By Elizabeth Cloutman
External audit shows district has strong balance sheet
El Camino Hospital is on solid financial ground, Chief Financial Officer Marla Gularte told the hospital district board of directors at its Sept. 12 meeting. The operating margin increased $15 million in fiscal year 2000-01, bouncing back from a $13.4 million loss the previous year to a $2.5 million gain, and net income increased $18 million.
A solid profit margin is especially important to El Camino in the next few years as it must either retrofit its 40-year-old building or rebuild to meet state earthquake standards for hospitals by 2008. It needs to show a healthy profit margin in order to qualify for municipal bonds within the next few years.
Arthur Andersen, the firm that conducted an external audit of El Camino’s finances, noted the outlook of bond-rating analysts on the health care sector is not positive. “If we were to go to the bond market today, we wouldn’t get a very favorable rating, but that’s okay,” Gularte told the Town Crier. “We’re not going today. We’re just trying to position ourselves … You need to demonstrate you can afford the debt you’re going to incur. It’s a pretty big target for us. We need to have about three years of an increasingly positive operating margin. It will support the kind of debt we will go after before we would even consider going to the bond market.”
The report by the auditor said that the outlook on health care is negative for several reasons. First, the federal Balance Budget Act has reduced Medicare and MediCal payments.
Managed care has also negatively affected hospital income, as have escalating personnel and supply costs. California is a particularly risky market because of the high cost of living, higher wage rates and its nursing shortage, the report stated.
Gularte told the Town Crier she credits not just the pressure of the bond issue but, in particular, El Camino CEO Lee Domanico for the hospital’s much improved financial status. Domanico became CEO in November.
“When Lee Domanico got here, he was very focused on setting goals for this organization.
“One of the first things he said to the management team was that he wanted to, at minimum, break even and try to make a couple of million dollars.”
