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Updated: 10:40 a.m. Monday, May 10, 2010 | Posted: 4:44 a.m. Monday, May 10, 2010

Grady hospital makes profit

AJC exclusive: DeKalb might cut hospital's funding



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Grady hospital makes profit photo
Vino Wong
Senior staff nurse Mary Jones performs patient intake with the new EPIC system that Grady began using in March.
Grady hospital makes profit photo
Vino Wong
Staff nurse Janine Daniels attends to a patient in the neuroscience center, which was established by a multi-million dollar gift from The Marcus Foundation.

By Craig Schneider

The Atlanta Journal-Constitution

Grady Memorial Hospital officials say the once-struggling medical center is actually making a profit.

Grady CEO Michael Young told The Atlanta Journal-Constitution that a recent audit for 2009 showed the hospital about $34 million in the black. Young noted that about $25 million of that resulted from one-time infusions of cash and some accounting procedures that do not represent real cash on hand.

But still, the audit by KPMG determined that the hospital brought in about $10 million more than it spent. Grady has an overall budget of about $740 million. For a safety net hospital that serves many people who pay little or nothing for care, and that had a $50 million operating deficit two years ago, the shift is remarkable.

"It is spectacular," said Young, who took the helm of the hospital in 2008.

Young said the hospital is financially stable enough to consider pay raises for employees, which has not occurred at Grady in three years. Young plans to break the news that the hospital is profitable to the Grady board at a meeting Monday.

Amid the celebration, however, Grady's profitability has raised concerns among hospital officials that some outside sources of funding may reduce their assistance.

DeKalb County Commissioner Connie Stokes said her county, which regularly provides about $20 million a year to Grady, might consider reducing that sum. . Stressing that the county is facing its own budget crunch, Stokes said she would review the matter before the county commission's midyear review of its budget in early June.

"If indeed Grady did turn a profit, we may be able to reduce the amount we give," said Stokes, who is the budget and finance chairwoman on the commission. "I am really going to look at that."

Fulton and DeKalb provide a total of about $75 million to Grady, and Grady, in turn, provides care for the indigent of those counties. No other county provides direct funding to Grady.

Fulton Commissioner Robb Pitts said that while one year of profitability is not enough to prompt a major funding change, he hoped that down the line Fulton could reduce its level of funding as Grady grows more profitable.

The prospect of such cuts worries Grady officials. They stressed that the hospital needs the full financial support of the two counties -- as well as the state and the metro Atlanta corporate world -- to remain financially viable.

Some other county commissioners said they do not view Grady's financial stability as a reason to decrease funding. Pete Correll, the head of the Grady corporate board, said he does not sense a strong feeling on the part of either county to do so.

"Now is a time to celebrate," said Correll, who was among the business leaders who spurred the effort to save Grady three years ago. "This says our strategy is working: Bring in a lot of [corporate] capital to fix up the hospital, bring in a new management team, and benefit from the tremendous support from the counties and the state."

Correll noted that without that financial support, Grady is a "horribly money-losing operation."

The thought of Grady making a profit is shocking to some people, who've watched the hospital struggle for decades. Grady serves many of the metro area's poor and uninsured. The medical center was on the verge of financial collapse about three years ago, with hospital officials worrying they would have to shut down the place.

Correll was among several business and community leaders who banded together in 2007 to save Grady. They led an effort that transferred control of the hospital to a new corporate board, replaced the hospital chief and secured more than $300 million in donations to replace and improve antiquated equipment.

At the request of many of the donors, most of the $300 million has been reserved for capital improvements to equipment and facilities. That money will largely be exhausted by 2012, Young said, adding that the state and county funding will be needed to help the hospital continue to reinvest in equipment and facilities.

The profit identified in the audit pertains to the hospital's operations budget. The turnaround in operations was accomplished by trimming hundreds of staff positions, dismissing management officials who tolerated mediocrity, and revamping operations from Grady's emergency room to its neighborhood clinics, Young said.

Fulton Commissioner Lynne Riley said the county pays Grady specifically for the care of Fulton's poor, and that financial relationship is carefully tracked. She said the hospital's overall profit or loss has no bearing on that relationship.

The money from Fulton and DeKalb counties to Grady has varied in recent years, depending on the hospital's need and the counties' ability to pay.

The state provides support to Grady through trauma care funding, federal indigent care dollars and general Medicaid payments. Sen. David Shafer (R-Duluth), who often comments on Grady, said he does not expect the state to reduce funding due to the hospital's newfound financial stability.

Grady officials say it has been about a decade since Grady showed a profit. At the time, the hospital received a cash infusion from the state, said Grady spokesman Matt Gove.

The counties did not ask for any money to be returned in those years, Gove said.

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