Crediting improved business efficiencies and implementation of "best practices" guidelines, Natividad Medical Center officials are touting a $15 million decrease in operating losses already this year.

Natividad is being operated by an interim management team from Chicago-based Huron Consulting Inc. under the terms of a two-year, $6.3 million contract to improve the safety-net hospital's operations and its bottom line. The hospital lost about $25 million and required a $22 million subsidy from the county last fiscal year. The county budgeted a $12 million subsidy for the hospital for this fiscal year.

Since taking over last fall, Huron has completed a business plan as part of the turnaround effort, which is being paid for through a two-year agreement worth up to $8 million between the county and two area hospitals — Salinas Valley Memorial Hospital and the Community Hospital of the Monterey Peninsula.

According to hospital officials, the $15 million improvement includes savings realized through the end of March. The savings are in comparison with Natividad's deficit at the end of last fiscal year. The improvement includes about $11 million in revenue and $4 million in expenses.

Natividad's interim chief financial officer, Harry Weis, attributed the gains to improvements in registration, billing and collections, as well as successes in securing government funding for treatment of the under-insured and uninsured.

About half of the revenue improvement is due to government funding, said Weis.

Supervisor Dave Potter, who is chairman of the hospital board while Supervisor Jerry Smith recuperates from cancer surgery, said the savings report is great news, especially because it pre-dates the first phase of the improvement plan.

The board approved the initial six-month phase of the improvement plan earlier this month and will consider an administrative "streamlining" proposal at next week's meeting.

"To see this kind of improvement just as the result of business efficiencies is great news," Potter said, adding that additional improvement is still expected. "We're still not at zero. We need to realize as much (improvement) out of the hospital as we can."

New Natividad Chief Executive Officer Bill Foley said hospital officials decided to release the improvement numbers as the hospital begins the first phase of the improvement plan.

"As we're rolling that out, we thought it would be good to discuss the improvements made," Foley said.

Natividad trustee Dr. Kurt Sligar called the improvement a "positive" and said he's hopeful for continued improvements from the Huron team.

"From the board's standpoint, we're just really pleased with Huron's performance in regards to its management team," Sligar said, adding that hospital employees had said the interim managers were teaching them "how to fish rather than feeding us fish."

Weis said the ultimate goal for the interim management team and the experts guiding the implementation of the improvement plan will be to "increase patient volume."

The first phase of the improvement plan began in early May, focusing on the revenue cycle and labor and non-labor operations.

"While we have a great deal of labor and non-labor management and revenue cycle work ahead, the goal of increasing volume at Natividad will be the ultimate test of the turnaround," Weis said.

Article published May 16, 2007
Natividad announces $15m savings
Staff report

Natividad Medical Center officials said the hospital has reduced operating losses by $15 million compared to last year.

The hospital is being run by Huron Consulting Group/Wellspring Management, which projected the hospital would lose about $15 million this year but is working on a business plan to provide $18 million in savings to the county by next year.