ROCK SPRINGS — The Memorial Hospital of Sweetwater County Board of Trustees heard and approved an audit report for the fiscal year ending June 30, 2020, at its monthly meeting on Wednesday, Oct. 9.
Although the COVID-19 pandemic affected both finances and the audit, the hospital received encouraging comments about their financial situation in the report presented by Darren McGarvey and Dan Deyle of CliftonLarsonAllen LLP. The audit was conducted remotely for the first time due to the pandemic. The process was quite different from previous years, but it was able to be completed, and the audit is in “really, really good shape,” McGarvey told trustees.
The most significant and unusual transaction for MHSC as well as other organizations during the audit period related to COVID-19 provider relief funds, McGarvey said.
McGarvey provided a COVID-19 timeline including key events as they relate to health care organizations nationwide. On Jan. 31, 2020, the secretary of the U.S. Department of Health and Human Services (HHS) declared a public health emergency under Section 319 of the Public Health Services Act in response to COVID-19. Then on March 13, President Donald Trump declared a COVID-19 national emergency.
Cancellation of surgeries and procedures deemed elective in the early days of the pandemic equated to lost revenues ranging from 40-65% for health care organizations throughout the U.S., leading to liquidity challenges for many. The federal response addressed liquidity concerns fairly quickly, according to McGarvey.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted March 27, 2020, included $2 trillion in economic support. Specifically for health care providers, the CARES Act offered $100 billion in financial aid, including $50 billion for general distribution with the rest paid through targeted distributions including: $10 billion for rural providers, $12 billion for COVID-19 hot spots, $4.9 billion for certified nursing homes and $30 billion for uninsured care.
Still, “getting money quickly into providers hands can lead to ambiguity, and that’s where we are today,” McGarvey said. There has been a lot of variability and ambiguity in the industry as far as how to account for these funds appropriately. The HHS has provided conflicting guidance on the issue, he said.
McGarvey said that one important thing for the hospital to keep in mind is that for organizations that received $750,000 or more in federal expenditure awards during a single fiscal year, those funds will be subject to a more thorough single audit. Additional reporting requirements are also in effect for the federal awards.
In addition, Medicare set up a program early in the pandemic where hospitals could receive advance payments to stem cash flow issues when elective and other procedures were shut down. This led to an increase in days of cash on hand, but McGarvey noted that the Medicare advance payment funds are sitting unused with the expectation that those will be paid back. Some of the provider relief funds have also affected the financial picture while they sit unused.
In the MHSC management’s analysis of the hospital’s financial activities and performance during FY20, it said that although there wasn’t a great increase in patients and COVID-19 positive cases at the hospital, the facility did see laboratory services increase immensely since it was one of the only testing facilities in the county.
The hospital experienced an overall decrease in outpatient visits, including emergency room, imaging, surgery and clinic visits, as the community stayed home and social distanced. Elective surgeries were also canceled in the early days of the pandemic in an attempt to preserve personal protective equipment (PPE) for staff. Revenues decreased by as much as 25% for the last four months of the fiscal year. MHSC applied for and received Accelerated Medicare payments to ensure a stable cash flow and also received CARES Act funds to offset lost revenue and COVID-related expenses.
Deyle provided industry benchmark data during Wednesday’s audit report presentation. MHSC reported $85.7 million net patient service revenue based on audited financial statements from 2017-20. Deyle said the hospital has maintained a steady bottom line.
Looking at the hospital’s operating margin, Deyle said it was nice to see a 2.5% growth in patient revenue. Given everything that’s gone on at the hospital, including lost revenue at the end of the fiscal year, Deyle said it shows that MHSC is trending in a positive direction from a revenue standpoint.
The hospital’s growth in revenue was offset by about a 4.5% increase in expenses, a lot of which were related to COVID-19. For FY20, days cash on hand, at 136, was almost identical to where it was in 2019 not accounting for COVID-10 relief funds and advance Medicare payments. In 2017, days cash on hand was at 88. Another piece of encouraging news was that the audit showed an improvement in the average collection period time.
Financial and operational highlights:
— The hospital recorded an operating loss of $1,534,551 and an operating gain of $40,558 in 2020 and 2019, respectively.
— The hospital recorded an increase in overall net position of $5,278,189 and $1,218,947 in 2020 and 2019, respectively.
— The days in net patient accounts receivable are 44 and 55 in 2020 and 2019, respectively.
— The hospital has experienced significant growth and change since 2014, according to the management analysis. The investment in hiring physicians resulted in accelerated startup costs that significantly increased total expenses. Typically, providers do not realize their full income potential until their practice matures, which may take several years.