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NRMC board receives reality check
By Johannes Brann
Typically, the monthly finance committee meeting for Nevada Regional Medical Center is a one hour review of financial statements and capital purchase items, but the meeting on Monday was anything but typical.
Although the finance committee has three board members plus five administrators from both the hospital and nursing care operations, this time, six board members were present along with the interim chief executive officer plus various administrators, including three others from Freeman Hospital, Joplin.
On Tuesday, the entire board was present plus James M. Sneed, a certified public accountant, who was hired by the city of Nevada to serve as an independent consultant to the city council on the hospital.
Board members received a strong dose of medicine on Monday, which stretched into the regular board meeting on Tuesday evening. On Monday, this began with the report of the director of long-term care, Steve Branstetter. While his income and expense statements showed Moore-Few and Barone Alzheimer Care Centers to be in solid financial shape, his written administrator’s report along with oral comments minced no words.
With regard to the long-term care unit being required to transfer $1 million to NRMC on Nov. 9, Branstetter’s written report asked, “Is this going to be a one-time thing?”
While normally, Branstetter provides a summary of his written report and is otherwise known for being quiet, this time he spoke up.
Orally, he asked, “While City Attorney Bill McCaffree said the ordinance requires repayment to be made, what I want to know is how long will this take and will it ever happen?”
Doing some mental calculations aloud, the long-term care director said that even if the hospital made a profit of a million dollars a year — something he thought might not happen right away — it would take 8 years for the hospital to meet its own obligation of having 70 bond cash days on hand and another year to pay back the million dollars owed to the Long Term Care Unit.
Referring to the effort and time it takes for Moore-Few and Barone to accumulate $1 million, Branstetter said, “You know, that’s a lot of hard work that a lot of people have done over the years to run a good business. And it’s kind of hard to take for someone to say, ‘Do this,’ [transfer $1 million] and we might not ever get it back.”
Branstetter’s written report said he learned at the Nov. 7 meeting of the Nevada City Council how, early next year, the council will be looking at whether the “Long Term Care Board will be split from the Hospital Board.”
Meeting chair, Dr. Brad Copeland, expressed his personal thanks to Branstetter and Angela Barrett, director of Barone. Looking around the room he said, “Steve, we really do appreciate what you, Angela and all your staff do for the residents and how hard all of you work. I know that goes for the entire board.”
If Branstetter’s words raised eyebrows, board members received an even stronger dose of reality on Monday with a review of the first half of the audit of NRMC for the 2016-17 fiscal year with the remainder covered on Tuesday.
David Taylor from BKD, a 95-year-old Springfield, Mo., based firm of certified public accountants led a review of 11 pages in the 20-page executive summary noting “adjustments” in operating results and a “going concern modification.”
“While the unadjusted loss for fiscal year 2017 — what had been previously reported to you — was $4,149,699, as you can see on page four, due to five adjustments, the total adjusted loss was $6,417,252,” said Taylor.
For the hospital, in descending order of size, the “adjustments” included $864,178 on the hospital’s pension plan (Local Government Employees Retirement System). Then came a $700,000 reduction in net receivables, removal from the books of a potential $500,000 special Medicaid payment to NRMC, a $350,000 Medicare cost report but a gain of $146,625 from miscellaneous sources.
Said Taylor, “Please understand that the pension adjustment is not cash that you have to pay out; it is an adjustment on your books.”
While two years ago, there was a sizable pension plan adjustment in the hospital’s favor, for fiscal year 2016, the negative adjustment amounted to $664,000 while in 2017 it was $864,000.
Taylor said, “further attention will need to be paid to this when budgeting, the hospital does have a net pension asset of $6.6 million while the nursing homes have $1.2 million.”
Turning to net receivables and a slide which compared gross receivables with net receivables, Taylor said, “The overall trends in the collection rate is not favorable. In 2015 it was 31.97 percent, in 2016 it grew to 38.16 percent but in 2017 it dropped to 33.82 percent.”
A week earlier, NRMC interim CEO, Wes Braman said, “In the hospital business, it’s almost become standard to take what you are owed and write off almost 60 percent of that.”
He said he knew how crazy that sounded but added that costs have nothing to do with what the government or private insurance will pay for a service or a piece of equipment. “So we’ve really got to get a handle on our billing and collections and watch them closely,” added Braman.
Since 2011, hospitals which have a high level of uncompensated care (uninsured and Medicaid patients) are eligible for special payments called Disproportionate Share Hospitals. While the auditors agreed the hospital is owed over $5 million dollars in back DSH payments, litigation and possible settlements make it difficult to calculate.
“During 2017, the hospital recorded $500,000 of such payments onto its books,” said Taylor. “This is reversing that adjustment and restoring it to a liability. When it is received, it can be recorded.”
Taylor then said the hospital was overpaid by Medicare and so needs to pay funds back.
On Tuesday evening, Taylor reviewed the second half of the audit, which provided a statement of operations, the operating margin, cash flows, assets, accounts receivable and the debt to capitalization.
But on Monday, Taylor concluded by expressing serious concern over the hospital’s shortage of cash. The written report noted how on June 30, 2016, the hospital had 73 days of cash on hand while one year later it was down to 20 days and as of Oct. 31 cash stood at 7 days.
Since the hospital received that infusion of $1 million on Nov. 9, board member Bob Beaver asked aloud how much of that lump sum remains.
“It’s essentially gone,” said Mike Leone, controller of Freeman Health System.
A month ago, Beaver had asked if the hospital was behind on its bills and received a vague answer from Mike Harbor. Now he received a clear answer.
“Yes, some bills were over 90 days behind and were incurring penalties, which only makes the financial situation worse,” said Leone. “So we used the million dollars to get caught up.”
On Tuesday, Leone indicated there are still three large bills. The hospital is behind in its payments for software to Cerner by $600,000.
The second item is a repayment of $300,000 to Medicare for overpayments. The final item, which is still being discussed, is a claim for $198,000 in severance owed to the previous management firm, Quorum Health Resources.
On Monday evening, Steve Graddy, chief financial officer of Freeman Health System said, “I’m sure we’ll be able to stretch out payments to Cerner over time but once we know what we exactly owe Medicare, we’ll have to pay it all at once.”
Graddy went on to note NRMC has enough to pay Medicare, meet its payroll, make its bond payment, keep the lights on and continue to serve patients as always but added, “We’ve got a cash problem.”
On Monday, board members were assured the monthly bond payments have never been missed plus there are reserve funds for their payment.
“Some of the decisions we will face will not be easy or pleasant,” added Leone.
On Monday evening, Paula Baker, Freeman Health System CEO said, “Let me underscore, this hospital has tremendous potential. Yes, we’ll be looking for cost savings but we cannot cut our way into the black. So, we’re going to be focused on the opportunities for increased revenue.”