News

$160/hour travel nurse cost hammers Pardee budget

By Bill Moss, Published: June 14, 2022

Citing the need to replenish its reserves after soaring labor costs last year and to invest in medical facilities to serve a growing patient base, Pardee UNC Health Care won approval last week to borrow $14 million.

The Henderson County Board of Commissioners, which owns the hospital that has operated since 2011 under a management agree with UNC Health Care, authorized the bonds last week after hospital CEO Jay Kirby described the trials and triumphs of the past 2½ years dominated by the coronavirus pandemic.
“Covid pulled and even tore the fabric of our nation, and even our own community at times because the fact is none of us had been through a pandemic before,” he told commissioners during a 45-minute presentation and discussion on June 6. “Those of us in health care had never seen anything like it. Our country had never seen anything like it. And as leaders mutually, all of us, we were hearing varying opinions, on television, on media, in writing, from our constituents and our stakeholders. Our organizational and system responses across the state and even the county and region were different.”
Pardee, emergency medical services, Blue Ridge Community College, Blue Ridge Health, Advent, elected leaders and others pulled together to respond — just as, in Kirby’s favorite analogy, young children are taught to “hold hands to cross the street, because it gets dangerous out there.”
Just when Covid seemed to subside a year ago, the health care industry found the worse was to come.
“We didn’t endure one Covid spike, but two Covid spikes this past year,” Kirby said. “As a result, the two waves of Covid washed over the country and really pushed nursing and wages and salaries to an all-time high that have impacted us tremendously.”

Budget has tripled in 10 years.

In the past 10 years Pardee’s budget has grown from $100 million to $350 million while its range of services has expanded beyond the Justice Street campus and beyond the county’s borders.
“We see about 8,000 people get admitted to our hospital (each year), and there are about 26,000 people that use our emergency department,” Kirby said. Around 150,000 patients visit for X-rays, labs and other ancillary services and 73,000 people a year seek treatment at one of the four urgent care centers Pardee operates. “But you might be most surprised to learn that over a quarter of a million people just in the last 12 months have visited a Pardee physician and a physician practice,” he said.
The hospital’s workforce of 1,500 and payroll of $150 million make Pardee an important economic driver of the community, Kirby said, as it pays an average wage of $70,000 — $59,000 if physician wages are omitted.
Despite the challenge of Covid, Pardee had a good year financially in the fiscal year ending on June 30, 2021, generating $16 million more in revenue than expenses, a 6 percent margin.
Then came July 2021 to today, when the “three-legged stool” of revenue sources — regular operating income, the hospital’s investment portfolio and its philanthropic donations — all plunged and when, on the expense side, labor costs skyrocketed.
“And so this year’s budget, you’ll see in 2022, we have had a terribly difficult year and that difficulty is primarily in salaries and benefits,” he said. “If you look at where we have been hammered, it is the cost of nursing and support services care.”
Fresh nursing school graduates in the past started at $60,000 a year and veteran nurses could make $90,000 a year. Then came Covid’s one-two punch. As the second spike pushed a new wave of patients into hospital beds, “nurses became a commodity and the bigger the health system, and the more rich the health system, the more they could pay.”
That forced Pardee and other hospitals into the market for travel nurses, which was on fire with competition.
“We’re taking care of sick people, but our staff went down,” he said. “And as a result, we were all scrambling to meet the community needs and the trust that people have in their local health care organizations to fill it and so we started at $120 an hour. The demand kept going and went to $130, went to $140, went to $150, up to $160 an hour. That’s over $320,000 a year for 2,000 hours. They were making more than our physicians.”
Yet, whenever they discussed the rising costs, Kirby said, administrators and board members never wavered.
“At our hospital board meetings, in our administrative team meetings, there was never a question as to whether or not we were going to stand down and only accept so many in our hospital during the second wave based on our status. It was, ‘Go get ‘em. We are the safety net for this community. Go get the people, no matter what it costs,’ and that’s what we did.”

‘Skate to where the puck will be’

The labor spike is causing to Pardee to limp to the finish line of this fiscal year with a minus-3 percent margin, wiping out the impressive $16 million gain from a year earlier.
Last week, Kirby formally presented the request from Pardee’s board for authorization to borrow money both to replenish its operating fund and to cover capital projects the board says the hospital needs to meet demand.
Retirees and working families moving here, new manufacturing jobs the county has recruited and the diminished reputation of Mission Health under corporate ownership have all spelled more growth for Pardee. The Hendersonville hospital has the third highest revenue in the 15-unit UNC Health system, after the sprawling flagship hospitals in Chapel Hill and 660-bed Rex UNC Health Care in Raleigh.
“More and more people are choosing Pardee and quite frankly, what’s happening in Asheville is helping us as well because people are defecting,” he said. “They’re choosing Pardee for their care” because “Pardee is seen as a quality health care provider.”
Quoting hockey great Wayne Gretsky, Kirby said, “You gotta skate to where you think the puck’s going to be.” As the region grows, “we’re going to need more medical office space. We’re going to need a bigger hospital footprint, we’re going to need more urgent cares.”

Cash drops by $25 million

Three years ago, commissioners authorized Pardee to borrow $15 million in general infrastructure bonds, which funded the new Justice Street parking lot, removal of the old EMS building and redesigned hospital entrance, new roof and air conditioning chillers and other upgrades and repairs.
“Fast forward to today. Where we cash-flowed $16 million last year, we’re losing $9 million this year,” he said. “We had to make investments in our cardiovascular service, we had to make investments in our orthopedic service line, we acquired the Hawk-Brown building, we acquired some property contiguous to us and many of our areas are dated and we had to upfit. And so our board said, ‘Wow, we’ve been through a hard road and don’t look now but there’s a recession and inflation on the horizon. Maybe we should do a reimbursement resolution and pay ourselves back this $14 million we spent over the past 18 months.’”
Administrators, bond counsel for Pardee and the county, the Finance Committee and full board supported taking this step, Kirby said. The decision makers “said yes, we need to do this because from where we’ve been and where we’re headed, we need to make sure that we’re a liquid organization.”
Commission Chair Bill Lapsley, who served on the search committee when Pardee hired Kirby in 2011, said he had confidence in the CEO, his team and the hospital board. Commissioners voted unanimously to authorize the $14.1 million borrowing plan, which would have a 20-year term. If it wins the OK from the N.C. Local Government Commission, Pardee would seek the lowest interest rate it can get through competitive bids from lenders.
“The security obligation to pay these bonds is solely Pardee’s responsibility,” Kirby told commissioners. “It’s not a general obligation bond. It’s not a tax and it’s not at the hands of the citizens or you. … These are difficult times, I know. But good work and good things are coming out of this community. And great things are coming out of Pardee Hospital.”