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By Dan Rudy 

Wrangell hospital in pecuniary predicament

 


Wrangell Medical Center’s finances seem to be in a tight spot, its board of trustees learned at a Dec. 17 meeting.

In an independent audit conducted by BDO USA in Anchorage, the hospital’s assets were totaled at $6.1 million, down from $10.4 million the previous year. The biggest loss was from $3.5 million in written-off costs relating to a previous effort to build a new hospital, in addition to those related to depreciation of property and equipment value.

The hospital’s expenses are up as well, rising from $8.7 million to $10.4 million. The hospital currently has less than a month’s operating funds on hand, far less than the recommended six months.

Conferring with the board by telephone, BDO partner Eric Campbell walked members through the audit’s findings. To begin with, auditors concluded the hospital’s finances all check out.

“That’s what you want to see on your audit report,” Campbell told them.

In addition to apprising the board of the hospital’s financial state, Campbell’s report identified three areas needing improvement: neglected monthly reconciliations, provided services not being billed for in a timely manner, and receivables not being reviewed well.

“You have procedures in place, they’re just not being followed,” said Campbell.

His report identified WMC’s previous Chief Financial Officer Dana Strong as holding some degree of fault for issues in completing the audit on schedule, in October rather than in August. Campbell found that budgetary reconciliations throughout the year had not been completed as timely or as accurately as they should have been.

“He would be the responsible party,” Campbell said. Strong left his position in October.

For the size of hospital WMC is, Campbell said in future a more hands-on CFO would be needed than what might at a larger facility. “That was not happening.”

“You did everything right the last time,” he said, as far as vetting for the position was concerned. “I think your references let you down.”

Asked whether it would be wise to continue sharing a CFO position between Alaska Island Community Services and WMC, Campbell cautiously replied, “It would have to be well thought-out.”

While not unheard of for a critical care hospital and behavioral health facility to merge a financial management position, Campbell said he could not think of any current examples in the state.

“Really you need somebody with experience,” he advisedl. However, he warned finding a talented financial officer will be difficult in the current market because of the hospital’s smaller size.

Coming back from retirement to assist WMC in the interim, Olinda White presented the hospital’s financial situation to the Wrangell Borough Assembly on Dec. 9. She conveyed to the hospital board what she had to the Assembly.

Currently WMC has $4.3 million in accounts receivable, or funds owed to the hospital for services rendered. The full amount of receivables is not necessarily the face-value of money WMC will eventually recoup, however.

“We’re working on trying to lower this amount, and we’ll get there eventually,” White explained.

Among the reasons she gave for the swelling figure were problems with the Medicaid computer system. Hospitals across the state have had trouble processing its bills, holding up payments and straining budgets. The State of Alaska in September filed a lawsuit against Xerox, the company behind the problematic system.

“As of today, Medicaid is sitting at $461,000,” White said. “That’s high.” Earlier in the day she did receive around $400,000 from Medicaid and another $27,000 from Medicare, which help the hospital’s situation some.

White said she is working with staff to set up goals for reducing the receivables total by $2 million or more, which she explained could take a year or two.

“We’re trying to do it as fast as we can,” said White. “We have to worry about it.”

In the near future, the hospital will try to bring its expenses into check, cutting unneeded supplies and trimming waste where possible and reducing its full-time equivalent (FTE), or hours being put in by employees each week.

“There are some things we can do to move people around,” explained hospital CEO Marla Sanger.

“We’re just trying to do it one day at a time,” White said. More long-term, charges will also be raised beginning Jan. 1. White said it has been two and a half years since these were last adjusted.

“We have to do it to stay in line with costs,” said White. For Medicare and Medicaid billing, she explained next year’s rates will be locked in for a four-year cycle. If outdated rates are held over, the hospital would soon find itself providing services at a loss.

Despite its finances, the WMC board and management are still hopeful for a new facility in the near future.

Board treasurer Barbara Conine asked Campbell if their financial situation would preclude building a new hospital.

“I would not really look to the financial statements to determine whether to build a new hospital,” Campbell replied. “I would focus on a feasibility study.” However, he added the $3.5 million write-off “could raise some eyebrows.”

Board vice-president Bernie Massin also questioned whether a new hospital would be possible considering the financial situation.

“I don’t think you can stop at this stage,” White responded. “It’s going to take a lot,” but she said the current facility is not up to the task required of it.

“I think we have to find a way,” said Sanger. She argued the hospital is an economic driver for the community, and that a new facility would be an investment in Wrangell’s future. “We’re just in a little bit of a holding pattern.”

At the October Assembly meeting, its capital requests list estimated a new facility’s costs to be $39 million.

 

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