Hospital receives clean audit and grassroots proposal

Tuesday evening’s meeting of the Nevada Regional Medical Center’s board of directors saw the presentation of the annual audit report, a review of the monthly financials as well as a “proposal.”

Local doctor and immediate past-president of the Missouri Medical Association, Dr. Warren Lovinger, sought approval from the NRMC board for what he termed “A Grassroots Proposal.”

In a brief noon-time interview, Lovinger summarized his concept beginning with what he saw as a fundamental problem for NRMC.

“The problem is debt and the monthly payments to Cerner for its billing system,” began Lovinger. “If the debt was paid-off and there was a way to lower the monthly cost to Cerner, the hospital would be healthy and rivaling any in the area.”

The balance on the bonds for the south tower addition to NRMC currently stands at $14,845,000. Annual bond payments with interest – and it was noted that no bond/interest payment has ever been missed – total $1,554,300.

The annual payments to Cerner for current services come to $936,000.

Adding those he said the hospital has annual fixed payments of $2,490,300.

“Look at this, $2.5 million in fixed payments for debt based things,” said Lovinger. “And it’s devastating for an institution our size.”

Moving on he said “We have to issue an SOS which means ‘save our services’ and then we need to look, with the help of everybody at how we can work on those issues, because those are things the community can help with.”

He would like the group to develop ways to reduce the debt and create a significantly larger endowment fund.

He praised the current hospital board but pointed out how the hospital has such crying needs that most of the money raised by the present foundation goes to meet one or more of those needs.

“We need to raise a significant amount which is untouched but is invested; the earned interest could be spent,” explained Lovinger. “The hospital needs a foundation with a sustaining fund.”

Further, there is an unpaid balance owed to Cerner of $605,000 as well as an outstanding balance of $941,056 owed in management fees to Freeman Health System.

Having obtained and analyzed various statistics about NRMC – number of employees (372), average spending per non-physician full-time equivalent employee ($49,825), the number of deliveries (259) surgeries (698), in-patients (942), emergency room visits (9,989) electro-cardiograms (3,007), radiology (9,645) and lab tests (101,097) – two things became clear to Lovinger.

He said, “First, look at all this hospital does for our city and county every year; we really need it.”

And second?

“Debt is a four-letter word which is really, really bad and we’ve got a lot of it here at Nevada Regional,” said Lovinger.

In reaction, board member Delton Fast recalled Lovinger helping to raise much of the funding for Nevada’s YMCA saying, “I think this is really needed; he has a proven record and he’s the right one to take this on.”

The board endorsed his plan to form a group of about 10-12 people, none of whom would be full-time employees of NRMC or the city of Nevada.

David Taylor, a partner with the Springfield based auditing firm of BKD LLP, presented a summary of the annual audit.

“As the executive summary you have before you shows, we have five take-aways.”

He said this was a clean audit; there were no findings.

Second, audit adjustments increased operating results by 214,000 leaving a $4.1 million loss for the 2017-2018 year.

Third, while this was a significant loss, BKD thought there was overall improvement in operating results compared to 2017.

Finally, the auditors raised concerns about the hospital being in violation of the 70 bond cash days on hand covenant, the low amount of available cash and its struggles to maintain higher patient volumes and revenues on a consistent basis.

“And yet, let me make this clear, despite all the headwinds the hospital is facing, we do believe that NRMC is being well-managed financially,” said Taylor.

The auditor pointed out several things the hospital and its board need to consider going forward including Medicare and Medicaid making harder to get paid with payments being lowered.

On the positive side, with the closure of Mercy Hospital in Fort Scott, NRMC will qualify for “sole-community hospital” status which will likely mean increased revenue.

Reviewing October’s financials, Interim Chief Financial Officer Mike Leone said the month’s loss totaled $124,903.

While October outpatient volumes and billed charges well exceeded the budget – 5,931 in 2018 versus 5,212 in 2017 – these gains were more than offset by lower than budgeted volumes and billed charges for acute patients and those in the behavioral health unit.

Acute care admissions totaled 71 in October 2018 versus 72 in 2017 but had been budgeted at 89.

October saw 104 admissions to the BHU while a year ago they totaled 121 but had been budgeted at 134.

Commented Leone, “As we told you when we presented the budget, we realized our targets in several areas were going to be a challenge to reach but for us to break-even or make a small gain for the year, the targets had to be ambitious.”

While the number of visits to the emergency room were down compared to a year ago (798 versus 807) the number of deliveries and surgeries were up (respectively, 26 versus 25 and 65 compared 61).

Once-a-year, employees are permitted to have several basic lab procedures performed at no-cost. In addition to these lab costs, pre-employment physicals and drug screens performed on NRMC job candidates had not been recorded as an expense “for over a year.”

Leone’s written report states that if the one-time expenses for employee care are removed, “total expenses would have been $3,324,752” which would have yielded the hospital a net gain of $165,458 for October.

Therefore, in addition to lower revenues, expenses were higher than budgeted.

The board reviewed and tabled spending $22,365 for offsite back-up storage of data. The board did approve renewal of the workers compensation insurance policy with a premium of $236,818.

As to the hospital’s cash position, on Sept. 30, the hospital had $412,854 while on Oct. 30 cash amounted to $890,630 which is seven days cash on hand.

Leone distributed a cash flow projection from Dec. 1, 2018 through Feb. 2, 2019. January will be one of two months with three employee paydays with the other being August.

Said Leone, “Despite that, this projection shows we’ll still have cash in the bank; we should still be able to pay our bills and we’ll be serving patients in a new year.”