By Jerry Morgan, Reporter

VAN DYKE -- The dramatic improvement in hospital earnings, as reported by interim operating and financial management earlier in the fiscal year, may not have been entirely reliable.

New Chief Executive Officer Kevin Storey told the Comanche County Medical Center's Board that he had made additional expense provisions for bad debts, contractual adjustments, inventories and accounting errors totaling around $760,000 to get the financial records ready for the annual audit.

Storey, who has served as chief financial officer at other hospitals, said there may be other fiscal year end earnings adjustments, but expressed hope that they would be positive, rather than negative.

Storey presented an unaudited earnings statement for the hospital's fiscal year showing a net loss of $391,000. The loss was after a non-cash provision of $1,154,000 for depreciation, so the hospital had a positive operational cash flow for the year of around $750,000.

The Board of Directors of the Comanche County Consolidated Hospital District met in regular monthly meeting on Tuesday, July 31. As has become usual in recent months, much of the meeting took place behind closed doors in executive session to consider topics in private as allowed by state law.

The meeting was conducted by Board president Gale Easley, and attended by all by the other five members, Joe Locke, Karen Petty, Charles Mazurek, Billy Ray Evans and Janna Morris.

Medical Report: Dr. Chiang Leaving

Following the approval of minutes from two prior meetings with only minor corrections needed, Chief of Staff Dr. Howard Dickey gave the Medical Staff report.

Dr. Dickey commented that Dr. Michael Chiang was definitely leaving the hospital to work elsewhere, with his departure planned for late August.

Dr. Dickey reported that both of the contract emergency room physicians supplied by Southwest Medical Associates had worked out well so far and that the medical staff was pleased with them. He said that the service would be used a bit more heavily than the every other weekend currently scheduled during September when two staff physicians will be out on vacation.

Dr. Dickey added that the use of the physicians assistants and nurse practitioners during the day, supplemented by Dr. Fagan and the contract physicians, was covering the ER very well.

Executive Session

The Board then adjourned into a closed, executive session that lasted for two hours and fifteen minutes.
Chief Executive Officer Kevin Storey and Chief Nursing Officer Shannon Steigleder were invited into the closed meeting at separate times.

At the resumption of open session, Karen Petty offered a motion, seconded by Charles Mazurek, to appoint Doctors Roy Wood and Laurance Bryson to the Courtesy Medical Staff. The vote of approval was unanimous.

There was no action taken on either of the other two stated agenda items for the executive session, the discussion of personnel issues and the review of physician rural health clinic contracts.

Clinical Report

Chief Nursing Officer Shannon Steigleder next gave the Clinical report. Steigleder reported that the hospital had hosted a recruitment luncheon for vocational nursing students at Ranger College and that she hopes to hire three graduate vocational nurses from there.

Steigleder also reported on working with the Healthcare Foundation and a donor family to purchase materials to decorate a hospital room with the Disney/Pixar "Cars" theme that will be used for pediatric care.

CCMC will be offering a course taught by a Registered Nurse in Advanced Cardiac Life Support in September. Annual competency training courses for the Nursing Staff have been initiated and post-partum and newborn care has been added to the list of required training courses. A course in diabetic continuing care will be offered in late August.

A total of 80 surgical and special procedures were conducted in June, up from 66 in May. The respiratory department conducted 2,178 procedures in June and earned a 100% grade on all quality assurance indicators for the month. All the staff is participating in a 90 day pulmonary function self study course to receive credits for required continuing education.

The emergency room had 469 visits during June with 24 cases resulting in transfers to a higher level of care and 108 resulting in hospital admissions.

The laboratory performed 5,408 billable procedures during June, a work volume that is around the usual levels.

At the conclusion of Steigleder's report, both she and Board secretary Karen Petty left the meeting.

Organizational Chart Adopted

The next agenda item was a review of the hospital's Organizational Chart presented by CEO Kevin Storey.

Storey presented several different charts, including the last one formally approved by the Board in 2005, a representation of how the administrative organization had been operating during recent months following the termination of the previous administrators, and a proposed new organizational chart.

The new chart had the effect of removing four departments from direct reporting to the Chief Nursing Officer and having them report instead to the Chief Executive Officer. The departments affected included Respiratory Therapy, Pharmacy, Laboratory and Financial Counseling.

Storey stated that the proposed realignment was consistent with normal hospital management practices.
Storey added, however, that in many hospitals the Emergency Medical Services department reports directly to the CNO, rather than the CEO, and that after some scheduling issues had been resolved, that he might recommend that change at a future date.

After minimal questioning, Gale Easley commented, "It looks good to me."

Storey then requested formal Board action regarding the proposal.

Charles Mazurek made a motion to approve the proposed organizational chart. Joe Locke seconded, and the vote of approval was unanimous. It was noted that the changes would take effect immediately.

Executive Report

The next agenda item concerned the Executive report, and it was also presented by Kevin Storey.
He first noted that the hospital was a couple of weeks behind schedule on renewing physician contracts and that they were being drafted. Storey added that the hospital was trying to recruit a woman physician who was originally from Gorman. He promised to bring the physician contracts back to the Board at a future meeting date.

Storey discussed some of the work he had been doing with EMS Director Danny Owen on the problem of achieving full time ambulance staffing availability. Storey said that one additional employee had been added to the EMS staff and the addition had solved the worst of the staffing problems.

Responding to a question from Gale Easley, Storey noted that the new ambulance had not yet been received, but that the bill for it had arrived. He discussed how the hospital would be filing before the end of August for $35,000 in grant funds to cover a portion of the cost. He added that the ambulance should be delivered within the next two weeks and that the hospital had the cash to pay for it when received.

