Kremmling Hospital District hopes to improve on 2013 financial woes | SkyHiNews.com

Kremmling Hospital District hopes to improve on 2013 financial woes

Hank Shell
hshell@skyhidailynews.com

Sky-Hi News file photo

A financial audit of the Kremmling Memorial Hospital District released last month paints a bleak portrait of the entity's finances in 2013, though an executive with the district pointed to improving numbers in 2014 as a sign that the district isn't headed toward insolvency.

The audit, from accounting firm Dingus, Zarecor & Associates PLLC, found that the district's operating margin had fallen from -7.1 percent in 2012 to -11.1 percent in 2013.

The district's current ratio, a liquidity ratio that can indicate an entity's ability to pay off short-term debt, also fell from 1.8 in 2012 to 1.2 in 2013, according to the audit.

By the end of 2013, the district's liabilities exceeded its assets by more than $2.4 million.

“The District has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern.”
Audit letter
Dingus, Zarecor & Associates PLLC

"The District has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern," states a letter from the auditor to the district board.

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The district, which does business as Middle Park Medical Center, has been under increased financial pressure since the construction of its new facility, MPMC-Granby, in 2012.

The district financed the new facility with a hospital revenue bond. In December 2013, the district dipped into reserve funds to make its semi-annual bond payment, violating bond covenants and defaulting on the bond.

The bondholders have agreed not to call the bond before January 2015, according to the audit, and the district made its June payment on time.

Minutes from the district board of directors Aug. 14 meeting state that "drastic changes are needed to assure financial viability for the facility," though CFO Brendan Gale disputed that assertion.

"I would have preferred that the comment be made simply stating that 'improvements need to be made,'" Gale wrote in an email in response to inquiries about the district's finances.

Gale did not say whether there was a possibility that the district could relieve itself of MPMC-Granby in the future. He said the Granby operation is "an important part of the future of KMHD, and a vital part of health care in Grand County."

Financial challenges

The district has made a number of changes to combat financial ills since 2013, Gale said.

One major change has been the initiation of a management contract between Middle Park Medical Center and Centura Health.

The agreement, effective June 1 for a period of four years, dictates that Centura will appoint a chief executive officer, to be approved by the district board. The district announced this month that David Ross would fill in the new CEO position.

In return, the district pays Centura the compensation, benefits and expenses of the CEO as well as a management fee. The fee is $23,334 in the first year and increases to $60,000 in the second year, $80,000 in the third year and $100,000 in the final year.

The district also made a staffing reduction in March 2014, and has worked to make staffing more efficient, Gale said.

Staff productivity has increased steadily since 2011. In 2013, the net patient service revenue per full-time employee, a measure of staff productivity, exceeded that of 2012 by more than $10,000 and 2011 by more than $30,000, according to the audit.

Other areas of focus include claims and billing, improving market share and increasing specialty care, which Gale said is an area of opportunity for the district.

Financial uptick

Some of the changes the district made seem to be paying off, according to financial statements released in May 2014.

Net revenue in May 2014 exceeded the same month last year by more than $200,000, and year-to-date net revenue was up more than $500,000.

Year-to-date operating expenses in May 2014 dropped slightly from 2013.

As of May 2014, the district had also closed the gap between its total liabilities and assets, though liabilities still exceeded assets by more than $900,000.

Though finances seem to be on the uptick, Gale said additional improvement is needed.

In May 2014, the district's days in accounts receivable, or the time it takes to collect payments, stood at 84 days, well above its target of less than 58 days.

Looking forward to the district's December 2014 bond payment, Gale said the district would have enough cash on hand to make the payment, and would even be able to transfer the funds to the bond trustee in September.

Reform benefits

Though not quite the financial boon some may have hoped it would be, the expansion of Medicaid associated with the Affordable Care Act, also known as Obamacare, has benefited the district.

"The Patient Financial Services and Social Services departments are encouraging patients who may be eligible for Medicaid to apply," Gale said. "The result has been that KMHD receives some reimbursement for services provided to those patients which, though minimal, is better than no reimbursement and possibly having to write off those account balances."

Since October 2013, the number of Medicaid-approved individuals has more than doubled in Grand County, according to numbers from the county Department of Social Services. Between October 2013 and August 2014, enrollment increased from 988 to 1,957.

The amount of revenue KMHD receives from Medicaid has increased in turn. In May 2014, revenue from Medicaid was $324,352, up from $105,982 in May 2013.

Hank Shell can be reached at 970-887-3334 ext. 19610.

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