Like most businesses, Johnston Health faces financial hurdles, but hospital leaders expect it to emerge from the downturn stronger than ever.

“Health care very clearly is not immune to the recession,” said Kevin Rogols, president and chief executive of Johnston Health, which has a hospital in Smithfield and family clinics throughout the county.

“We’re doing everything that we can to manage through the economic conditions, focusing our attention on providing the very, very best quality of care that we can,” Rogols added.

On July 10, the hospital will close the Smithfield clinic of Johnston Medical Associates. Also, the hospital has laid off Dr. Eric Gloss, vice president for medical affairs, and done away with the post.

“We are going through a difficult economic period and asking all of our staff to make sacrifices,” Rogols said. “We made the decision to eliminate a vice-president position so we would in fact be seen as leading the efforts to make ourselves as cost efficient as we can.”

Johnston Health faces the same challenges as hospitals across the nation, said George Pink, a professor in the School of Public Health at the University of North Carolina at Chapel Hill. “There’s no doubt that most hospitals are under a lot of financial pressure,” Pink said.

Fifty-four percent of the country’s hospitals have suffered operating losses recently, according to a March survey by the Healthcare Financial Management Association.

Since Oct. 1, the start of its fiscal year, Johnston Health has reported net operating income of $25,000. In the same eight-month period the year before, the hospital had operating income of $4.9 million.

“We are blessed with very, very strong communities that are still growing and a very strong medical staff that’s still growing,” Rogols said. “We’re break-even; we’re not making a lot of money, but we’re doing better than 54 percent.”

The hospital has actually brought in 1.4 percent more operating revenue during this period, but not everyone has paid his or her bill. This fiscal year, bad debt -- or money owed to the hospital by patients and others -- has soared 21 percent, or $4 million.

Year to date, the hospital’s net income, including investment income, is $2.4 million. Net income in the same period last year was $5.3 million.

April was an especially sour month for Johnston Health. The hospital had an operating loss of about $1.1 million and a net loss of about $500,000. Total revenue was $4.5 million less than projected for the month. “What you saw in April was definitely not typical,” Rogols said. In May, the system ran a relatively small operating loss, while March saw operating income of about $1 million, and January brought an operating loss of more than $500,000.

“It’s hard to predict the economy, as you well know,” said Jim Perpich, director of marketing and communications for Johnston Health. “The things that our hospital is experiencing are the same things that all hospitals are facing.”

Those factors include shrinking payments from government programs like Medicaid, rising costs, a drop in insured patients and less demand for elective surgeries. About 16 percent fewer patients have passed through the hospital’s doors this year compared to the year before; on average, they stayed about 11 percent longer.

Pushing through

Rogols is confident the hospital will continue to grow, and he emphasized the cost-cutting measures the system has taken.

“We have been very, very diligent,” Rogols said. “We’re managing through the economic environment.”

At the hospital’s finance committee meeting on May 27, Chief Financial Officer Stephen Sawyer spoke about a plan to save $1 million each month, mostly by getting patients out quicker. Part of the plan, he said, was to reduce the average patient’s stay by about half a day.

The closing of the Smithfield clinic will also make the hospital more efficient, Rogols said. “Visits to physicians have slowed down, and we have an opportunity to bring some of those services together and centralize them,” he said.

Johnston Health is not just cutting back, though; hospital leaders believe their investments in new facilities will bloom and thrive, especially when the economy recovers.

Since this time last year, the system has taken on $140 million in long-term debt and begun building a bed tower in Smithfield and a hospital in Clayton.

“Timing is everything,” Rogols said, explaining that Johnston Health got its bonds at a low interest rate. “We’re going through the same economic pain right now that virtually all industries and hospitals are going through,” he added, “but we’ve got a long-term strategy that we think will very much meet the needs and expectations of the citizens of Johnston County in a fiscally responsible manner.”

The Clayton hospital is scheduled to open in September.