Wrangell Medical Center passed its annual financial audit without complaint, though its cash flow situation is still not in the best of health.
Financial officer Doran Hammett ran down the numbers for members of the hospital’s governing board during their monthly meeting December 20. Revenues for the past five months still are lagging behind expectation, around eight percent below budget. Expenses have also been lower than expected, by about six percent, but the hospital is nonetheless running at around a $224,460 loss for the 2018 fiscal year.
The year began on July 1 with just over $838,600 in reserve, enough to run the hospital for 28 days. In the time since, accounts receivable have increased by around $160,000 while other expenses in inventory and equipment have had to be offset by the borrowing of $250,000 from the borough through a zero-interest emergency line of credit it had set up in the summer of 2015.
While the WMC is a public asset, historically its assets have been maintained independently from the city’s finances. Maintaining revenue flow has in recent years proven difficult, and while the creation of a municipal line of credit was one way to alleviate the hospital’s financial fragility, transfer of its billing services in 2015 to Alabama-based service TruBridge had been another.
The firm’s ability to collect on outstanding bills initially helped bring WMC’s total accounts receivable down from a high point of $4.2 million in 2014, but coding errors on the hospital’s end this year contributed another financial dilemma. By October cash reserves had dropped down to just over $311,000 in only a matter of months, prompting administrators to approach the Borough Assembly with its credit request.
By last week’s meeting Hammett reported the hospital had around $554,000 in cash reserves, or just under 20 days’ worth of operating funds. While billable services have slowed somewhat, he did have good news to report concerning WMC’s FY16 and FY17 audit. Independent auditor BDO USA reported no instances of noncompliance with the Wrangell hospital’s bookkeeping, and did not identify any “material weaknesses” in its statements.
“You have clean financial statements, according to them,” Hammett said.
Looking ahead, WMC chief executive Robert Rang informed board members the Assembly had approved an agreement with Southeast Alaska Rural Health Consortium to cooperatively contract an architect to design a new hospital facility. Wrangell’s current hospital campus is in need of replacement, Rang has explained, both to meet more modern code requirements and to improve its compensatory flow from Medicare and Medicaid through depreciation of assets.
Costs on a draft concept for a facility presented in November came back higher than the hospital had hoped for, and over three decades could run between $90 million and $115 million. Given its revenue situation and limited resources on the part of the borough, last month members of the WMC board and Assembly concluded a partner such as SEARHC would be needed to make any such investment feasible.
As SEARHC earlier this year acquired clinical provider Alaska Island Community Services, representatives expressed its interest in exploring a partnership with the local hospital, with which it already does considerable business.
Ahead of its decision, a letter recommending hiring a consultant in cooperation with a partner had been submitted to the Assembly by the Wrangell Medical Center governing board in November. Under the subsequent non-binding agreement, SEARHC would help cover architectural costs while the direction of the project would be toward developing a connected campus arrangement with the AICS clinic on Wood Street.
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