RLMC reports negative net income, operating on losses

“Our audit for 2011 is still underway,” Schumann said. “Our operating performance has not improved a whole lot — it’s improved a little bit, but not by very much.”

A recent report published by Business North ranked RLMC as No. 15 out of 24 health care systems in the northern region, based on its net operating revenues for 2010.

Several factors account for RLMC’s negative revenue stream.

“There are many contributing factors, it’s hard to nail just one,” she said.

One factor is financial assistance to patients who cannot afford their hospital bills, also referred to as charity care or the community care program. It pays for a percentage of qualifying patient’s hospital bills — up to 100 percent of the bills — based on patient income and assets. The program targets helping those who have an income too high for state-run health care assistance programs, but too low to afford large hospital bills.

“It’s to help the people who are in that gap; the people that fall through the cracks,” Schumann said.

In addition, a state-mandated, automatic 22-percent discount on RLMC hospital bills for any patient who has no health insurance also costs the hospital, she said.

Another factor affecting the revenue is operating in a remote community, Schumann added. There are “several chunks of time” when there is no one utilizing the hospital’s services, Schumann explained.

“We don’t have the volume of people requesting services and are not as busy as a larger market, but we still have to have the staff available here so we can provide emergency care for anyone who walks through the door at any time,” she said. “It’s going to cost more to provide services, but our goal is to provide the best health care we can for our community.”

The fact that support or specialty doctors for RLMC typically travel from another area to International Falls adds to the cost dilemma, she said. Sharing a border with Canada further shapes the cost of operating in this market, Schumann said.

“We have a unique market,” she said. “Normally, it’s a pie-shaped market, if you look at the radius surrounding the hospital’s location, say an hour drive all around. But we only have half a pie — so to speak — because Canada is on the other side, and Canadians stay in Canada for their health care.”

Since the 2009 merging of the clinic and hospital systems, RLMC management is still figuring out ways to run the two in a more financially efficient way, a shift that would potentially save on operating costs, Schumann said. In July 2009, Rainy Lake Medical Center and Falls Memorial Hospital were merged into one RLMC system to become affiliated with Duluth-based Essentia Health. Having the clinic and hospital at two separate campuses presents a financial challenge, Schumann added.

“In general, clinics are more expensive to operate than hospitals,” she said. “We’re still working out ways to improve our operations — we’re not on the same information system for billing purposes. Being on separate campuses, there are additional work flow issues that make things more costly.”

Overall, Schumann added, rising health care costs and lower reimbursement rates from insurance companies are other factors impacting the financial state of RLMC. An updated financial audit and report will be presented to the RLMC Board of Trustees at the end of this month.

The report will be based on the 2011 financial audit, and is expected to show “our operating performance has improved slightly,” Schumann said.