Friday, October 26, 2001

Shands is shaking out finances
Hospital's losses fall, capital sought

By Sarah Skidmore
Times-Union Business writer

Shands Jacksonville, the product of the merger of two financially troubled hospitals, has significantly improved the its finances since the hospital's formation two years ago. Now the hospital has launched a plan to try to make the upswing stick by getting between $275 million and $300 million in additional capital to reinvest in the hospital over the next five years.

Because of a long history of insufficient investments by University and Methodist hospitals, which joined to become Shands, there is more than a decade of annual losses that the hospital has to overcome. But since the formation, the hospital went from losing $53 million in 2000 to losing $12 million in 2001, and chief executive and president Bob Norton said the hospital is in line to break even for this year.

"It's good news for us, some people may not think it's a big deal," he said. "We've come through the first two years of our existence with some success, but it's time to create a long-term plan for success."

This long-term plan hinges on securing capital for a five-year rebuilding plan.

Norton said the hospital can come up with half of this amount on its own. It already increased its revenue, streamlined its services and is actively looking to continue to do so through selling assets, such as the operation of the dialysis clinic to an outside company. He hopes that by reinvesting in the programs, staff and facilities that revenue will continue to grow.

Shands already invested $28 million in capital in the past two years into programs such as neuroscience and cardiology and patient rooms. But there are still major hurdles to overcome from its past -- such as the trauma center, which is 30 years old and is intended to serve only one-third the volume of patients it actually sees. It plans to use the additional capital to upgrade facilties such as this and continue to improve its programs.

"The other half [of the money] has to come from the partners who originally agreed to support us in this," Norton said. "I think everyone understands the critical nature of care centers at this time."

These partners are: the city, the state, the University of Florida College of Medicine, creditors and Shands HealthCare, the umbrella organization for the hospital.

Shands has not submitted any formal requests but is actively discussing possibilities with each of the parties. No specific amount has been requested of any entity, but Shands has made them aware of the need. Norton said he expects the primary financial requests will be from the city and state.

But it doesn't look promising when the state is facing a $1.3 billion budget shortfall. To solve part of this problem, the state may cut a Medicaid program that would cause Shands to lose an additional $5.5 million a year.

Sharon Ashton, spokeswoman for the mayor, said the city is dealing with an upcoming $8 million shortage. Shands already has a $23.5 million annual contract with the city to serve low-income and uninsured patients.

But Norton remains positive.

"We are very aware of the situation the state is in and the trickle-down effect that has on the city," he said. "Everyone has grown in the past two years to understand the critical importance of this institution in the community."

Norton said Shands provides invaluable services to the community, and without creating a long-term solution for the financially crippled hospital, it may someday cease to exist.

The hospital expects the support of the University of Florida and Shands HealthCare. The new CEO of Shands HealthCare, Timothy Goldfarb, said he is eager to expand the presence of Shands Jacksonville.

Norton said the hospital, a training hospital, expects support from Shands HealthCare and UF's medical school.