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Community Health CFO makes sudden exit

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Tom Fischer, the chief financial and chief operating officer of Community Health Network, departed suddenly this month.

Fischer Fischer

Sources with knowledge of the situation described Fischer’s exit as a firing. But a Community spokeswoman said Fischer resigned in a private meeting with Community CEO Bryan Mills.

Community officials declined to give any further explanation. Fischer, 60, who joined Community as CFO in 2005, declined to comment.

Mills and Fischer have been close friends for decades, dating to the time they both worked for the Ernst & Young accounting firm. Now Holly Millard, Community’s chief accounting officer, is serving as interim CFO while Community searches for a replacement.

Regardless of whether Fischer was fired or quit, his departure comes at a crucial time for the Indianapolis-based hospital system. Like most hospitals, it is struggling with a decline in outpatient surgeries and with reimbursement rates from health plans that are not growing as fast as before.

community-chart.gif“It’ll clearly have an impact. Tom did a lot of good things for that organization,” said Ed Abel, a hospital accountant at Indianapolis-based Blue & Co.

Community is trying to cut expenses 15 percent to 20 percent, including via staff reductions. Community laid off more than 150 employees during the first nine months of this year, many of them part of what it described as a systemwide realignment.

Community spokeswoman Lynda de Widt described the staff reductions as part of the normal course of business in an organization that has 13,000 employees.

“We have realigned the system to meet our primary mission to put patients first, by improving patient flow and matching resources to care and volumes,” she wrote in an email. “To ensure we sustain our mission, we’ve also taken other measures to include eliminating duplication of services, reviewing programs, not filling some positions that are currently vacant, and looking to grow business in new ways.”

Community reported in late November that it has spent $5 million so far this year on severance costs. It has not mentioned labor reductions in any of its quarterly financial reports since 2009, the year it began a multi-year, $100 million cost-saving initiative.

It’s not clear how many Community employees were let go as part of those reductions. In June 2009, Community told IBJ it had 8,600 full-time-equivalent employees. A year later, it reported 8,242 full-time-equivalent employees—a reduction of more than 350.

Overall, Community’s employment has continued to rise in recent years, as it has acquired physician practices and two other hospitals.

But the staff reductions in its core hospital operations, spread over the past four years, have been about the same in percentage terms as layoffs announced this year at three other large Indianapolis-area hospital systems.

In June, St. Vincent Health announced it would cut at least 865 workers. In September, Indiana University Health announced cuts of 935 positions. And in October, Franciscan Alliance said it would cut 925 positions.

“It was pretty similar to what the other hospitals were doing,” Abel, the hospital accountant, said of Community. “They just were a little quieter about it.”

Missed projections

A quick look at Community’s third-quarter financial filing shows the hospital system is struggling.

Its profit from operations during the first nine months of the year was $20.7 million, far below its plan for the year, which envisioned $68 million in profit in the first three quarters.

In fact, Community’s profits have missed projections in three of the past four years.

“Coming under every year, year over year over year, we’d look into that,” said Suzie Desai, a bond analyst at Standard & Poor’s who follows Community. “We do look at budgets year over year and how on or off the mark they are.”

There is no indication, however, that Fischer’s departure was a result of missing financial projections.

Indeed, Community’s financial struggles are not unusual among Indianapolis-area hospitals, nearly all of which have seen their finances suffer due to surprising declines in patient visits.

At Community, inpatient admissions so far this year have risen, but only 0.5 percent. Physician visits are up a handsome 11 percent. But outpatient surgeries, which are one of the most lucrative parts of a hospital’s business, have declined 2.9 percent.

“Hospitals across the country are dealing with lower operating margins, due to a variety of factors,” de Widt wrote. “During the past few years, the network has implemented a number of strategies to improve and sustain an appropriate operating margin.”

What is really bedeviling Community is what it describes as its “dramatic” rise in charity care and bad debt. Since Franciscan Alliance closed its Beech Grove hospital in March 2012, lots of low-income and uninsured patients have sought care at Community East Hospital, at 1500 N. Ritter Ave., just six miles from Franciscan’s former Beech Grove campus.

Community’s charity care and bad debt have equaled 5.8 percent of its patient revenue so far this year, up from 4.7 percent a year ago.

Many Indiana hospitals have posted poorer financial figures this year because a state program called the Hospital Assessment Fee is waiting for federal approval to be renewed. Once the expected approval is given, Community and other Indiana hospitals will receive the extra payments that they did in 2012.

“The financial statements have been a little bit shaggier,” Abel said. But,  “It’s not necessarily all doom and gloom on their bottom line.”

Desai, the bond analyst, added that Community’s finances would have to deteriorate a lot from their 2012 levels before she would have concerns about Community’s credit-worthiness. And Fischer’s departure, while significant, isn’t an automatic red flag, she said.

“Certainly, there are times when people come and go, and organizations move on,” she said. “We generally see that [health] systems have done some succession planning.”•

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  • No Medicaid expansion
    Regardless of whether or not you support Obamacare/ACA, we must factor in Pence's decision not to expand Medicaid. Hospitals are already paying for the patients who were uninsured and who will still be uninsured because they choose not to enroll in a plan for 2014--charity care. The problem is that tens of thousands could have been on Medicaid in Indiana, at the expence of the Federal Government, had Pence chosen to expand Medicaid. Some reimbursement (Medicaid) is better than none (charity care). Pence's decision had a direct impact on Indiana's hospitals systems laying off so many employees. Systems in many other states who expanded their Medicaid have faired far better.
  • See real people in healthcare.
    Jim, The people who make health care decisions no longer do health care. The president is a failure. He no longer desires the monicker "obamacare" because of its association with "failure care". Your insistence on the ACA title (which no mainstream, non-apologetic Obama ass-kicker would recognize) shows your hand. You don't care about health care. You are an Obama supporter and don't care who it hurts, the people who pay, or the people who are POORLY served. People are in my office from all over the world, even from those socialist third world paradises Obama supporters insist are paragons of future US healthcare. Go there Jim, for your appendectomy. Don't import their failure here. And the millions the accountants and decorators have spent and the lobbies of hospitals? Failure as well. Keeping pace with this unfit man we call President.
  • Elaine - Where Is the Surprise?
    Elaine - I am not sure about your logic blaming the situation on the ACA. Under the ACA, these "charity" cases are more likely to have insurance that will either cover most of the hospital costs and/or allow the "charity customers" to go to a regular doctor rather than the emergency room. You also need to recognize that health care in the US is about twice the per capita costs of most industrialized/modern countries. Something has to give to make the system more affordable for everyone. Whether directly or indirectly, the ACA is forcing almost all health care providers/hospitals to examine their costs. Community Hospitals have spent millions on brick and mortar over the past few years, perhaps without a solid plan to recover those costs as planned. Unfortunately, we all pay for these inefficiencies.
    • Surprised?
      This is the way of the future, under ObamaCare. It looks as it many of the folks who the Prez thought he was going to force to buy insurance will simply forgo it, resulting in higher insurance costs (or no insurance) for rest. Those without insurance don't pay but still get medical care at hospitals -- gratis. This includes, of course, illegal aliens and their families. How can a hospital survive when forced to provide care to people who won't pay for it? When will taxpayers say enough?!

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