Opinion: Tahoe Forest Hospital needs to focus on cutting costs
Special to the Sun
While the 5 percent Tahoe Forest Hospital District rate increase is of concern, a far greater concern is the state of the district’s finances.
While the District earned $2.8 million on operations last fiscal year, those earnings were supported by an unconscionable $8.4 million profit on cancer drugs — a more than 100 percent profit (Medicare allows a 6 percent markup on cancer drugs).
Without this windfall, which exploits some of the most vulnerable patients, the district would be losing serious money.
CEO Dorst notes that Tahoe Forest’s rates are comparable to other regional hospitals, in some cases higher, in some cases lower. As a public hospital, Tahoe Forest is subsidized by direct payments from property taxes ($4.6 million in FY 2014-15). It also is able to borrow money in the form of bonds which are repaid not from operations, but by the taxpayers ($4.7 million in FY 2014-15).
Except for Plumas, the comparable hospitals cited by Mr. Dorst are not public hospitals and do not have these taxpayer subsidies. They must pay expenses and pay back borrowed money out of operating income alone.
The fact that Tahoe Forest depends on $9.3 million per year in taxpayer subsidies to stay afloat raises great concern about the district’s solvency; if Tahoe Forest was a private hospital, it may be bankrupt.
Fortunately, Tahoe Forest has significant opportunities to cut expenses. The Multispecialty Clinic lost $7.4 million last year, because physicians’ salaries are subsidized by the district.
While some subsidies may be necessary to maintain coverage in critical specialties, like General Surgery (disclaimer: I am a general surgeon), the subsidies should not be needed for most specialties.
In some cases, such as Oncology, there are simply more physicians than the community requires. In addition to salary subsidies, many physicians/directors receive yearly stipends for administrative duties, which in many cases are done without compensation at other hospitals.
Another cost-cutting opportunity is the excessive number of administrative and managerial personnel. The current organization chart shows 69 administrative, supervisory, and managerial positions, a grossly excessive number for a health system with a 24 bed hospital. Not all of these positions are currently filled.
It is clear that to maintain solvency without imposing an excessive financial burden on patients and taxpayers, Tahoe Forest’s Board of Directors and next CEO must be committed to serious cost cutting.
Currently, it appears to me that the priority of the district is the preservation of the income and perquisites of the medical and non-medical staff rather than the benefit of the community. This has to change.
I call upon the board to schedule public workshops to determine what services the district should be providing and which activities of the district the public is willing to subsidize. I also call upon the Board to add community members to the CEO search advisory committee.
These should be necessary steps before a permanent CEO is selected. The recent fiscal year’s financial performance is not an anomaly. The district’s finances have been deteriorating steadily over the last 5 years.
Without the board’s commitment to the better management of expenses we will lose our hospital.
Jack Kashtan is a Truckee resident.
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