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VAN DYKE -- Financial matters and
operating performance dominated the discussion at the regular monthly
meeting of the Comanche County Consolidated Hospital District's Board
of Directors on Tuesday, November 28. The Board serves as the
governing body of the Comanche County Medical Center (CCMC).
Five of six directors were present at the
meeting. Board president Charles Mazurek conducted the meeting, with
members Mary Jane Atkins, Gale Easley, John Mack Weaver and Joe Locke
participating. Karen Carr was absent.
Medical Staff Report
Following the routine approval of the
minutes of the prior Board meeting, Medical Chief of Staff Dr. Howard
Dickey discussed the Hospital District's surgical and podiatry
policies.
Dr. Dickey reported that the latest
meeting of the medical staff had featured a "spirited" discussion
regarding the scope of practice of podiatry, medicine specializing in
foot care. Questions had been raised regarding the variance between
opinions from the Attorney General and the administrative code. The
local controversy involves an ongoing dispute between podiatrists and
orthopedic surgeons as to their medical boundaries of practice.
The medical staff tabled the matter and
referred it to the hospital's legal counsel for review prior to taking
any action.
Another question was raised at the
medical staff meeting involving surgical policy regarding amputations.
The medical staff recommended to the Board that the hospital's
surgical policy be amended to require a review and approval by a
second staff physician prior to performing any amputation.
Mary Jane Atkins offered a motion to
approve the recommended change in surgical policy. Joe Locke seconded
and, without further discussion, the vote of approval was unanimous.
Dr. Dickey commented that things were
going well in the Emergency Room regarding physician scheduling and
that the medical staff was getting more rest and getting more work
done thanks to Drs. Fagan and McCrory working there during the days.
Executive Session
The Board next adjourned into executive
session to consider medical staff reappointments and the report of the
Quality Improvement/Compliance committee as presented by Sarah
Anderson, Compliance Officer.
Following the completion of the executive
session and resumption of the regular, public portion of the meeting,
John Mack Weaver offered a motion to approve the medical staff's
recommendation regarding medical staff reappointment applications. Joe
Locke seconded and, without further discussion, the vote of approval
was unanimous.
The motion approved the reappointment of
Dr. William Evans for courtesy staff, Drs. Henry McGowen and Avi
Deshmukh for consulting staff, and R.N. Michele Stanford and C.R.N.A.
Robert Laird as allied health professionals.
The Board also acted by unanimous vote to
accept the report of the Quality Improvement/Compliance committee.
Audit Report and Operations Analysis
CPA Michael Oatman of the Waco firm of
Parrish, Moody & Fikes presented the results of his firm's independent
audit of the Hospital District's financial books and records. He
opened his presentation with a review of trends, regulatory and legal
developments affecting community and rural hospitals. He warned the
Board to expect increasing regulation from federal and state agencies.
As Oatman focused his comments on the
Hospital District, he stated, "I'm worried about your hospital, and
where it will be financially, next summer. So, my presentation is
couched to address that a little bit."
Oatman pointed out that the District's
operating loss had grown from $975,917 in fiscal 2005 to $1,393,400 in
fiscal 2006, both of which ended on June 30. The growth in the
non-cash depreciation expense resulting from the new hospital facility
had more than accounted for the growth in the operating loss, however.
The operating loss exclusive of depreciation expense decreased from
$363,508 in FY 2005 to $208,980 in FY 2006.
In the non-operating (non-hospital
operations) financial area, property tax revenues grew by more than
$200,000, interest expense grew by $485,000. The financial provision
in the previous fiscal year to write off the remaining undepreciated
value of abandoned hospital facilities in DeLeon and Comanche of
$522,000 was replaced with $95,000 in gain on sale of previously
written-off assets. Grants and contributions grew by almost $170,000.
The bottom line net change in assets for
FY 2006 was a decrease of $309,105. The same number for the prior year
had been a decrease of $427,540.
Oatman commented, "We're here wearing our
auditor hat today. We're not aware of any errors or irregularities or
illegal acts that need to be reported to the Board." He added that his
firm had not had any audit instructions from or involvement by
hospital management that would have had any impact on audit results
other than encouragement to get it completed in a proper fashion and
by the deadline.
Oatman reported two significant audit
adjustments. One was a negative adjustment, increasing the provision
for bad debts and contractual adjustments by around $300,000. The
second was a favorable adjustment from the cost report calculation
which recognized that the Hospital District would receive $422,910
more from Medicare and Medicaid than it had billed.
