Hospital Board reviews audit, finances

The Adams County Hospital District No. 2 Board of Commissioners reviewed the Dec. 31, 2016 and 2015 audit report, prepared by Dingus, Zarecor and Associates, during their regular meeting on July 27.

The audit revealed two material findings for the District, and displayed the final financial reports for East Adams Care Center.

The District received a clean opinion rating, DZA Representative Joe Lodge explained, and the District ensured all information was presented in a clear and accurate manner.

At the end of 2016, Lodge stated the District has a positive net position, which measures the financial health of the District. At the end of 2016, the District recorded a net position of $8,941,943.

Lodge explained the increase in patient receivables during the past year is highly attributed to the increase in swing bed patients.

Lodge reviewed the revenue and changes for the District, explaining the earned income and expenditures for the past year compared to the year prior.

With the addition of the nursing home, expenses increased in 2016, but Lodge said the majority of the increase was attributed to the long-term care facility.

The expenses over revenue before capital contributions recorded a loss of $1,109,221 for the District. The year prior, the District recorded a positive amount of $676,986. Lodge explained this amount included the $1 million donation of EACC.

For the change in net position, the hospital recorded a loss of $263,082, while EACC recorded a yearly loss of $846,139.

The District saw an increase in cash flow, and Lodge said while more cash has gone out of the District in the past year, the majority of it went to construction.

In patient accounts receivable, Lodge explained the district saw a large increase with Medicare, which is primarily due to the increase in swing bed patients.

The District also continues to have long-term debts, and Lodge said a large amount is from Medicare/Medicaid patients, and also self-pay and uninsured patients.

Medicare/Medicaid pays based on cost, and Lodge explained this typically does not generate much revenue for the hospital.

Lodge explained the District had two material weaknesses in audit findings: account reconciliations and manual journal entries.

During the audit, Lodge stated numerous adjustments to journal entries had been prepared and proposed to achieve accurate account balances.

He said significant adjustments were made to correct balances related to accounts payable, accrued interest, cash, accrued payroll, capital assets, miscellaneous revenue and the allowance for doubtful accounts.

Lodge said any large change in accounts where management is unable to reconcile the discrepancies is what categorizes the issue as a material weakness.

His recommendation for the District is for management to review all accounts on a monthly basis, instead of at yearend, prior to the audit.

For the manual journal entries, Lodge explained the reports had been posted, but there are not enough people reviewing the documents.

The journal entries are required to maintain internal controls over financial accounting and reporting to help ensure public funds are properly safeguarded.

Lodge recommended the District utilize individuals in the billing department to assist with the review of the manual journal entries, as they are the most familiar with the accounts.

Lodge also took the Commissioners through graphs of comparison data from East Adams Rural Healthcare and districts of similar size. While the statistics help give a baseline for comparison, Lodge reminded the Commissioners that every district offers different services.

In terms of days of cash on hand, the District recorded 135 days during 2016. Lodge explained there is still cash to be paid on the construction project, and a goal to aim for is for 90 days of cash on hand and then grow from there.

For the current ratio of assets versus liability, Lodge said the District is slightly higher than they should be. If the District can bring the total down to a rating of two, it is closer to where a district of their size should be, Lodge explained.

In long-term debt and the net position, Lodge said the District is recorded 50 percent, which is high. It only effects how much the District can borrow in the future, but it is recommended to bring the amount down.

CEO/CFO Gary Bostrom explained the long-term debt will be a gradual decline, since the bond will be paid over the course of 30 years.

Lodge also cautioned the District with the amount of total days of patients account receivables. The District is quite a bit higher than the goal of 45-60 days, and Lodge explained the higher the number, the more difficult it is to collect money on accounts.

For the bad debt position, Lodge said the District is making positive steps by writing off less each year.

In terms of salaries and benefits, 59 percent of operating expenses goes to paying wages and benefits. Lodge said this is comparable with other districts.

Along with the audit report, DZA also included a management letter and recommendations for potential future improvements within the District.

Bostrom updated the District on the current financials at the conclusion of the audit report. The current month’s revenue is under budget by $61,694, and deductions from revenue are under budget by $78,897.

The District is currently recorded a year to date income of $97,597, compared to the 2016 year to date loss of $265,701.

The Commissioners will hold a special board meeting in August to review and approve and interlocal agreement for the Columbia Health System. The agreement will include eight districts who will cooperate and share resources.

The next Board of Commissioners meeting is scheduled for Aug. 24 at 5:30 p.m. in the hospital conference room.