Aspen Valley Hospital readies for shifting landscape in 2022
New 65,000-square-foot orthopedic, ambulatory surgery facility in Basalt expected to have major impact to AVH’s bottom line
Aspen Valley Hospital executives are expecting a hit to the facility’s bottom line in 2022.
In anticipation of the scheduled March debut of the Vail-based Steadman Clinic and the Steadman Philippon Research Institute — a 65,000-square-foot, three-story building currently under construction at Willits Town Center in Basalt — hospital officials have forecast a decline of up to 70% in 2022 orthopedic revenue compared with this year’s performance.
“The impact is a $20 million outflow of surgical revenues,” AVH CEO David Ressler said at the Dec. 13 meeting of the hospital’s board of directors, noting this year’s “high-water mark” in orthopedic revenue is tracking 34% ahead of orthopedic revenue generated in 2019.
“It’s a significant impact that we’ve been planning for since we started our partnership discussions with the Steadman Clinic,” Ressler told the board.
Orthopedics are a big driver of AVH’s business, representing nearly 37% of its patient revenue. The emergency department is next at 22.2%, with primary care third at 10.9%, according to the hospital’s financial data.
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AVH entered into a joint partnership with Steadman Clinic on Dec. 1, 2020, and the two entities currently operate an orthopedic center on the hospital’s second floor. That space, known as The Steadman Clinic at Aspen Valley Hospital, will remain open, but the Willits location is expected to be a game-changer for orthopedic offerings in the Roaring Fork Valley.
“It will certainly be an attraction to people all over the country,” Ressler told the board.
The project is a collaboration among The Steadman Clinic, Orthopedic Care Partners, Aspen Valley Hospital and Vail Health.
“When that surgery center generates profit,” Ressler said of the Willits facility in an interview Thursday, “we will receive 25% of our share of the profit.”
The 2022 budget was adopted last week by the hospital’s board of directors and projects total patient revenue of $147.5 million, which would fall $17.1 million short of the $164.6 million projected by the end of this year. After meeting its financial obligations, the hospital expects a net patient service revenue of $99.1 million in 2022, which would stop $9.4 million shy of the projected $108.5 million in 2021.
Total operating revenue is budgeted at $103.3 million for 2022, which is $8.7 million less than the $112 million expected to close out this year.
“This was the most difficult budget that any of us on the executive team can recall ever being involved in,” Ressler told the board last week, “and of course we said that last year as well and it still has topped last year.”
Hospital authorities also are expecting an increase in expenditures in 2022 chiefly because of a 5% across-the-board wage increase totaling $3.1 million, the $15.8 million implementation of Epic medical records software and another $9.9 million budgeted for capital improvements.
“That is going to have a dramatic effect on our budgets … and ultimately our cash reserves,” Ressler told the board of the Epic roll-out.
Patients have been staying longer at AVH — which is a public hospital supported by a voter-approved mil levy that an elected five-member board of directors oversees — as evidenced by a 20.5% increase in the length of stay through October of this year compared with the opening 10 months of 2020, and 31.5% increase from 2019.
While AVH has not grappled with the high volumes of COVID-19 patients seen at other hospitals, those patients “tend to have very long lengths of stay,” explained Ressler to the board, adding that “the practical implications are that we have patients here for a longer period of time, and so that also has contributed to higher length of stay.”
The hospital’s average daily census — which is determined by multiplying the number of annual admissions times the length of stay, and dividing that figure by by 365 — rose 19.1% through October year-to-date over 2020 and was 4.8% higher than 2019.
That is one reason why the hospital is budgeting for three full-time employees in its care units.
“When we put a COVID-positive patient in the ICU, they may not be intensive care-related acuity of a patient,” AVH Chief Operating Officer Elaine Gerson told the board. “They’re put in the ICU to segregate them from our general patient population. Whenever we put a patient in the ICU, it requires two staff resources. One is typically an RN and then depending on the acuity of the patient, it could be a patient-care tech (who) is the second staff or a second RN if the patient is severely ill.”