Storey reported that the hospital had not made good progress in hiring a new Chief Financial Officer. He added that there were two candidates still being considered. Despite the lack of a CFO, however, Storey said good progress is being made on preparations for the financial audit.

Storey noted that a required annual survey in support of approximately $300,000 in Medicaid Dispro payments that had been prepared by the interim CFO was rejected and that it almost cost the hospital the loss of the funds for the coming year. He added that he had spent over a week correcting a nine page listing of errors on the previously submitted survey.

Storey told the Board that the hospital was not on a credit hold from any vendors, despite rumors that had been circulating. He added that a couple of instances had occurred recently where invoices that had originally been sent to an operational department manager, rather than directly to accounts payable, had caused delays in vendor payment, but were immediately corrected when called to the attention of accounting.

New Materials Manager Introduced

The newly hired Materials Manager, Rick Sanchez, was introduced to the Board. Sanchez has been working at the hospital for three weeks and, as Storey described it, had "hit the ground running."

Sanchez, who has worked at other hospitals in similar capacities and who recently moved to a home near Proctor Lake, distributed a long list of purchased items that he had discovered in the past few days and weeks, where significant cost reductions were available. He noted that the hospital was obligated by law to spend its money in the most efficient manner possible.

Sanchez mentioned one account he had found where there were $31,000 in overcharges for lab supplies. He stated that credits will soon be received to correct the situation. He described how he had already negotiated lower lab test costs that would be price capped for two years and escalation limited thereafter.

Sanchez reported on another instance where the hospital had been charged on a maintenance insurance contract for equipment that the hospital no longer owned or operated. He said that around $26,000 worth of cost savings over the past two years would be forthcoming.

Sanchez stated that hospitals were frequently vulnerable to overcharges and were often taken advantage of and added that they needed people such as himself, whom he self-described at various times as a "bull in a china shop" and as a "jerk", to represent them in dealings with vendors, rather than simply accepting the terms and billings offered.

Sanchez continued at length describing various ways the hospital could achieve significant cost savings.

One area discussed concerned lowering surgical supplies costs by reprocessing.

Sanchez emphasized that he would be very careful to keep medical and operational personnel involved in the process of controlling costs so that they would be satisfied with the results and that the quality of hospital care would not be compromised. As he closed his presentation, he said that he had located around $100,000 in cost savings in three weeks, and that he was just getting started.

Sanchez concluded, "I'm here because I enjoy it. I love what I do. And I can promise you that your money will be spent wisely, as best as I can do, under my watch. And there will be lots more money found." He added that CCMC would be successful and would be the envy of many in the state.

Executive Report Resumed

Kevin Storey resumed his Executive report by stating his intention to involve departmental managers more in budgeting, operational decision-making and approving departmental expenses than had been the case in the past. He outlined improvements being made in the expense approvals and payment process. He also stated his intention to share financial operating results with hospital employees through managers meetings and "town hall" meetings.

Storey noted his intention to improve security for confidential information, and also to improve both the accuracy and timeliness of financial reporting. He stated his intention to eliminate large accounting adjustments made at fiscal year end and to present monthly reports with greater reliability and availability.

He explained his intention to present more in-depth financial information and charts to the Board at monthly meetings.

Storey noted changes in attitude needed on the part of the accounting staff to research problem areas rather than write them off as a loss. He said that the hospital was "bleeding money" currently, but that it was being stopped.

"The good news is that all this stuff can be fixed, and we are fixing it," Storey stated. "It takes a little bit of time because we are having to retrain at the same time we are fixing the problems." He compared the situation to the question of how do you eat an elephant, and the answer is, "one bite at a time."

Storey noted that he was very disappointed with the quality of the automated accounting systems being used, describing them as "not very user friendly." He said they were lower cost than some of the alternatives, but said that a more integrated system was needed, even though it cannot be afforded right now.

He also noted problems had been found where there is not sufficient backup training where if one key employee is out on vacation or for other reason, vital knowledge is sometimes absent. Identifying such problem areas and providing backup training is needed.

Financial Report

Storey then transitioned into the Financial report, and began by gratefully acknowledging the efforts of the existing accounting staff.

Storey said that the hospital still has sufficient cash reserves to meet two payrolls for both employees and physicians, as well as the bond payments due in early August.

Storey then described how he and the auditors had booked an additional $500,000 in reserves for bad debts and contractual allowances.

He said both he and the auditors expected the annual cost report calculation to show that the hospital is owed more money from the federal government.

Obsolete inventory still being carried on the books were written down with a negative impact to earnings of about $200,000.

Problems were also noted in the prepaid insurance and the property, plant and equipment areas, although it was believed that they would result in earnings credits rather than charges.

An example was discovered where a favorable Medicare and Medicaid cost report settlement of $60,000 was booked to income when initially determined, and then again booked to income when the payment was received. The correction required was a $60,000 negative charge to earnings.

Storey described most of the problems as having occurred after the departure of the previous CFO and during the following interim period.

He noted that revenues were up over May, but were still below budget by $50,000, and were below budget for the year by $1,670,000.

Storey emphasized that most of the large negative adjustments discussed were one time situations that were being addressed.

Storey advised Board members to watch cash flow carefully to see that bills are being paid on time and that cash reserves are being accumulated. He added that there are a lot of things that need to be fixed, and that they are moving on fixing them, and that the hospital has some good people working there.

Storey added, "The results will be seen in the upcoming year." He expressed his hope that there would not be large unpleasant accounting surprises at the end of subsequent years, and added his expectation that he would not have a job if there were.

At the end, Gale Easley commented, "Good report" and Storey responded with a laugh that this was the first time he had heard that comment after reporting a $400,000 loss.