If it’s possible for a year end hospital audit to be exciting, this one was, according to Eastern Plumas Health Care’s Board member, Jay Skutt. The Sept. 27 Board of Directors meeting heard the Auditor’s Report for the fiscal year ending June 30, 2012. EPHC showed such positive financial improvements, even Auditor Jerrel Tucker of TCA Partners LLP was excited. “For a hospital this size in the middle of nowhere, that’s a very good year. I was very surprised.”
Tucker said that he chose to compare EPHC to “peer hospitals” that are “the best small hospitals in the state–to very profitable hospitals, and you’re right there with them.” He reported the following signs of a healthy hospital:
1. EPHC showed an increase in net assets of over $1.1 million in cash. This was caused, largely, by staff efforts to cut expenses, to the tune of over $900,000, and a cash reimbursement of over $400,000 for its Electronic Health Record (EHR) from the federal and state governments for meeting “meaningful use” qualifications. Overall, according to EPHC Chief Financial Officer, Jeri Nelson, this combination of cutting expenses and bringing in cash meant “a $1.4 million flip in the right direction.” In addition, the hospital’s total net assets came in at $5,127,610, which meant a 25 percent increase in this year alone.
Moreover, this cash increase allows the hospital to put money in savings. A cash reserve is essential in weathering economic vagaries, such as times when Medicare and Medicaid programs withhold large payments without warning, said Nelson. Now, the hospital can handle these issues without dipping into their line of credit—which increases debt and interest payments.
2. Accounts Payable was down by $1.6 million. “Do you know how much easier that is to manage?” Tucker asked the Board during his Audit Report. Also, Accounts Payable days (amount of time before vendors are paid) have been cut in half from last year—from 93 to 43. This, again, brings down interest payments. It also increases vendor confidence said CFO Nelson, and it ensures that vendors continue to deliver needed medicine, food, and supplies in a timely manner.
3. The hospital has 34 days of cash on hand. Auditors like to see at least 30 days Tucker said, so “that’s very positive.”
4. Accounts Receivable days (the amount of time before a bill is paid and money is in the bank) are down to 56, which is in keeping with the top Peer Hospitals. EPHC can thank their Business Office, said Tucker, for working hard to make sure bills are paid in such a timely manner.
Tucker then compared EPHC to the Benchmark (auditor ideal) and the Average of the top quality Peer Hospitals. “You don’t want to be compared to losers,” he said, adding that EPHC measured up to the best small hospitals in the state in all the key areas. His comparison not only looked at the key financial measures of hospital health discussed above, it also measured the percent of labor/benefits and supplies as compared to net patient revenue. Again, EPHC was right with the best hospitals on these measures, at 59 percent. This, he said showed the hospital was doing a “very good job of matching staffing to revenue, which is crucial.”
Tucker also praised the hospital’s financial managers for working hard to qualify for programs at the federal and state level by completing all the paperwork correctly and “following all the rules and regulations . . . You did a really good job of maximizing all opportunities for reimbursement.” He explained that it’s especially tough for hospitals that provide services in places that are small, rural, and isolated, because they “can’t keep solvent on their own,” and thus rely on state and federal programs (primarily Medicare and MediCal) to stay afloat.
“All in all, a very good year,” Tucker said in summary, “really positive from a financial standpoint. No red flags. You really solidified your financial position this year.”
CFO Nelson followed with her monthly report to the Board. She said that during the previous year, when things were so tight, CEO Tom Hayes did a very good job of impressing on the staff the need to cut budgets, and staff response was positive “across the board.” Now, staff will be receiving an across the board 2.5% pay increase in thanks for their efforts. “We want to show the staff our appreciation,” Nelson said.
Nelson also reported that the first two months of this fiscal year have continued the upward trend. “Cash this month is very good,” she said. “We’re not getting into our line of credit, which is huge . . . this has never happened before.”
In his Board report, CEO Tom Hayes also thanked the staff for their efforts in causing the positive financial turnaround. “It’s a real testimony to staff efforts in controlling expenses,” he said. In addition, he thanked the community: “We’ve worked hard to gain the community’s trust, and they’ve responded very positively by utilizing our services, by letting us know what we’re doing right and where we need to improve. I think that’s something we’ve realized in these difficult economic times—we need each other. And, we’re stronger as a hospital and as a community for it.”