Oatman commented that in FY 2006 the
hospital operations was a little bit better off than it was in FY
2005, however, he was not encouraged by the interim financial
statements for the early months of FY 2007. He noted that much of the
current fiscal year had occurred in the summer months, which are
typically the slowest months for hospitals.
Oatman also pointed out that although
property tax revenues have increased, that they are mostly now
dedicated to the service and retirement of the hospital construction
bonds, and therefore largely unavailable for support of hospital
operations. He noted that of the 25 cents in the tax rate, that
approximately 16.5 cents are dedicated to debt service, and the
equivalent of another 6 cents are needed to cover the cost of
operating an ambulance service, leaving little for other hospital
operations.
Oatman commented that since the year end
Medicare and Medicaid cost reports for the prior year had indicated
that the hospital was being underpaid for its services. He added it
was reasonable to assume that the reimbursement rates for FY 2007
would be increased and that another $200,000 or so of additional cost
reimbursement for underpayments might be anticipated.
Oatman suggested that the hospital might
want to prepare an interim cost report after the results of the first
six months on the current fiscal year are available.
Oatman then displayed some graphs
comparing CCMC to national averages for rural and small urban
hospitals. He pointed out that CCMC has less cash on hand, expressed
as average days of expense, than comparable hospitals, and that the
trend was worsening. He noted that with low cash reserves, the
hospital was vulnerable to any unexpected disruption in its cash flow.
"There's just not margin for error," was his assessment.
Oatman then discussed how the percentage
of contractual deductions and bad debts have increased from around 41%
of gross billings in FY 2003 to 45% in FY 2006. He noted that the
effect of the increase, which is largely outside the realm of hospital
management's control, has been to remove around $1,000,000 in net
revenues from operations.
Oatman added that it would not be
sufficient to simply blame others for the financial difficulties being
imposed on the hospital. Rather, it is up to management to find ways
of operating within available revenues.
Oatman noted that the hospital's
personnel expenses as a percentage of gross revenues "has come down a
little bit." He noted another favorable trend by observing that the
hospital's in-patient discharges has been growing slightly, versus a
larger trend of declining in-patient discharge numbers.
Chief Executive Officer Evan Moore
commented that the percentage of contractual deductions on out-patient
revenues was around 70%, and Oatman agreed, adding that the in-patient
contractual deductions rate was much lower.
Oatman noted that CCMC's personnel costs
as a percentage of net revenues are near the average for
governmentally-owned hospitals, and not clearly out of bounds.
Yet, in a following slide, Oatman showed
that CCMC's net revenue billings per full time equivalent employee
were well below comparables. He noted that CCMC was lagging industry
averages, adding, "You've stayed flat. You haven't gotten any
economies of scale versus the net revenues that are coming in the door
out of your combined operations of the two hospitals."
Oatman expressed doubt that the hospital
could easily catch up to the national averages without negatively
affecting the quality of health care provided to its patients. If,
however, the trends could be improved, so would the financial
operating results.
Recommendation to Investigate Critical
Care Hospital Designation
Auditor Michael Oatman discussed
operating strategies to allow the hospital to improve its financial
situation. He discussed the hospital changing from its current
Prospective Payment System designation to either a Critical Access
Hospital or Medicare Dependent Hospital designation. He did not
recommend consideration of the last alternative, since the program had
not enjoyed a stable history, sometimes coming and sometimes going.
Oatman said that a quick calculation had
been made after the completion of the Medicare and Medicaid cost
reports to see if the hospital would have been paid more if it had
been a Critical Access Hospital. He said that the calculation
indicated that the would have been paid more.
Oatman later added that the projected
benefit of a Critical Access designation was "over $500,000".
"Will that be your future?" Oatman asked.
"I don't know. You'll have to work and manage it. But there's enough
to make me think that we ought to look at this strategy in more
detail. It has a financial benefit. I just think that any kind of
reasonable scenario over the next couple of years is likely to show a
financial benefit. But, it has costs as well. You limit your services.
You built a 38 bed hospital, and can only use 25 of them if you are
critical access. You don't have to tear down the rooms, and you can
convert back if you ever wanted to, to being a PPS hospital. But you
are limited. And, there are times when you have more than 25 patients
in the hospital. One of the requirements of being a Critical Access
Hospital is you have a transfer agreement in place, so if you are
full, they have some other place to go."
