Clarendon Memorial Hospital was informed Tuesday night during its regular board meeting that it's received a clean audit for the fiscal year ended Sept. 30, 2014.
Representing Albany, Georgia based auditing firm Draffin & Tucker, LLP, was Certified Public Accountant (CPA) and Certified Fraud Examiner (CFE) Jim Creamer, who briefed the board on the hospital's financial outlook, recent history and future challenges.
"You're going to see, as we go through this information, a lot of numbers that look significantly different in the past couple of years; they look that way for a reason," he said. "Y'all have had a really good year -- you've had a good turnaround, and I want to talk about some of the things that made that happen."
Creamer said that "everything was clean from start to finish. We did not make any material adjustments to your books or any adjustments at all that weren't given to us by management ... I want y'all to have a good comfort level that what management tells you during the monthly meetings is something that you can rely on. And that's probably the most important part of tonight's presentation -- the clean opinion."
In 2013's fiscal year, the hospital lost $4.9 million, he pointed out, which is known as a decrease in net position and reflects revenues less expenses. This year saw a $710,248 profit.
When examining such a turnaround, Creamer said he looks at accounts receivable (AR) as patients don't always pay what they're charged. He also looks at cost reports where the hospital receives an interim payment at some point and settles up at the end of the year.
"I think about all these numbers that can change and estimates, and things like that and when I go back and look at this -- we have been very conservative this year in our estimates," he said.
Expenses were managed very well, he said. Factors driving a turnaround can include cutting expenses and decreasing staff.
"But we didn't do that. There was almost a 3 percent increase in expenses, and I would expect, in any reasonable environment, that expenses would increase every year," he said, which were managed well and bolstered by a solid increase in growth.
Net patient revenue rose from $60.7 million in 2013 (FY) to $67.4 million in 2014, which accounted for the "predominance" of the turnaround, he said.
"You had a good year this year," he said.
Total assets of the hospital have dropped from $74.5 million in 2011 to $61.6 million in 2014. Three million was spent last year to refund debt, he pointed out.
"And having the new debt on the books is going to be better for us going forward," he said, and accounts largely for the drop from 2013 to 2014, along with standard depreciation of equipment.
Total liabilities consisting of current and long-term debt were $49.4 million in 2011; $51.5 million in 2012; $49 million in 2013 and $44.6 million in 2014. The hospital's net position -- assets minus liabilities -- has dropped from $25.2 million in 2011 to $17 million in 2014.
The years 2012 and 2013 saw significant losses -- $3.3 million and $4.9 million, respectively. However, the hospital's net position increased from $16.3 million in 2013 to $17 million in 2014, he noted.
"You still have a strong equity position," he said. "That's kinda where you look at your longevity."
Gross patient revenues reflect the total services of not just the hospital but three nursing facilities: Windsor Manor Nursing Facility, Lake Marion Nursing Facility and Lake Moultrie Nursing Facility. Those numbers have seen an upward trend of $132.9 million in 2011 to $151.1 million in 2014. Looking at deductions is "really important," he said, "because we know whatever we charge a patient we don't collect the full amount of the charge."
Managing deductions improves the bottom line, he said. In looking at that chart, which includes bad debts, the hospital has seen $75.9 million in deductions in 2011; $79.6 million in 2012; $90.6 million in 2013 and $83.7 million in 2014.
Offsetting those costs are government funds tied to what is known as the Medicaid's Upper Limit Payments (UPL) -- money given by the state based on the difference between the actual cost per day of treating a patient versus interim rate paid per day. For 2013, CHM received $3.6 million in UPL; 2014 saw $4.2 million in UPL.
There's also disproportionate share payments -- known as DISH -- from the state's Medicaid program, which reflect CMH serving a large number of uninsured patients. In 2013 and 2014 those payments were $1.9 million and $4.8 million, respectively.
Total operating expenses have continued to climb: $59.9 million in 2011 to $70.7 million in 2014.
"Which you would expect," he said. "The improvement you had was in spite of the increase in expenses."
As for Medicare, the financial statement shows roughly a third (32 percent) of the hospital's gross patient revenues derive from Medicare. About 15 percent of the hospital's gross patient revenues were derived from Medicaid in 2013; 2014 saw that figure drop to about 12 percent.
Clarendon Health System Chief Executive Officer Richard Stokes said he was heartened by news of the clean audit but refuses to be complacent.
"We were really glad that the numbers we've been reporting to the board are accurate and right on," he said. "It speaks well to the changes we've made to date and also points to changes we have yet to make."
It's taken solid teamwork to reach this point, he said, while acknowledging there's plenty of work to keep rowing in the same direction.
"We're not going to sit back and relax. We're going to keep on going. I don't want people to get complacent. It doesn't work that way anymore," he said. "I'm real happy with the team and our physicians and all the employees. It took all our efforts."
