What does KSB Hospital’s money go toward? (PART 2) – by KSB Hospital’s Chief Financial Officer Tony Evers

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Running a hospital is a business, and as with any other economic entity, KSB must carefully balance our sources of revenue and our expenses.

Intuitively, reimbursement for patient care is our primary source of revenue and our workforce is our largest expense.  KSB depends on a highly trained workforce to provide the advanced level of care and service that patients depend upon. As a result, labor costs, are by far KSB’s largest expense. Wages and benefits account for more than 66 percent of all KSB expenses.  Supplies are broken into medical, non-medical and other.  These expenditures account for 12 percent of the KSB expense pie.  Other major expense categories include contracted services and depreciation. See chart below for a more detailed breakdown of KSB’s expenses.

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So, how can a hospital stay out of the red?

Again, like any business, KSB must keep a close eye on our financials to ensure our revenues are not outpaced by our expenses. It can be difficult to understand how hospitals stay out of red ink given our commitment to providing care regardless of a patient’s ability to pay and ensuring the availability of services, even when some services tend to lose money.  Ways to ensure KSB remains fiscally solvent include:

  • Accountability. Each year KSB develops a budget for the upcoming year.  Everyone in the   organization plays a role in being accountable for meeting or exceeding the budget.
  • Cost-saving strategies. For example, KSB belongs to a group purchasing organization which keeps cost of supplies down.
  • Negotiation. KSB has depended significantly on our ability to negotiate more favorable rates with private insurers to make up for losses experienced under reimbursement by government payers as well as uncompensated care.
  • Philanthropy. The role of philanthropy in the world of hospital finance cannot be overstated – KSB has invested resources in the hiring of a new Director of Fund Development to maximize donations and ensure everyone understands the importance of KSB to the community.
  • Volunteering. KSB volunteers help run the gift shop, manage help desks and other important tasks, freeing up resources that can be spent elsewhere.

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