In other comments Oatman noted that many
other small, governmentally-owned hospitals across the state had made
the decision to operate as Critical Access Hospitals. He cited the
experience of a similarly-sized hospital in Port Lavaca that had
converted to Critical Access in anticipation of a $1 million benefit
and that they got it. He reiterated that he believed that the change
in reimbursement designation would benefit CCMC.
Oatman then recapped the hospital's
financial situation, the timeframe he was concerned about and
alternative strategies. He then paused in his presentation by noting
that everyone had been fairly quiet and wondered if there were
questions or comments.
Charles Mazurek stated that recently
someone had asked him about the portion of the tax revenues that were
dedicated for the ambulance service. He then noted that none of the
property tax revenues are dedicated for any purpose other than those
for service of the bonds.
Oatman then said, "Folks, I'm worried
about you." He continued, "The positive thing is, you’re financially
tight, but you've got money in the bank and you've got a great
facility, you've got physicians, and you've got some time to start
working on addressing some of the financial issues."
Oatman later added that he thought it was
a manageable issue, but cautioned the Board not to be so confident as
to think that just because the hospital has weathered numerous earlier
storms, that it will automatically make it through the next one
without some significant changes taking place.
Questions followed regarding cost-cutting
and how that related to changing to Critical Access designation.
Oatman responded by stating that
across-the-board cost-cutting was not generally a good strategy if a
change to Critical Access was planned. He stated that "targeted
cost-cutting" was what should be accomplished, without going into any
detail.
Administrative Reports
Chief Nursing Officer Shannon Steigleder
noted that there had been some morale problems in recent weeks among
the nursing staff related to smoking issues and changes in the paid
time off policies. A couple of nurses had quit, but things are now
getting better. She noted that there were three LVN positions open,
but that the RN staff was complete.
Steigleder noted that the Olympus
laparoscope system had been ordered, and that a loaner system would be
in use in the operating room until the hospital's system can be
delivered.
Steigleder explained the advantages that
the higher-priced Olympus system had that caused it to be selected for
acquisition, among which were greater capabilities in integration with
existing hospital computer systems and expandability for a wide
variety of surgical uses. She added that the Olympus system would be
far less costly to sterilize between procedures due to its ability to
be autoclaved.
In response to a question from the
reporter regarding financing for the equipment purchase, Evan Moore
explained that the Foundation would donate $30,000 to serve as a down
payment on the $73,000 system. He added that the hospital has
negotiated for a five month window to arrange for payment of the
balance of the equipment cost, $43,000. A grant request has been
written and submitted for the balance of the system cost.
Moore stated, "We hope that grant comes
through. However, we have set aside monies that are specific to
purchase equipment with, and cannot be used for any other purpose, to
pay for it if that grant doesn't come through in that period of time.
And also, next April, the Volunteers will dedicate their golf
tournament money to paying off this system if we have to pay for it
without the grant funds." In response to a followup question, Moore
said that the grant request was for $71,000.
In his portion of the Administrative
Reports, Evan Moore commented that he also believed that the staff
unrest with changes in the paid time off policy was beginning to
settle down. He noted that Leisha Hodges had met, or was scheduled to
meet, individually with the employees who were directly affected by
the policy change, and estimated that she was 80% completed in that
effort. He added that the PTO changes would save money, but that most
of the changes would take a while to be realized.
Moore was questioned about his opinion on
Oatman's suggestion that a change to a Critical Access billing
designation should be considered. He responded that although he was
not fond of the idea, he agreed that it should be carefully
investigated and that a presentation on the question would be made to
the Board on its next meeting on January 9.
Moore added, "If the money warrants it,
and the medical staff will support it, then I think it's something we
will need to do. You can't turn away if it's $500,000."
Moore explained that although efforts
were continuing to get expenses down, that management would also be
working carefully in that regard to make sure that it doesn't hurt
funding available under Critical Access. He then said, "You have to be
prepared for either eventuality, and we'll be very careful."
When Charles Mazurek asked about how
often the 25 bed limitation would be a problem, Moore said he guessed
that there had been 30 days or more in the year and a half that the
new hospital has been open that it has exceeded 25 patients. He said
that the high patient census he could recall was 34 (in a 38 bed
hospital).
