The January meeting of the Coffey Health System Board of Trustees brought the long-awaited 2014 audit report. While the picture wasn’t pretty, the good news is that there were no unexpected surprises.
Certified Public Accountant Matt Morris, director with the accounting firm BKD, presented the preliminary audit report. Morris explained that the audit would have ordinarily been completed by May of 2015 but two factors—the rocky 2014 Healthland software implementation coupled with internal record keeping issues that same year—created the need to reconcile all 2014 data prior to completing the audit. Work is underway to finalize 2015 records and get the audit schedule back on track for May.
As expected, the audit reflected a net loss of $4 million. A number of factors contributed to the loss; primarily, a decrease of approximately $1 million in net revenue and a $2 million increase in net expenses. Net revenue dropped from $21.7 million in 2013 to $20.9 in 2014. Spending increased from $23.6 million to $25.8.
Additionally, bad debt write-offs jumped from $7,433 in 2013 to $771,000 in 2014. Also contributing to the negative bottom line: $741,000 in county tax dollars was credited to the 2013 audit for a new ambulance and CT-scanner while the actual purchase of the equipment occurred in 2014.
The rough start to the Healthland software also impacted the bottom line. The hospital also wrote off roughly $1 million more than anticipated because of billing and collection issues. Without these issues, Morris said, net revenue would have actually exceeded 2013.
“Hopefully that is a one-time hit and won’t repeat itself in 2015,” Morris explained.
Morris further explained that careful attention was paid to internal controls for 2014.
“There are obviously control/risk issues that we have concerns with given the way things played out. We didn’t find anything outside of what the board is already aware of,” Morris said. “I think now that you have your CEO, CFO, and controller in place, now is the time to re-evaluate and make sure that the control structure is operating the way it should be so that going forward you won’t have any of these higher risks to yourself than is necessary.”
Morris stated that BKD hopes to issue an unqualified audit opinion.
“We haven’t run into any numbers that aren’t jiving to where management doesn’t agree that they need to be adjusted. That would typically be the only reason why you would have a qualified or adverse (audit) opinion.”
In other business, Chairman Steve Hopkins began the meeting by introducing new trustee Jeff Clark. The Coffey County Commission appointed Clark to replace Tim Smith who chose not to re-apply at the end of his three-year term.
Chief Executive Officer Leonard Hernandez reported that structural repair work continues at Waverly Medical Clinic. The clinic has been closed since mid-December, with patients being seen at other CHS clinics. Hernandez stated that work is anticipated to take longer than the original estimate. The clinic could potentially be closed through February.
He also reported that recruitment has begun for a new physician to replace two primary care physicians who recently reduced their workload to part-time status. John Atkin, M.D. now serves only as medical director for local nursing homes, while Donald Braun, M.D. has accepted a position at another hospital. Braun continues to see patients Coffey County Medical Center two days per week. Priority attention is also focused toward recruiting laboratory staff and a non-physician provider.
Chief Financial Officer Jim Van Hoet and Executive Finance Committee Chair Craig Stukey reviewed the monthly financial status. Two substantial expenses – 2014 physician incentive payments coupled with $1.2 million in bad debt write-offs for 2014 – resulted in a net loss of $423,571 for December.
Under the consent agenda, the board approved the finance committee’s recommendation of paying $200,000 toward a $600,000 loan from 2014. The remaining $400,000 of the loan will be renewed with the bank. Hernandez will review the decision with the Coffey Health Foundation Board of Directors, as the foundation put forth collateral for the loan.
Chief Medical Officer John Shell, M.D. requested medical staff appointments for Cindy Sirois, M.D.; Alexandra Heeren, A.P.R.N.; and Joseph Gadzia, M.D. The appointments were unanimously approved under the consent agenda.
The board unanimously re-elected the current slate of officers: Chairman Steve Hopkins, Vice Chairman Peter Allegre, Treasurer Craig Stukey, and Secretary Rosemary Rich.
Trustee Levi Saueressig reviewed work toward new Quality Assessment Performance Improvement and Risk Management Plans. The board will review the proposed documents for future discussion.
Peter Allegre, chair of the strategic planning committee, reviewed a three-year strategic plan. The board will also review that document for further discussion and approval.
The board entered two executive sessions with Hernandez, both to address non-elected personnel. The first session lasted thirty minutes, followed by a fifteen-minute session.
Eight trustees were present at the meeting: Hopkins, Allegre, Craig Stukey, Rich, Clark, Cameron Roth, Levi Saueressig, and Dennis Young. Judy Reese was absent. The meeting adjourned at 8:56 p.m.
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