Three months into the new fiscal year, Medical Center Health System finances are not showing any improvement, but with new administration leadership and the approval of a new budgeting system, there is hope the tides may start to turn.
MCHS Chief Financial Officer Robert Abernethy, who previously worked on an interim basis after former CFO Jon Riggs resigned in December, reported on the financials for the month ending November 2017 at an Ector County Hospital District finance committee meeting Tuesday night.
For two months ending in November, earnings before interest, depreciation and amortization (EBIDA) was negative $800,000. October shows a $700,000 loss and November shows a $100,000. The hospital had budgeted to break even.
Abernethy said last year, the first two months of the fiscal year, they reported a $1 million positive EBIDA.
Finance committee member and District 7 board member Ben Quiroz asked if that $800,000 loss could possibly be made up in the next few months, which Abernethy said could be possible if the health system were more current on accounts receivable. Accounts receivable is money that is owed to the hospital.
Abernethy said the accounts receivable is probably the biggest issue moving forward. Gross accounts receivable are currently totaling about $301 million currently, with the hospital’s around $260 million and another $40 million in ProCare, he said.
“So we’ve got a significant amount of money sitting out there. Probably the value of that when we get things straightened out and back on track when we’re in the $50 to $55 million range,” Abernethy said. “We’re looking at a number of options that we’ll be visiting with the board about later.”
The operating costs of the hospital was over budget by nearly half a million dollars due to unfavorable salaries, wages and contract labor caused by missed staffing targets, the financial report shows.
“I know we focus on revenue cycle and we focus on accounts receivable and cash receipts. We’re also gonna have to focus on operating expenses because the cash issue is as much a cash inflow as it is a cash outflow,” Abernethy said.
MCHS President and CEO Rick Napper said as far as expenses go, they are relative to the volumes.
“The budget is based on the volume that was there, the volumes’ been up,” he said. “So naturally your expenses are gonna go up.”
Finance committee member and District 1 board member Bryn Dodd said the former hospital administration’s solution to the salary and labor costs was attrition, which she does not believe is the answer for the issues. Napper also later addressed labor and productivity issues in the ECHD board meeting, adding that he is not a fan of across-the-board cuts and will be looking at a productivity assessment, establishing benchmarks and educating leaders and employees.
Capital contributions the hospital makes to ProCare was above budget, as well, which also concerned Dodd.
“The capital contribution for ProCare was $3.2 million for October and November alone, compared to the budget of $2.2 million,” Dodd said, adding at this rate by the end of the year capital contributions will be closer to $18 million rather than the $14 million they budgeted.
“I’ve been ridiculed and criticized by other board members and administration because I voted against this budget and because of the way I voted for decisions with ProCare. But these are examples of the reason that this budget wasn’t feasible, it wasn’t realistic and that’s the reason I voted against it,” Dodd said.
While Dodd later said she knows ProCare can be beneficial to the hospital, she feels they need to rein it in and figure out how to better control it.
Napper said during the regular meeting he is planning on doing an assessment of ProCare to see exactly where it stands and how they can move it forward in the future.
“I think that ProCare has some very good strategies behind it and it is an opportunity for growth and I’ll be coming back to the board with some strategies on that.”
By the end of the regular board meeting Tuesday night, which followed the finance committee, Dodd said she feels that with Napper and Abernethy stepping in, changes are being made and a feasible, realistic plan finally seems to be in place.
NEW BUDGET SYSTEM
The finance committee and ECHD board of directors also approved the purchase of a budgeting and financial reporting solution Tuesday night to help improve the health system’s budgeting process.
Quiroz and Dodd both voiced concern over implementing a new system in the wake of a disastrous conversion to the health system’s new digital record-keeping system, MCH1 or ‘Cerner’ system, but the purchase of the system was approved contingent upon the hospital’s accounting team getting references from other hospitals that use the system.
Abernethy also recommended the agreement include language that reflects that a specified number of hours of tech support and knowledge transfer be addressed in the agreement.
MCHS Controller Grant Trollope said the new budgeting system will be implemented starting in March and they will have it operational to budget the 2019 fiscal year. MCHS previously had the budget prepared by independent consultant Financial Resource Group after losing their knowledge base in the department with their internally developed budget programmer around 2013, he said.
“Basically what they’ve been working with on budget is an accumulation of Excel spreadsheets that don’t tie together and it’s a piecemeal system right now,” Abernethy said, adding they do need to move forward with a new way of budgeting.
The cost to contract with FRG cost about $124,000 per year. The budget system approved Tuesday, PremierConnect Budgeting and Financial Reporting, came at a cost of $80,500.
In addition to cost savings, Trollope said the new system will be more efficient, there will be more time for review since department directors can input directly into the system, and it would help with continuity and staff development.