Responding to a tough financial year and decreasing patient volumes, Maine Medical Center announced on Friday, June 28, that it will offer early retirement to approximately 400 employees to reduce costs.

Lincoln County Healthcare CEO Jim Donovan said on July 1 he expects no programmatic changes at LCH through the rest of this fiscal year, which ends September 30, but closing the budget gap in 2014 may be difficult.

Donovan said LCH is in the midst of developing its budget for fiscal year 2014, which must be approved by the board of trustees by the end of this month.  

With low patient volumes, as well as anticipated reduced Medicare and MaineCare reimbursements, LCH’s current draft budget projects a $3.5 million shortfall next year, Donovan said. That’s a far cry from the $1.7 million profit needed to meet MaineHealth’s 2 percent operating margin goal.

LCH employs about 1,200 full and part-time employees. Last year, faced with a projected $2 million budget shortfall, LCH laid off four full-time employees, chose not to refill 10.6 staff vacancies and cut vacation earnings for one pay period.

At this point, Donovan could not define how LCH will close the 2014 budget gap. Medicare’s preliminary decision, announced July 2, to allow St. Andrews and Miles Memorial Hospital to merge under St. Andrews critical access provider status is expected to substantially improve LCH’s future financial outlook. In April, Donovan estimated the merger could bring $3.5 to $6 million additional federal dollars to LCH annually.

The FY13 midyear financial picture shows LCH finished March 2013 with an excess revenue balance of about a half million dollars (data provided by LCH Chief Financial Officer Wayne Printy). That balance is significantly better than the March 2012 bottom line ofabout $149,000 but falls short of theFY13budget target of $754,000.

St. Andrews Hospital and Village posted a half million dollar overall loss at the end of March, as opposed to aroughly $100,000 loss at the same time in 2012. Oddly, the large loss was actually good news, being significantly less than the $1.1million loss anticipated in the FY13 budget.

Miles Memorial Hospital ended March 2013 with $1.2 million in excess revenues, up from about $940,000 at the end of March 2012, but significantly less than the $2.0 million budget projection.

St. Andrews’ inpatient and outpatient revenues were down in the first six months of 2013 relative to the same period in 2012, 11 percent and 16 percent, respectively. The same data for Miles Memorial show inpatient revenues up 8 percent, while outpatient revenues declined 2 percent, relative to 2012.

“April was really bad, but May was good,” Donovan said. He said he expected the summer busy season to be positive; but in general, the organization needs to continue to adapt to patient volume declines.

Sue Mello can be reached at 207-844-4629 or suemello@boothbayregister.com.