Taking Methodist into a new millennium.

Medicare cutbacks are forcing Peter Butler to cope with an unusual medical crisis -- more patients and less revenue

Peter Butler is facing the biggest challenge of his 20-year career as president and CEO of the Methodist Health Care System.

Along with hospital systems throughout the United States, Methodist is struggling financially due to continuing cuts in Medicare payments as part of the federal Balanced Budget Act of 1997.

Butler will watch his organization lose money on operations this year, primarily because of the decrease in Medicare funding and the increase in drug costs, he says. The system, with its $800 million operating budget, faces an unusual paradox - the more patients it sees, the more money it loses.

"We've never been busier and never done worse," says Butler. "The revenue side of our equation is under severe pressure."

The losses will force Butler to dip into the mighty Methodist war chest estimated to hold hundreds of millions of dollars - Butler won't divulge exactly how much. Healthy reserves at the 80-year-old non-profit make it one of the richest health care systems in the country. So when Butler sees red, it's not quite as devastating as it is for some of his rivals.

While revenue issues are the industry's biggest ills these days, Butler is not tightening up on the purse strings.

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