They’re Still In The Red But The Future Of PMH Is Looking Brighter
Marlinton, WV – Pocahontas Memorial Hospital incurred a deficiency of revenues over expenses of over $713,000.00 for the fiscal year that ended June 30th, 2010. That’s accountant-speak for saying the hospital finished in the red for the year. Despite that bleak number, Rod Hardy of the accounting firm Arnett & Foster says there is reason for hope that the hospital can once again become profitable. As he presented the June 2010 financial audit report, he told the hospital Board of Trustees they are already taking steps towards improving the bottom line.
“One of the things that’s already happened is we sold the Home Health agency; that netted you some cash of $400,000.00” says Hardy “plus that agency was losing about $200,000.00 a year, so you pick up that benefit every year. In addition to that the hospital management team is looking at any service lines that may be not profitable and need to be discontinued, eliminating any unnecessary expenses. Probably the biggest change you’ve made as far as moving forward is the hiring of the Minnie Hamilton management team.”
Hardy says there are four specific areas of concern identified by the audit. The first is the monthly reconciliation of account balances, information that is essential to the hospitals’ Board.
“The general ledger [account] is only as good as the subsidiary ledgers that feed into the general ledger” he says. “You reconcile your cash, you bring that into the general ledger; you reconcile your accounts payable, who you owe money to, and you bring that into the general ledger. If those reconciliations of cash, accounts receivable, accounts payable are not done each month then the monthly statements that you’re seeing as a board are not accurate [and] you’re making decisions for the hospital based on those statements.”
The other recommendations include creating a better estimate of patient fees that can be collected based on historical information, establishing offsite storage of critical hospital data, and managing credit balances to ensure that fees are not owed to patients or third party programs such as Medicare or Medicaid.
Hardy also discussed three possible scenarios for projected operating income for the next few years. Option one is to stay on the present course, option two is to make operational changes and option three is to become a division of Minnie Hamilton and thereby be eligible for other grant money.
“If you take the status quo, we’re showing a loss of 1.241 million dollars” says Hardy. “If you look at the middle column and you make some operational changes, some of which have already started, you’re seeing a profit of $64,000.00 dollars; so you’re looking at about a 1.3 million swing from option one to option two.”
Under the merger with Minnie Hamilton, PMH could see a profit of $295,000.00 dollars. All three estimates are for the year ending June 30, 2012.
Hardy says the largest difference in the numbers between options one and two could be achieved through a reduction in expenses such as salaries and wages, reduced overtime, less costly drugs and bringing the hospital billing back in house. He says PMH, in conjunction with Minnie Hamilton, is already implementing some of these changes, with plans for more. If PMH were to choose the third option, he says a couple of changes would be required.
“If you merge with Minnie Hamilton, the hospital would look to convert from a county owned hospital to a not for profit corporation, a 501c3 corporation” he says. “The other thing that would happen is as a county owned hospital right now, you have to pay much higher fringe benefits than your competitors. If you were a 501c3, you could make your fringe benefit payouts to your employees more in line with your competition.”
Hardy says this is a viable option, but would require time to achieve. He says another county owned hospital in the state is going through the conversion process now, but is running into some legal hurdles. He recommends PMH stick to the second option, but also keep option three on the table. The board members approved the audit as presented.