Hoping to build on year of record profits, Erlanger aims for $18.7 million profit

Erlanger
Erlanger

Already in a self-described "turnaround year," Erlanger Health System hopes to pick up even more momentum in its financial comeback as it aims for a $18.7 million bottom line in 2016.

The public hospital's proposed budget for next year is up $8 million from the current year's budget, and factors in a projected 8.9 percent increase in admissions with $29.4 million in operating profits. Officials say they hope to build on a year of record profits that have come after three years of losses before 2014.

"We're building a success story," Erlanger Chief Financial Officer Britt Tabor told members of the hospital board's budget and finance committee Tuesday.

The budget also includes a 3 percent raise for all employees except a subset of nurses, who will receive the second phase of a $5 million market adjustment to bring their pay up.

Erlanger's self-described "aggressive" budget comes as hospitals and health advocates in the state are warning of financial turmoil at hospitals after Tennessee lawmakers' decided this spring not to expand TennCare to 280,000 people just as federal payment cuts are slated to increase.

For Erlanger, that looks like $9.2 million in payment cuts from Medicare and Medicaid, officials said.

photo Erlanger President and CEO Kevin Spiegel speaks with members of the Chattanooga Times Free Press editorial board.

"There are a lot of big issues out there that could negatively affect our operations," CEO Kevin Spiegel told the board.

Despite the unknowns, Spiegel said the hospital is well positioned to continue increasing its market share. The hospital is poised to more than double its budgeted income of $10.8 million for 2015: As of March, the hospital had a $25.3 million year-to-date net income, with $39 million from operations.

Erlanger has continued to acquire physician practices, and hopes to attract more. At Tuesday's meeting, the committee approved what Spiegel has called "the most important investment we will make over the next 10 years": a contract for a nearly $100 million IT system that seeks to centralize the hospital's fractured system of record-keeping - a major physician headache.

Meanwhile, the hospital has completed an $8 million overhaul of its orthopedic unit, renovated cath labs, and will open inpatient rooms at Erlanger North on Morrison Springs Road - all expected to drive admissions. The hospital is also starting a $40 million expansion at Erlanger East on Gunbarrel Road.

Still, trustee Henry Hoss questioned whether the hospital could continue to expect such growth in a highly competitive health care market.

"What makes you think we're going to continue to increase market share?" Hoss asked, nodding to Erlanger's main competitors, CHI Memorial Health Care System and Parkridge Health System.

While Spiegel said he does not see the hospital's growth plateauing over the next year, he acknowledged that officials have to balance setting "new bars" with "legitimate threats" at the local, state and federal levels.

"This is still going to be a very, very tough year for us," Spiegel said.

The final budget will be voted on in June.

Contact staff writer Kate Belz at kbelz@timesfreepress.com or 423-757-6673.

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