times the $4 million loss in 2016, a new financial statement shows. Before discovering the accounting error, Edward-Elmhurst thought it made a $1.7 million profit in 2017 and a $17.7 million profit in 2016.

Six months into the latest fiscal year, the financial picture has improved slightly. Edward-Elmhurst reported a $15 million loss as of Dec. 31.

Earlier this week, Mastro said collecting the $92 million wouldn't have prevented the $50 million in cuts the system announced in August. They involved laying off 84 people and not filling 234 jobs.

To be sure, hospitals across the country are in financial pain. Drug costs are rising. Patients with high deductible insurance plans are skipping out on paying medical bills, leaving hospitals to eat the cost of treating them. Locally, Advocate Health Care, the largest hospital network in Illinois, and Centegra Health System are among systems making major cuts.

During the call with investors, Edward-Elmhurst officials highlighted several accomplishments. The number of doctors and other providers who are affiliated or employed at the health system climbed 80 percent from 2013 through December 2017, totaling 564. That underscores Edward-Elmhurst's ability to recruit, Mastro said, and doctors are key to referring patients to hospitals.

The number of patients discharged from the system's three hospitals and who live in surrounding communities increased to 37 percent as of September, from 33 percent in 2013. Visits to the system's immediate care centers and clinics inside Jewel-Osco stores, which are typically cheaper than a hospital emergency department, are up, too.

"We believe we will weather this challenge moving forward," Mastro told investors. "We will continue to focus on revenue growth and operational efficiencies."

"Edward-Elmhurst Health plans another round of cuts" originally appeared in Crain's Chicago Business.