In the black

Kona Community Hospital officials anticipate the 94-bed facility will be in the black for the third consecutive year thanks in part to increasing revenues and static expenses.

After nine years of losses, including a $7 million deficit in fiscal year 2008-09, the hospital earned a $500,000-plus profit in 2010 and $1.5 million profit in 2011, Dean Herzog, the hospital’s chief financial officer, said. On Thursday, Herzog, along with Jay Kreuzer, the hospital’s chief executive officer, provided West Hawaii Today an update on the hospital’s financial status.

The hospital’s 2011 profit would have been higher had the Hawaii Health Systems Corp.-affiliated hospital not had to contribute nearly $4 million to fund retirement and pensions, Herzog added.

Both officials said the hospital is on target to turn a profit again this fiscal year, which ends June 30. Herzog estimated the profit to be around $1.5 million.

“Being in the black is always a year-to-year challenge,” Kreuzer said before explaining the hospital must control expenses while still providing needed services. “It’s a challenge to be on top of the game, and staying there means watching it everyday.”

Up until fiscal year 2008-09, the state hospital had consistently operated at a loss. An analysis of Hawaii Health Systems Corp. annual financial reports between 2002 and 2009, prior to the hospital turning a profit, showed the hospital’s loss ranged from $3.8 million to more than $16 million — an annual average loss of $7.6 million.

The hospital has increased its revenues by offering additional services to increase patient volume, such as the hospital’s new one-day-a-week cardiology program; working with the other 12 hospitals within the HHSC; keeping more tests and laboratory work within the hospital; and ensuring money owed to the hospital, including insurance reimbursements, is collected, Herzog and Kreuzer said.

“We’re collecting every dollar that we can get,” Herzog said. “The collections are right where they need to be.”

The hospital has also reduced its accounts payable, or what it owes its vendors, to 60 days, he noted. Several years ago, before Kreuzer’s and Herzog’s tenure, the hospital’s accounts payable stood at 120 days.

Officials have also kept expenses from changing too much over the past couple years by closely watching staffing levels to ensure community needs are met without having excess staff. While staff is hired when someone leaves, Kreuzer said 55 positions cut in 2008 to curb a $3.7 million budget shortfall are still vacant.

Kona Community Hospital also curbs expenses by working with other HHSC hospitals to treat patients who need care not offered on Hawaii Island as well as to combine orders with the hopes of obtaining a lower price for the necessary items, the officials explained.

“We are always looking at the services we provide and whether we can provide them more efficiently to meet the needs of the physicians and patients so they don’t have to go off island,” Kreuzer said.

With a profit expected this fiscal year ending June 30, the hospital will put the money right back into the facility, just as it has for the past couple years, to meet community needs, Kreuzer said.

In 2011, Herzog explained, approximately $900,000 was spent on new equipment for the operating and emergency rooms. So far in 2012, the hospital has spent $500,000 on equipment and repairs, including replacing the hospital’s ceiling with anchored tiles to keep it from falling as happened during the October 2006 earthquake.

“The hospital is doing very well right now,” said Kreuzer.