Presented by Gene Meyer, LMH President & CEO

Financial

· Year-to-date, gross patient revenues of $106.6 million were running ahead (1.3%) of projections, and expenses were $564,000 (1.1%) under budget. Revenue deductions for the first six months of 2004 were running $422,280 (0.8%) over budget, which includes charity care of $1.8 million (21.2% over budget). Despite these challenges, good fiscal management and better than expected patient volumes have resulted in net income through June of $3.5 million (58.1 percent over budget projections).

· The 2003 audited financial statement, presented to the Board of Trustees in April, reported a positive financial picture of the hospital’s efforts to focus on the community’s health care needs by delivering new services and expanding outreach efforts to a regional market:

· The hospital’s financial statement for 2003 reported $4.7 million in net income (revenues over expenses). As a not-for-profit hospital, LMH re-invests revenues over expenses to finance future facility improvements, purchase new equipment and provide additional services. This reflects a $1.8 million increase over last year’s results.

· With 152,190 outpatient visits, 8,032 inpatient admissions, 28,788 emergency visits, and 1,110 births, 2003 was another record year for LMH. This activity resulted in net patient service revenue of $94 million for 2003, compared to $85 million for 2002, a 10.5 percent increase.

· This positive trend allows the hospital to make continued investments in technology and facility improvements. In 2003 those investments totaled $11.9 million and included $4 million for the implementation of a Clinical Information System; $2.8 million for an addition to Lawrence Health Plaza, which houses the expanded LMH Oncology Center including radiation therapy; and costs associated with the addition of the Wound Healing Center at Sixth and Maine streets, family practice clinics in Tonganoxie and Baldwin City, expansion of women’s imaging services at LMH South, and acquisition of a Gamma Camera in Nuclear Radiology.

· The hospital delivered $3 million in charity care in 2003, compared to $2.4 million in 2002. The amount of charity care LMH provides has increased 44 percent in the last five years. Discounts from gross patient charges for contractual allowances for Medicare, Medicaid, Blue Cross and other third-party payers and charity care totaled $91 million (48 percent of gross revenue) last year compared to $70 million in 2002.

· The hospital achieved an increase in operating income despite significant increases in supply and pharmaceutical expenses. In 2002, medical supplies and pharmaceutical drug costs totaled $12.7 million or 14.6 percent of total operating expenses. In 2003, they totaled $14.8 million or 15.4 percent of total operating expenses, an increase of $2.1 million or 16.9 percent over 2002. The major factors contributing to the increased medical supply and drug costs were the growth in the number of oncology patients treated with high cost drug regimens and the increase in cost and number of surgical implants used in orthopedic surgeries and other special procedures.

· Overall, operating expenses in 2003 increased 10 percent over 2002. Salaries and employee benefits totaling $47 million in 2003 accounted for almost 50 percent of operating expenses.

Operations

· Faced with a shortage of psychiatrists who provided inpatient treatment and low census, LMH closed the Senior Care Services Unit April 30. Mental Health services continue to be provided to medical patients by a Psychiatric Consultation Team consisting of a psychiatrist, nurse and social worker.

· LMH is working towards providing cardiac angioplasty services for our community. Cardiovascular Consultants and cardiologists from the University of Kansas Hospital are being considered. Local physician involvement is significant.

Hospital/Medical Staff

· Joining the Medical Staff in the second quarter were John D. Clark, MD, Neurology; Randall E. Dooley, MD, Urology; and David L. Dunlap, MD, Family Practice.

· Kenneth Holladay, MD, who has practiced family medicine in Eudora for 43 years, retired in May.

· The second annual Marguerite Lockwood Volunteer of the Year Award was presented to Bea Carlson, an LMH Gift Shop volunteer, and Reathyl Brummett, a Food and Nutrition volunteer, at the LMH Auxiliary’s annual meeting and volunteer recognition celebration May 6. Together these two volunteers contributed 3,600 hours of service in 2003.

· Sheryle D’Amico, Director of the LMH Oncology Center, was awarded Breast Cancer Action’s Wellspring Award, recognizing an outstanding female who has made an ongoing contribution to breast cancer research or education in our community. Sheryle has led a multi-disciplinary team of physicians, staff and community members in researching and developing a Breast Center at LMH. Construction on the new center, which will be located near the east lobby entrance, is expected to begin in September.

Other

· On May 18, the hospital went “live” with its new Clinical Information System, which compiles patients’ medical records electronically. With the new system patient information is entered electronically by clinicians and physicians, which allows them access to the medical record simultaneously in real time.

· LMH hosted the annual Report to the Community and Reception on May 12 during National Hospital Week.

· In April, LMH hosted the first of a series of Business-to-Business luncheons for nine area manufacturers.

· Auxiliary President Emerson Hazlett presented the annual report of volunteer activities at the April meeting of the Board of Trustees. He reported that contributions by junior volunteers, student volunteers and Auxiliary members in 2003 totaled 40,527 hours at an estimated costs savings to LMH of $696,659. There were 60 new adult volunteers in 2003. Emerson presented the hospital with a check for $75,000, which will be used for the new LMH Breast Center. The Auxiliary also reimbursed the hospital $49,000 for salaries and benefits of employed Gift Shop staff, and they provided $13,000 for scholarships for 13 students pursuing medical careers.

· The 23^rd annual LMH Health Fair attracted a great turnout on April 24, with an estimated attendance of nearly 2,000.

· The hospital received a $25,000 bioterrorism preparedness grant from the U.S. Department of Health and Human Services. The grant is being used to upgrade hospital preparedness for biological, chemical or radiological terrorism.