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By Dan Rudy 

New hospital CFO warns tough road ahead

 


The financial situation for Wrangell Medical Center has improved in recent months, but its new chief financial officer told the hospital’s board of trustees at its May 20 meeting that there is still much left to do.

Doran Hammett presented the hospital’s budget for next year, which on the revenue side builds from projected income for the 2015 fiscal year. Net revenue after write offs, charity and bad debt are anticipated to total at just over $10 million, better than the previous year, yet still be below a high of $10.7 million for 2012.

Hammett explained some of these increases will come from the hospital’s revamped rehabilitation program. Due to Wrangell’s geography, WMC does not experience much patient migration, which has a stabilizing effect on its revenues. Eventually though, he predicted income will gradually decrease unless other revenue sources can be developed.

Operating expenses for FY2016 are anticipated to run at just over $10 million, up from $9.8 million the previous year. Contributing factors include rising costs in insurance and benefits. Though staff-related costs are generally fixed, as revenue declines issues of sustainability will arise, a problem being faced by small and medium-sized medical providers around the country.

“The oncoming reality is that hospitals this size are going to continue to struggle,” Hammett said.

In March, WMC’s interim CEO Marla Sanger advised the board to consider alternative organizing models, such as forming closer partnerships with other regional medical providers, or else look into being managed by a larger organization.

“It’s something we need to keep on our radar screen,” Sanger said.

Members of the board approved the year’s budget unanimously. However, board president Terri Henson proposed that in the future the board could hold a budget workshop in advance of the meeting and be further involved in the process. Her criticism was that the board currently only has one chance to review, discuss and approve the budget. A workshop would also be an avenue for receiving public input.

“We need to move in that direction,” Henson said.

For the board’s regular financial update, Hammett reported income for April was up around two percent over the month’s average.

“You’re on track for May to be a pretty good month, too,” he said.

Earlier this month, Hammett was hired to handle the hospital’s finances through the end of 2015. He will also continue serving as CFO at Petersburg Medical Center, where he’s been working since last June. He will divide his time each month between the two locations and a third, with family in Oklahoma.

Hammett admitted the arrangement is experimental, but with the aid of the Internet and modern technology the absences should not be problematic, he said.

“So far, I’m really pleased with our decision to try this,” he told the hospital board.

Hammett commended interim financial officer Olinda White for easing the transition, following the departure of CFO Dana Strong last October. White came out from retirement to guide WMC through its annual audit, which found substantial problems with the hospital’s accounting and finances.

In December, White and Sanger informed the Wrangell Assembly that the hospital had less than a week of funds on hand for operations, with already high accounts receivable made worse by delays in Medicaid repayments.

In his May report, Hammett said the hospital currently has about 25 days of cash on hand—or $640,000 at time of the meeting—though numbers for the month are still tentative.

“I hesitate to book anything without something in writing,” he said.

Hammett’s goal is to bring WMC’s cash reserves up to 60 days, in part through lowering its accounts receivable, or uncollected accounts for services rendered. That figure is at “100 days” at the moment, an accounting expression which he explained signifies around $2.5 million. Hammett would like to reduce that amount to 60 days, or around $1.8 million.

Hammett recommended that the board hire a risk assessment company to assist in WMC’s billing collection. The hospital’s finance department currently employs three people, who Sanger explained are already busy enough with other duties.

“It’s a very complex environment,” she said. Collection on some accounts can be a time-consuming and resource-intensive process, and having a third party, such as TruBridge, to focus primarily on those tasks would be beneficial to current staff.

The board will hold a special meeting on June 8 to discuss the idea further and take public commentary. A meeting time will be announced as the date approaches.

In staffing matters, Sanger explained Aaron McPherson, head of the rehabilitation department, is preparing to take his nursing home administrator licensing exam. Securing the certification would allow WMC to comply with regulatory requirements for its long-term care facilities after current license holder Janet Buness retires at the end of June.

Sanger also recommended McPherson and development coordinator Kris Reed be authorized for approving checks issued by the hospital. WMC policy requires two signatories for all checks it issues, a role currently filled by Buness and another outgoing employee.

 

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