2020 Fiscal Year capital and operating budgets.

We have started to develop our Fiscal Year 2020 capital and operating budgets. This budget will need to reduce expenses or have more income. Toward that end, for the last several weeks we have been asking you for your ideas regarding how we can save money or generate additional revenue.

As you know, Holy Cross only receives a fraction of the amount of mill levy support that is allowed by law; we receive 1 mill while the law allows up to 4.25 mills. Many if not most of the other small rural hospitals in New Mexico receive the maximum amount. For Holy Cross the difference between what we currently receive and what we could receive amounts to about $4M more per year. Local tax support is the way other New Mexico communities have shored up their local hospital’s finances. Until that happens for us, we need to find creative ways to reduce our expenses or reliably increase our revenue.

All of this budget planning is taking place in the context of our February financial statements. We are reporting a loss of about $492,000 for that one month. We reported revenue that was $1.5M lower than the month of January. There were a number of expenses that were recorded in February that actually occurred in previous months. For example, we received numerous invoices from vendors that were several months late. This made February look much worse than it otherwise would but didn’t really change our year-to-date financial performance. For the year thus far, we have lost almost $766,000 although we had budgeted a modest profit of $126,000. That means we have a negative variance to budget of about $892,000!

The impact of our critical access status is noticeable and positive. For the first 10.5 months that we were designated as critical access we saw additional revenue of about $1.3M. Our current financial situation would be much worse if not for this additional revenue from Medicare.

I am sure you will agree that losses of this size are not sustainable. Until we are able to approach the community about increasing the amount of local tax support, we need to adjust our budget internally. But we are taking a different approach than we did last year. Last year we asked the question, which service should we keep open and which should we close. While we didn’t close any service the process was very upsetting. This year we are asking the question, “How can we adjust our current services so we can continue to provide the care our community needs at the same time we reduce our expenses?”

The recent strategic planning input sessions that we offered to our employees and medical staff provided some useful ideas and opportunities. This information will be combined with the input obtained from the community input sessions and will be presented to the Board at the April meeting. The current budget schedule calls for the final budget to be presented to the Board at the May meeting. This step may be delayed by a month to allow the three new board members to have input into both the strategic planning and budgeting processes. We will hold All Staff meetings over the summer to update you on both documents. Until then, we will use regular communication tools (The Keeping You in the Loop weekly communication email and the Senior Leader department rounding sessions) to provide you with information related to these processes.

Holy Cross provides essential services to Taos County. Working together, we will find a path forward that will allow us to continue to meet the healthcare needs of our friends and neighbors!

Written by Bill Patten, CEO of Holy Cross Medical Center

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