Sonoma Valley Hospital reports better-than-expected first quarter

Financially challenged Sonoma Valley Hospital posted a positive first quarter review. Chief Executive Officer Carl Gerlach released a statement last week saying, “SVH posted a net income of $460,000 for the first quarter of its fiscal year, which began July 1. This is $390,000 better than budgeted. Despite lower-than-expected service volumes, staff efforts to better manage labor costs and improve collection of revenues have produced positive results. Cash balances showed an improvement of over $1 million due SVH collecting a backlog of payments due from the State and Medicare program. Net income includes $736,000 of parcel tax revenues.”
Gerlach explained that while volume was higher in July, the overall success of the first quarter can be credited to tight management – including better labor costs and less expenditure on consultants – and attention to revenues. He said the positive showing indicates what the hospital can do. “Better management, getting more proactive up front, making sure the health insurance is set up right for each person – it’s a tough business for that,” he said, “[but] we can do that.”
He reported two new challenges to the hospital’s financial security. First, he said, MediCal is reducing payments by between $500,000 and $1 million per year – reductions, which will chiefly impact SVH OB services. And second, the hospital’s health insurance provider is currently proposing increases of over $300,000 per year in premiums. To deal with this threat, the hospital has done two things, he said. They’ve mitigated increase in the health insurance cost to maybe $100,000, and worked on the MediCal side “so that it’s maybe a $400,000 hit.” While the hospital can’t control the MediCal side, he said, “we can mitigate it. We can fight; we can argue and make sure we do everything possible to minimize the damage.”
In a written statement, he summed up the importance the success of Measure P to the future of the hospital. “These two events demonstrate the need to continue to strengthen financial management and to realize the financial benefits that would be provided by passing Measure P. These benefits include: increasing physician confidence and therefore service volume and revenue; reducing equipment repair, maintenance and replacement costs; reducing utility costs; and improving cash flow by refinancing existing bonds.”