April 15, 2007
Over the last few years, the costs of providing health care have increased dramatically. Energy, medical, pharmaceutical, personnel, capital replacement and raw construction materials have increased while federal Indian Health Service funding has remained relatively flat.
For next year, the State of Alaska has proposed substantial cuts to various health care programs that could impact YKHC. About a quarter of YKHC's revenue stream is federal and state grants. Administration is waiting for the funding appropriations to be completed before taking any necessary actions.
As a result of unexpected increases in expenses and a decline in revenues this year, YKHC Administration has identified a necessary revision to the 2007 fiscal year budget.
"In order to remain financially strong and achieve a sustainable budget to operate our health care system, we are forced to reduce expenses in specific areas throughout our organization," said Gene Peltola, President and CEO. "We are in the process of reducing expenses by $6.64 million, or 4.3% of our total budget."
Leaders within YKHC have met with the Board to discuss the urgency to solidify and resolve the current financial deficit. A comprehensive financial assessment has revealed the greatest reduction in expenses associated with central supplies, rental and travel costs, vacant positions, and the current payroll.
"With this budget revision plan, we are faced with the unavoidable reality of downsizing our workforce," Peltola said. "While all reductions will be difficult, we will minimize the direct impact to the delivery of health care." It is anticipated that thirteen positions within YKHC's current workforce will be affected.
To reduce the expense related to rental costs, there has been a housing transition that affected Bethel-based employees. For many years, YKHC has provided housing as a benefit to a certain class of employees. These were located in a federally owned and regulated hospital housing complex. Unfortunately, federal housing regulations prevent YKHC from increasing rents to market rates and revenues have not kept pace with the increased operational and maintenance expenses.
In addition to this, YKHC has leased housing in the community to provide for the temporary healthcare workforce who travel to and from the Bethel Hospital. These rental costs are no longer sustainable.
The combination of reducing housing subsidy costs and eliminating outside leases will save YKHC over $200,000 this fiscal year and addresses the budget revision without greatly impacting our health care workforce.
Essentially, due to the ever-changing business environment, YKHC is forced to continually evaluate programs that may cause significant expense to the company.
Peltola affirms a fundamental message through this financial challenge, stating, "This is an important and challenging time for YKHC; however, we must continue to work together to maintain our mission of achieving excellent health care for our patients."