Moore added that he and Mike Hare had met
with Hiram Smith and Toney Prather regarding their interest in the old
DeLeon hospital building and that he expected that matter to be on the
January 9 meeting agenda.
Gale Easley asked about comments in the
audit report pertaining to the hospital's rural health clinic (Doctors
Medical Center) and an apparent imbalance in the increase of payments
to physicians versus growth in patient revenues. Moore responded that
much of the $422,910 favorable cost settlement had been attained from
an allocation of hospital overhead expenses to the clinic. He added
that the allocation did not make the clinic profitable, but it did
make it break even.
Mike Hare reviewed October hospital
operating statistics with the Board. He said that October had been a
good month. He pointed out that the 67 surgeries and special
procedures were well above the budgeted number of 50. Hospital
admissions were 129, versus a budget of 130. He noted improvement in
the average length of stay, dropping from 4.2 days in September to 4.1
days in October. The average patient census was 19, versus a budget of
21.5. Both emergency room and rural health clinic visits were well
above the budgeted figures.
Hare also reviewed some workers
compensation insurance policy renewal alternatives with the Board, and
noted that management recommended the lowest cost alternative. After
extended discussion, the recommendation seemed satisfactory to most
Board members.
Financial Report
Chief Financial Officer Pam Rice noted
out that the Board members' packets contained two sets of financial
statements. One was the usual set for the most recently available
month, October, and the second set was a restatement of the prior
fiscal year with all audit adjustments included. She added that the
prior year audited numbers report was provided because it was more
detailed than in the formal audit report and was in a format that the
Board was more accustomed to reading.
Rice also noted that the budget
amendments adopted at the prior Board meeting were reflected in the
current fiscal year report, with the single exception of projected
revenue growth from laparoscopic surgeries, which were loaded into the
balance of the fiscal year.
Rice stated that she had been required to
borrow an additional $200,000 and that the available cash resources
were becoming very tight. She noted that the lack of available cash
was having an impact on the hospital's bill paying practices. She
added that although the auditor was worrying about next summer, she
was worrying about right now. She noted that accounts payable of
almost $1.3 million was around double or more of the amount she would
like to see it be, adding that the number has been growing. Rice
pointed out that the hospital was current on all leases and loans.
October's operating results were
reasonably favorable, with the reported $33,020 loss being less than
half of the loss anticipated in the revised budget of $69,803.
Rice noted that she was nearing
completion of work on producing the long-requested departmental
earnings reports, and that they should be available for distribution
to the Board members as soon as the end of the week. Evan Moore
suggested that a finance subcommittee meeting should be held when the
departmental reports are available and Rice agreed that it would be a
good idea.
Near the end of the meeting, John Mack
Weaver commented that he had heard grumblings from unhappy hospital
employees regarding cutbacks on hours worked and pay rates while
others received 7% raises. Weaver noted that some of the changes did
not seem to be fair play or make good budget sense to him.
Evan Moore responded by saying that an
attempt was made to make the cuts in pay or hours worked to be
across-the-board, and not to be unduly discriminatory toward lower
paid employees. He noted that the 7% raise referred to was the percent
of his pay raise last year. He noted that the pay raise he was granted
was retroactive to his anniversary date, which was more than a half
year past when the raise was made. Moore stated that when calculated
on an annual basis, he received a 3.5% pay raise, not 7%. He added
that he was sorry about the complaints and that management was trying
to be as fair as possible.
Weaver then asked about the telephone
situation, noting that he had heard complaints from two different
sources of non-working telephones in the patient rooms.
Moore responded that the hospital had
experienced numerous problems with the patient room phones of damage
from being dropped. At the present, all available spare phones had
been put into service while the non-working phones were being
repaired.
Moore said that the telephone matter was
still being investigated, but he currently believed the best solution
would be to purchase an $8,000 digital-to-analog option for the
hospital's internal telephone system. This would allow the use of
standard, low-cost telephones in the patient rooms. Each patient
desiring to have a telephone available while hospitalized would be
provided a telephone at a cost of around $10. They could keep the
telephone and take it home when discharged. Not only would this solve
the problem of damaged and missing patient room telephones, but it
would also be a significant improvement in infection control.
Mike Hare added that the current patient
room telephones cost around $250 each and are in warranty, but that
the warranty would soon run out.
Evan Moore said the existing patient room
telephones are being sanitized regularly. |
