A substantial increase in unpaid debt by patients more than offset a banner year financially at Salem Memorial District Hospital, according to the 2019 fiscal year audit.
The audit report, presented at the October board meeting last week, showed a 14 percent increase in revenue, but a net loss of $279,243 after expenses. The net loss is two percent of the total operating revenue.
BKD CPAs & Advisors issued a “clean” audit, the best opinion possible, partner Jean Nyberg told the hospital board.
The audit showed the volume of patients grew significantly, with 511 more admissions, resulting in real revenue growth of about $2.9 million, she said. But accounts receivable also grew about $2.9 million over the previous year.
Gross receivables increased to $11.2 million from $8.3 million in fiscal 2018.
“A lot of that is volume driven, but it is also because there is a backlog of billing and collecting,” Nyberg said.
Days of cash on hand also decreased to 52 from 92 a year ago, partly because of the increase in accounts receivable. Much of the hospital’s cash is tied up in the accounts receivable balance, she said.
The audited statement of operations showed $24.99 million in total operating revenue, with expenditures of $14.5 million for salaries and benefits, $10.4 million for supplies and $813,964 for depreciation for a loss of $835,552. The addition of $556,309 in non-operating funds—primarily tax revenues—reduced that figure to $279,243.
That’s a minus 3.3 percent net operating margin compared to a 2 percent profit a year ago and a 1.5 percent profit in 2017. SMDH had an 8 percent loss in 2015 and 4.5 percent loss in 2016, the audit shows.
“A few years ago, there were some pretty significant losses for the hospital, and you’ve come back from that pretty well,” Nyberg told the board. She noted that rural Missouri hospitals in general have been around break-even or in the negative the last several years.
SMDH had “outstanding growth” from a volume and revenue perspective in net patient service revenue, she said. But salaries and benefits were up $2.7 million from last year with 20 additional full-time equivalent employees, she noted, and supplies were up $1.2 million due to higher volume and pharmaceutical costs.
On the positive side, SMDH has little debt with a 5.3 percent long-term debt rate compared to 35 percent for all Missouri critical access hospitals.
Recommendations to correct deficiencies included adding accounting staff to address segregation of duties issues in the revenue cycle and accounts payable, rechecking the pricing of inventory, and developing a policy of prior approval for large credit-card purchases.
Auditors also talked to management about evaluation of accounts receivable and making sure they were being scrutinized on a monthly basis, Nyberg said.
• In other business, administrator Kasey Lucas reported a 52 percent occupancy rate in September with an average of 13 acute care patients a day. Surgeries, home health and emergency room visits were all up from a year ago, with ER volume up 81 patients.
Patient revenue was nearly $5.7 million with net operating revenue of $2.4 million and a total profit for the month of $74,451, the report showed.
In response to a question by board member Ray Bruno during chief nursing officer Debbie Hines’ report, Hines said the hospital is currently using eight agency nurses, about half of the staff. Bruno asked what it would take to improve that ratio.
Hines said SMDH is actively recruiting nurses and offers pay based on an experience scale. The hospital also holds career fairs and recently started bringing in SBU nursing students for clinicals that give them a chance to work with real patients in a supervised setting, she said. SMDH also has an internship program.
“We do 14-week contracts (for agency nurses). When your mix is about half and half, we don’t like that,” she said. “But it’s tough to find nurses.” Other area hospitals also use a large number of agency nurses, Hines said.
In an expansion update, Lucas said work is continuing on the new central bath in long-term care.
“The first major undertaking was plumbing, and that’s complete,” he said. “We’re waiting for some doors to get in.”
Window replacement in acute care patient rooms has been delayed until spring due to the onset of cold weather. Cahills Construction will have 120 days to complete the work once it begins, Lucas said.
The hospital has been working with Gilmore Bell, a public finance law firm, on issuing revenue bonds to pay for the $1.8 million expansion project. The board approved a resolution at the September meeting to issue up to $2.5 million in bonds to be repaid with hospital revenues. The larger amount will allow for any contingencies that arise, Lucas said.
Gilmore Bell is now seeking bond proposals. The deadline is Nov. 11. Lucas said the finance committee will need to meet that week to review the proposals.
Chief operating officer Jason Edwards reported that SMDH Foundation fundraiser dates are set for next year. Dancing with the Salem Stars is Jan. 25 with 13 couples already registered. The annual golf tournament is June 5 and Wings and Strings is set for Sept. 12.
There was a large turnout for the Rising Above Cancer walk through downtown Oct. 1 and for the testing booth set up at the Rose Holland Trout Derby Oct. 5; he said. He predicted the cancer walk will be even bigger next year.
About 75 people were tested at the trout derby, where SMDH personnel checked blood pressure, blood sugar and body fat percentages, Edwards said. A hands only CPR demonstration was also offered.
In other action, the board approved the purchase of a replacement dialysis machine from Fresenius for $15,141. The machine was budgeted at $13,900. Hines said parts and maintenance are no longer available for the old machine it is replacing.
