Hospital group hears good, bad news from auditor

Eureka Springs Hospital Commission got some good news and had some bad news confirmed last week as the hospital's certified public accountant (CPA) presented his audit report for 2002-2003 and his associate presented the numbers for this year.

Part of the good news was the announcement of the promotion of Maryann Pownall to director of business affairs, K.C. Shaver as director of nurses, and Jonathan Stipsky as plant manager by interim Administrator Craig Ortego.

Pownall has been in the bookkeeping department at the hospital approximately five months.

Shaver had been working in temporary positions in the local hospital through nursing agencies for the past nine years.

Stipsky has worked with Quality Health Network, Inc. (QHC), in other locations and will take over the physical management of the hospital, according to Ortego.

Larry Phillips, a consulting plant engineer for QHC, told the commission "I have gone through this building with a fine-tooth comb. I have found nine pages of deficiencies that could shut this hospital down, if the state health department wanted to do it.

"We have been working with the state and have gotten down to four pages of deficiencies," he said. "They are working with us in this effort. They won't come back to inspect again until we call them. We hope to have everything in compliance in 30 to 40 days."

The age of the hospital facility has made it hard to keep it in compliance with health department standards for several years.

Shaver also had some good news for the commission.

The hospital paid approximately $29,000 for 1,000 hours of "agency nurses" in August. These are nurses not on the hospital's regular payroll, but are hired to fill-in positions.

Shaver said he had reduced the number of agency hours to 152, about $7,000, in the first two weeks of September and expected to need only 40 hours for the rest of the month.

"We hope to have zero agency hours in October," he said. "And we will try to keep it that way, if at all possible."

He said he will be starting training courses for the nurses, do patient satisfaction surveys, put up a suggestion box and "be a voice for the nursing staff."

Nursing agency expenses, and other professional fees category, were one of the highest costs for the hospital last year at $531,914 over $285,132 in 2002.

Ortego asked for permission to negotiate a contract with LHC Group to take over two-thirds of the operation of the home health department. The hospital will retain one-third control.

Ortego said the company proposed an initial donation of $25,000 to the hospital in addition to assuming home health department's debt and other expenses.

"We have wonderful people in our home health office," he told the commission, "but they are only able to provide basic services for patients. They do not have the resources to aggressively seek out new patients. That's what this company will do.

"The company can also bring extended services and additional resources to our patient base. They will hire our local employees, they won't be bringing in additional people until there is a need to expand services."

He said he would meet with the director of the program on a monthly basis to review the system's operations.

He expects the company to be in the hospital in approximately 180 days, mid-March.

Interim commission chairman Bill Fort expressed a bit of reluctance at "the offer of such a good deal," but the group gave Ortego the go-ahead to work on the contract.

The commission also approved a request to sign contracts with Dr. Thomas Whiteside, a pathologist, and Dr. Vianne France, who practices family medicine at the Eureka Family Medical Center. She has been working nearly a year "on a handshake," according to Ortego.

Fort went public with the news that the hospital was in serious financial difficulties in early August.

He called a commission meeting for the first time since early May and reported the commission had pledged investment CDs to cover payroll tax payments to the IRS and payments to vendors that were not made during the last part of 2003 and the first half of 2004 totalling approximately $366,000.

Fort had opened the meeting calmly reporting "a big problem in the business office. A check for thousands of dollars was left in a drawer and not cashed for four months.

"The accountant had not paid the payroll taxes for the last quarter of 2003 and the first quarter of 2004.

"We didn't know about all of this until the IRS descended and demanded payment of $116,000. The commission had to come up with the money immediately, so we pledged a portion of our CDs to cover that amount," Fort said.

"We then found out that $250,000 worth of accounts payable had not been paid and some of our suppliers were hurting. We pledged an additional $250,000 on the CDs to cover the amount owed."

Fort had opened the Aug. 6 meeting calmly reporting "a big problem in the business office. A check for thousands of dollars was left in a drawer and not cashed for four months."

CPA Bob Hughes of Hughes, Welch and Milligan, Ltd., of Batesville, confirmed the dark financial picture of late 2003 when he presented his audit last week.

He went through several pages of expenses and drops in revenue as he reviewed the audit.

"Your collection procedures were below standards," he said at one point.

He said falling behind on the payroll taxes was "very serious and care should be taken to monitor the situation."

In a comparison of Eureka Springs Hospital with hospitals of similar size in Ashdown, Fordyce, Booneville, Calico Rock, McGehee, DeWitt and Salem, Ark., Hughes said the hospital has the second lowest cost-per-day to patients, salaries a little higher than most, but the hospital needs more patients to increase revenue.

Betty Jones, who works for Hughes, said none of the months' books for 2004 had been closed out since the start of the year.

She, Ortego and Pownall had worked until midnight Wednesday to get the books closed so a current financial report could be presented to the commission.

She said the hospital has shown an income loss for the past four months, totaling $43,603 at the end of August.

She also confirmed the monthly increases in costs to hire agency nurses.

She did say the month of August had ended with a $42,356 profit.

"Profit is not a dirty word," Hughes said. "You have to have it to buy new equipment, hire staff and maintain services."

"My goal is to have an income of $550,000 per month," Ortego said. "I think we can do that, but we have to get past some of these other difficulties first."