Haywood Regional Medical Center officials remain confident that there is adequate money in reserves to get through the current crisis, according to cash flow projections by the hospital finance department.

“We will make it,” Al Byers, interim CEO, told the hospital board last week. Hospital officials also reported on the financial outlook to county commissioners last week.

The cash flow crunch isn’t expected to hit for another six weeks, according to Gwen Evans, hospital finance director. The hospital expects to make it through April on money coming in from patients who received care two, three and four months ago but are just now getting around to paying their bills.

But by May, this will have dried up and the hospital will have to start dipping into reserves. During May, June and July, the hospital expects to draw $6.3 million from reserves to get by, according to Evans’ estimates. The hospital plans to be ready for a Medicare inspection by March 31. It could take another month until the Medicare status is restored, however. Once patients do return, there will be a lag time before money starts rolling in.

The hospital has $19.2 million in investments, but it can’t spend the whole wad. The hospital has $5.9 million in debt, which must be factored out.

Subtract the debt from the total investments, and that leaves the hospital with $13.3 million it can actually use. Subtract the $6.3 million the hospital expects to need through July, and there is still $7 million left in the kitty.

Projections plagued by wildcards

The estimates are rudimentary, however, due to several unknown variables. The biggest wildcard is how quickly patients will return once Medicare and Medicaid status is restored and private insurers come back to the table. The hospital probably won’t resume at full tilt the day that happens.

“Getting our certification back is one thing but we have another problem. That is the residents of Haywood County have to regain trust in the hospital and its quality of care,” said Dr. George Brown, a long-time family practitioner.

Last week, one of Brown’s patients needed a chest X-ray. The patient wanted to go to Ashville, even though the radiology department that does X-rays in the hospital is still functioning and is unaffected by the Medicare status. The patient was uneasy about going to HRMC, but Brown eventually prevailed.

“There has to be a lot of this from physicians in convincing people that we have a good hospital,” Brown said.

Another wildcard is payroll. The hospital typically pays out $1.3 million in payroll every two weeks. But not anymore.

“We know that is going to reduce significantly,” Evans said. Evans said she doesn’t know exactly how much payroll will drop, but expects the current pay period to come in about 25 percent below normal.

The hospital has maintained that it will not lay off any of its full-time staff during the crisis, despite a 70 percent drop in patients. Payroll savings are being achieved other ways, Evans said.

For starters, employees who want to work fewer hours are being allowed to do so. How much people will voluntarily reduce their hours varies from week to week.

“We have to run time clocks and see what people have punched,” Evans said.

There is also a freeze on overtime, a freeze on hiring and reduction in hours for part-time employees. Savings will depend on how many people quit and don’t get replaced. Hospital officials have not elaborated on the reduction in hours for part-time employees, and whether this is effectively putting some part-time employees out of work.

Yet another wildcard is operating costs. The cost of supplies for IV bags, gauze pads, medicines and the like will obviously be less — a lot less given the lack of patients. Even overhead like laundry costs will be less. But how much less is not known.

The number of patients in the hospital is hovering around 20. Some of those are paying patients — either those who don’t have insurance and pay out of pocket or those with an insurance company that hasn’t pulled out.

But other patients coming through the hospital are getting free care — primarily women having babies and people with emergencies who can’t easily be transported to a neighboring hospital. The cost of that free care isn’t known.

“It is not something that is easy to get our hands on at this point,” Evans said.

Drawing down further

Projections beyond the end of July have not been made public. It’s unknown how much longer — and by how much — the hospital will continue to rely on reserves to make ends meet.

Even before the crisis, the hospital was operating in the red. It finished its fiscal year in September 2007 with a loss of $1.9 million. The hospital made $500,000 in both October and November of 2007, but proceeded to lose $1.1 million in December and January, putting it slightly back in the hole.

If the hospital was failing to making ends meet before, unless patients return in force fairly quickly, the hospital could continue to nibble away at its reserves for months to come.

The hospital’s debt

The hospital has $5.9 million in debt. Of that, $4.5 million is owed on a bond taken out 10 years ago to pay for construction of the Health and Fitness Center, according to the hospital’s most recent audit. The remaining $2.4 million in debt is on bank notes and loans for various pieces of medical equipment.

The terms of the bond and the loans require the hospital to keep its reserves at a certain level. If the reserves dip too low, the hospital would be in default on the terms of its debt. The banks and bond holders could ask the hospital to pay up while the getting is good. For that reason, the hospital has to factor out the $5.9 million in debt from its reserves when figuring out how much cash it has to draw on.