The financial health of Southwest Memorial Hospital is improving, a popular doctor has been rehired, and there has been a change in board leadership.
Orthopedic surgeon Dr. Doug Bagge has signed a new employment contract with Southwest Health System, the private corporation that manages the hospital.
As part of restructuring in August, SHS decided Bagge’s contract would be canceled at the end of the year, a decision that drew outcry from many members of a community he has served for 23 years.
This month, he and Southwest CEO Tony Sudduth negotiated a new deal.
“It’s good,” Bagge said of the new contract. “I’m looking forward to continuing orthopedic care for this community and appreciate the outpouring of support.”
“We’re glad to have him back,” Sudduth said.
Terms of the contract were not revealed, but both parties said Bagge’s wages were reduced to reflect the hospital’s efforts to cut costs.
Bagge is the only SHS orthopedic surgeon on staff at Southwest after Dr. Evan Tavakoli recently resigned to work elsewhere. Sudduth said the hospital is trying to determine a level of staffing that matches the local market for orthopedic services.
The hospital is attempting to overcome a financial crisis realized late last year. Top officials were fired in April, specialists with Community Hospital Corp. were contracted to implement a recovery plan, and 40 employees were laid off in August.
Overstaffing caused an imbalance between patient revenues and expenditures that threatened to close the hospital within months, officials said after the layoffs. Also, insufficient cash on hand created a violation of a bond package that is funding a recently completed $32 million hospital expansion.
In an interview Thursday, Sudduth said the “aggressive recovery plan” is working.
The hospital has had five consecutive profitable months, he said, and cash on hand has grown according to the schedule outlined in a forbearance agreement with lenders. The hospital’s bonds require enough cash on hand to operate the hospital for 81 days, equaling about $13.4 million. It takes $165,000 per day to operate the hospital.
In May, there was cash on hand for 15 days, or $2.4 million. In December, cash on hand rebounded to about 31 days, or $5.1 million, Sudduth said.
Cash on hand is required to reach 45 days, or $7.4 million, in June, according to the forbearance agreement.
“We’re seeing improvement and are moving forward,” Sudduth said. “This hospital is absolutely viable, and we have a good plan.”
The Southwest Health System board has new members after recent resignations. The volunteer board governs and oversees hospital business matters but is not involved in day-to-day operations.
Chairman Paul Deshayes Board and board members Scott Steeves and Kyle Cruzan recently resigned.
After advertising for the positions, the board chose Cody Burke, an anesthetist with SHS, and Shirley Jones, a comptroller with Region 9 Economic Development, to fill two empty seats. Another board member is being sought for the third.
New board Chairman Tom Rice said the new board brings diverse experience to help guide the recovery and improve its oversight role.
“They bring new energy and new ideas and will be part of the team effort to get the hospital back on track financially,” Rice said.
Rice thanked departing board members for their service and said their efforts were key to the expansion and upgrade of the hospital campus.
During public meetings, the community had demanded the SHS board take a more proactive oversight role to prevent financial problems. Rice said new measures include restarting an fiscal advisory committee that regularly reviews financial statements and works more closely with Medicaid to ensure the hospital is receiving proper reimbursements, more board education training, and more open communication with top managers with Community Hospital Corp.
“We are asking tougher questions now, educating ourselves more and working more closely with providers and management to ensure we recover and serve the community needs,” Rice said. “Our goal is to avoid financial problems in the future like the one we face now.”
Under SHS bylaws, only two board members may also be SHS employees. They are Burke and Terry Cook. The SHS board currently is composed of Rice, Cook, Jones, Burke, Steve Fusco and Dan Valverde. The board’s next meeting is Jan. 23 at 5 p.m. in the EMS meeting room on the north side of the hospital campus.
Also this month, SHS and Community Hospital Corp. announced that Karen Labonte has been hired as chief nursing officer. She previously served almost seven years as chief nursing officer for Northwest Health System in Springdale, Arkansas, and was responsible for five medical facilities.
Labonte holds a bachelor’s degree in nursing from the University of Maine in Fort Kent and a master’s degree in nursing from Benedictine University in Lisle, Illinois.
