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Published October 24, 2013, 08:45 PM

Altru Health System in Grand Forks explores cost-saving measures during financial hardship

GRAND FORKS – Altru Health System is tightening its belt during a period of financial hardship.

By: John Hageman, Forum News Service, INFORUM

GRAND FORKS – Altru Health System is tightening its belt during a period of financial hardship.

Dennis Reisnour, Altru’s chief planning executive, said Thursday that the system is not planning layoffs at one of Grand Forks’ largest employers. But, he said, Altru is exploring a number of cost-saving measures, such as combining responsibilities and holding off on filling open positions.

“As positions come open, we’re looking very carefully before we replace anybody until we feel like we’re on more solid ground financially,” said Reisnour, who has two positions in his department that he’s keeping open until at least the beginning of 2014. “We don’t anticipate doing any layoffs … but we are watching every position carefully.”

Altru senior leadership also is taking a 15 to 20 percent pay cut through the end of the year, Reisnour said. That affects about 20 administrators, officers and executives, he added.

“We also felt like we needed to lead by example,” Reisnour said.

He said Altru “has really slowed down our capital investment.” Private-room conversions and plans for the South Washington Street campus are going forward, but Altru spokeswoman Lindsey Reznicek said its master plans for remodeling its main campus are “on hold for at least a year.”

“As with many things, there are a lot of unknowns heading into the new year as to how patient reclassification will continue as well as what Medicare reimbursement rates will come in at,” she wrote in an email.

Medicare reimbursements

Reisnour said because of federal budget sequestration cuts enacted by Congress, Altru had budgeted for a $300,000 drop in monthly Medicare reimbursements this year. But that reduction has actually been about $1 million more than that a month, he said.

“We’re actually having a busy year as a health system, but we just aren’t getting paid by the Medicare program what we were a year ago,” Reisnour said.

Reisnour attributed that to patient reclassification that has increased the number of those designated by Medicare as observation or outpatient. Hospitals receive only a fraction of the reimbursement when a patient is classified as outpatient compared with when the person is classified as inpatient, according to Reznicek.

Second-quarter financial results released in July state that though total hospital discharges are up over 2012, “those classified as ‘inpatient’ are down while those classified as ‘observation/outpatient’ are up dramatically.”

A new normal?

Those financial results also state that Altru had an operating loss of $700,000 through June. Third-quarter results are expected to be released soon.

Reznicek wrote in an email that Altru’s year-to-date operating margin is 0.8 percent in the red. But she added that when combined with investment income, they are “running in the black.”

“We need about a 3.5 to 4 percent operating margin to have the capital it takes to stay modern,” Reisnour said. “We broke even in September. So we’ve been making changes. We feel like we’re turning a corner a little bit to where we’re at least breaking even, but breaking even is not sustainable.”

Altru leaders sent a letter to employees Oct. 8 describing their financial challenges. The letter, signed by President Casey Ryan and CEO Dave Molmen, states that they are “confident that if we can all work together” Altru can avoid cuts in services and layoffs that have affected other health systems.

Reisnour said he expects financial challenges for health systems like Altru to continue as the Affordable Care Act is implemented. But, he emphasized that they are working to make sure it doesn’t affect patient care.

“These changes are permanent,” Reisnour said. “That’s what we’re assuming, that there will be sort of a resetting of everything in health care. And all of us are going to have to figure out how to make that work for our communities.”