Texas County Memorial Hospital had about $1.6 million in excess revenues over expenses in 2012, the TCMH board of trustees and administration heard at this week’s monthly board meeting.
Stephanie Weis, partner at BKD, LLP of Springfield, and David Taylor, senior manager at BKD, presented the annual audit report. They explained that TCMH was “in a strong position financially.”
Taylor pointed out the positive bottom line included $858,865 in cash and pledges belonging to the TCMH Healthcare Foundation and about $1.5 million received by TCMH from the federal government for the adoption and implementation of electronic medical records within the hospital.
The growth of the healthcare foundation’s assets over the past seven years requires it to be included in TCMH financial statement. In 2012, the foundation embarked upon a $3.2 capital campaign to raise funds to build a tornado safe room and new surgery department that added to the funds it held last year.
“Your foundation is very active, having received $1.1 million in support from the community over the past two years,” Weis said. “This is an exciting time for your hospital as you prepare to move into the new construction.”
The auditors prefaced the audit with comments about the current “challenging healthcare environment,” explaining that the storm clouds are not likely to go away in the near future.
Taylor explained that the electronic medical records funding continues to positively impact the TCMH bottom line. He noted that the incentive funding goes down in 2013 and continues to dwindle annually.
“With the new depreciation and debt and interest payments you are taking on, it’s going to be very tough in the upcoming years to continue to have a positive bottom line,” Taylor said.
Taylor highlighted the fact that TCMH has 150 days of cash on hand.
“If the hospital stopped receiving payments, you would be able to keep the doors open for almost half a year,” he said, calling it “a tremendous accomplishment” that took many years of efforts to achieve.
In 2012, TCMH saw a slight dip in its non-current cash and investments due to the purchase of Hutcheson Pharmacy. But the hospital’s property and equipment asset numbers jumped up 96 percent due to the purchase of the pharmacy and equipment for the hospital expansion.
TCMH liabilities are set to go up with the addition of debt from the new construction.
“This is a big burden to take on in future years, but you are in a very good position with a 30-year loan at 3.75 percent interest rate,” Taylor explained.
The addition of new debt increased the hospital debt to capitalization percentage from just below 13 percent in 2011 to 26 percent in 2012. However, TCMH still remains below the rural Missouri hospital average of 31 percent.
“You are set to weather future healthcare changes much better than many of your peers,” Weis said, explaining that the new construction provides a “different starting point” for TCMH in comparison to other rural hospitals in Missouri.
TCMH is adding the expansion and renovation debt, but the average age of the TCMH facility will also drop dramatically with new equipment and space.
The average age of TCMH equipment and facility is 14 years of age, and the rural Missouri hospital average is nine. The older age factored in the new construction plans. BKD projects that TCMH will fall into the rural Missouri average by 2013 with the new construction and new equipment purchases.
“It’s important to remember that TCMH is not funded by any tax revenues,” Weis said, adding that many rural hospitals rely on tax revenues to fund 1 to 3 percent of operations.
“You are fully self-sufficient,” Weis said, “And that’s something to be proud of.”
Revenues continue to increase. TCMH had about $28 million in revenues from services in 2012 –– a 5 percent increase from 2013. Operating expenses and losses exceeded revenues in 2012, but labor expenses remained flat.
“This is good sign that your management has a handle on labor, and the volumes needed to handle the costs associated with the patient load,” Taylor said.
Challenges ahead: The auditors commented on federal healthcare changes brought on by the Affordable Healthcare Act and the American Taxpayers Act of 2012.
“Historically, the federal government has recognized that over one-third of Medicare recipients live in rural areas, making it difficult for rural hospitals to support capital and technological projects,” Taylor said.
Taylor explained that although some incentives have been provided to rural hospitals to make up for the number of Medicare recipients cared for by rural hospitals, many of the monetary incentives that directly impact the hospital’s bottom line have been cut in recent years.
As of April 2, TCMH and other hospital received an additional 2 percent reduction in Medicare reimbursement due to sequestration. Taylor explained that these cuts create “an extremely challenging healthcare environment.”
Taylor stressed that the financial picture has been challenging in the past, and that there is a positive side for TCMH.
“You are in a strong position financially,” Taylor added. “You have a great team in place to navigate these changes.”
Board chairperson and former longtime employee at TCMH, Omanez Fockler, agreed that current times were not the first healthcare challenges faced by TCMH.
“With wisdom and tenacity, we will survive,” she said.
According to the auditors, changes in reimbursement from the federal government provide a challenge at TCMH, and they accompany a large amount of uncompensated care the county hospital also provides.
•Medicare and Medicaid –– the largest payer groups at TCMH –– generated $15.5 million in revenue for the county hospital, which are federal and state funds coming back to the county.
•Uncompensated care provided by the hospital totaled about $6.45 million up from about $5.63 million in 2011. This number is a reflection of the numbers of patients who are uninsured and unable to pay for their healthcare.
•In comparing TCMH to other rural Missouri hospitals, it was noted that TCMH continues to provide a wage and benefit package to employees that is competitive with the rural Missouri average.
In 2012, the average salary expense at TCMH per full-time equivalent personnel was $46,263.
The auditors explained that there are many “fixed costs” to healthcare, and due to “excellent management,” the cost per patient discharge rose slightly from $4,812 in 2011 to $4,994 in 2012. The average cost per patient discharge in rural Missouri hospitals was $7,036.
•Following the annual audit, gross revenue for the hospital in 2012 was about $65.5 million with a positive excess of revenues over expenses of about $1.63 million
“With wisdom and tenacity, we will survive.”