PPH board approves $418.7M budget for coming year

By: ANDREA MOSS - Staff Writer | Monday, June 4, 2007 11:58 PM PDT ∞

ESCONDIDO -- Palomar Pomerado Health's board of directors approved an operating budget Monday that calls for the district to spend nearly $418.7 million in the fiscal year that begins July 1.

The board voted 5-0, with Directors Bruce Krider and Dr. Alan Larson absent, to accept the budget during a special meeting at Palomar Medical Center.

The board also agreed to raise the district's rates by 8 percent and approved a $15 million capital budget for the coming year.

The actions came without discussion after the district's chief financial officer, Bob Hemker, spent more than an hour explaining the new operating budget, which is 9.24 percent higher than Palomar Pomerado's $383.3 million spending plan for the fiscal year that ends June 30.

The new budget anticipates Palomar Pomerado Health's operations -- including the Escondido medical center and Pomerado Hospital in Poway -- will generate nearly $429.5 million in revenue next year. That represents a nearly 11 percent increase over the $387.3 million in revenue the district expects to see in the current fiscal year.

After expenses are subtracted, the district will have net income of nearly $10.8 million at the end of the next fiscal year, under the new financial plan. Additional revenue from property taxes, investments and other nonoperating income is expected to raise Palomar Pomerado's total net income to about $25.1 million for the coming year.

The numbers translate to a 10.6 percent profit margin. As a nonprofit, Palomar Pomerado is required to put that money back into the organization or its operations.

Hemker said the 10 percent profit margin is "where we need to be" to maintain the "A" credit New York-based Moody's Investors Services has assigned to the district. The company is one of three that rate organizations' and government agencies' credit-worthiness, and the ratings are important because they help determine the interest rates those entities pay when they borrow money.

Elaborating on the higher revenues, Hemker said it assumes that the number of people visiting the two hospitals' emergency rooms will go up by 5 percent, and that the number of admitted patients will also increase by 5 percent.

Those projections reflect recent patient trends, growth in the communities Palomar Pomerado serves, the addition of new physicians to a list of those affiliated with the district, and growth in the programs its offers, he said.

The rate increase, which is the same as last year's, was also factored in, Hemker said.

Employee salaries, wages and benefits account for the biggest chunk of expenses in the new budget. The district has earmarked more than $247.1 million, or 59 percent of the operating budget, for that category.

Palomar Pomerado has about 3,500 employees. The money set aside for them includes salary increases that the district is obligated to give under contracts with its employee unions, inflationary raises for nonunion workers, and nearly $8.9 million for temporary nurses and other personnel hired through outside agencies or registries.

Hemker said the amount to be spent on temporary workers is significantly lower compared with past years because the district has been making a concerted effort to ensure that it has the right number of permanent employees.

Palomar Pomerado expects, for example, to pay $12.6 million to registries in the 2006-07 fiscal year and spent $14.7 million in 2005-06, he said.

Supplies ($62.9 million), purchased services ($31.3 million), professional fees ($29.7 million), and depreciation and amortization costs ($21.3 million) account for most of the other expenses.

The capital budget calls for the district to spend $10 million on equipment, building renovations and computer systems in the coming fiscal year.

The remaining $5 million will be set aside for new facilities the district plans to build as part of a master plan that the board approved in 2004.

Director Ted Kleiter said Monday that he and his fellow board members had received copies of the financial plan about a week ahead of time.

That gave the directors time to analyze the budget and meet with the Hemker individually to ask any questions they might have had, Kleiter said.

-- Contact staff writer Andrea Moss at (760) 739-6654 or amoss@nctimes.com.