Magnolia Regional Medical Center received a clean, unmodified audit for the 2019-20 fiscal year.
It showed a loss of just over $1.6 million.
Michael Westerfield, of BKD, presented the audit report during Monday night’s regular Board of Commissioners meeting.
“The unfortunate side is that the financials did deteriorate a little bit this year compared to last year,” Westerfield said. “Not entirely unexpected given the circumstances of the year.”
He said there was an operating loss decline of around $325,000 driven by an increase in operating expenses primarily in salaries and purchased services.
“I think as the pandemic wore on, contracted nursing costs are really some drivers that cause higher expenses,” he said.
He said you don’t see any COVID-19 related relief in operating because the hospital was a governmental accounting entity.
“Overall we made a couple of audit entries which resulted in a net decrease of $1.6 million to the bottom line,” Westerfield said. “There were not a significant number of entries.”
There were a few related to COVID-related grant funding and getting them recognized into the financial statement.
This year’s audit was done entirely remotely due to COVID restrictions.
In other board news:
The hospital ended the month of December with a positive EBITDA of $25,893.
Net revenue for the month was $2,000,551.
Financial Officer Roxanne Stewart said inpatient admissions were up to 138 and ER visits were up to 704. Clinic visits were up to 812. She said there were 16 newborns and that the hospital may be beginning to see “COVID babies” – infants born since the pandemic was declared a national emergency on March 13.
The hospital had a non-operating income of $26,206, including $16,444 in sales tax revenue.
Year to date, the hospital has a positive EBITDA of $257,653.
Gross revenue is $14,347,061, with a net revenue of $6,058,091 after contractual allowances and charity care deductions of $60,897.
The net labor expense is $4,150,894. Non-operating income for the year is $645,836 including $76,078 in sales tax revenue.
Stewart said there is a sales tax receivable of $235,904. “That’s the amount that has been collected for the hospital and is in the account managed by the city,” she said.
“According to the new lease, effective October 1, 2020, all sales tax collected will be deposited into that account held by the city then we submit the requests,” she said. “The requests for October and November were submitted totaling $129,841. We received payments of $37,990.”
She added that it was primarily the utilities that were rejected for reimbursement.
The request for December was also submitted for $142,383, including property insurance of about $78,000, of which they have received only around $20,000.
“(The city) excluded the utilities and the property insurance,” Stewart said.
Chief Executive Officer Rex Jones said the approval comes from City Treasurer Kim Newell and Mayor Parnell Vann.
“I think ultimately, since the mayor signs it… I think (the treasurer) is going through and making the determination about what she feels is reimbursable and then gives that to the mayor and he signs off on it,” Jones said.
He said they have looked at the language of the tax bill and it was “pretty broad,” with no exclusions. “Any kind of operating expenses of the hospital can be covered by this fund.”
“The sales tax money was for maintenance and operations,” Jones said. “That is very clear. That’s why for all the years we’ve been able to use it for whatever we wanted to use it for.”
He added that when they went through the lease in discussion with the committee it was mentioned several times at a Magnolia City Council meeting that utilities would be a part of what those acceptable expenses are.
“I think the comment was ‘utilities alone would use up the money’,” board president Dr. John Alexander said.
Jones said the city denied their first reimbursement request for October. He said after Stewart had a discussion with the city treasurer they decided some of the things on the original submission were “not necessarily maintenance.”
Jones said they resubmitted October with the November reimbursement request. He said they paid November, excluding utilities, and used the original October submission to pay a small portion.
“We talked to our attorney and asked what was his experience,” Jones said. “He said of the 10 or 15 he’s done, all of these have been expenses that have been paid as part of maintenance for facilities. Because their interpretation has been that anything a landlord could reasonably expense as a maintenance expense would be included.”
He said the revised and resubmitted along with December’s request, which was paid except utilities and property insurance. He added that the city has provided no reason why the expenses are being denied.
“We feel like in good faith that we were submitting reimbursable expenses that we thought had been worked through in the lease,” Jones said, “because in the committee meeting and City Council meeting no one brought up any reservations about paying those things.”
He said front he conversations between Stewart and the city treasurer that maintenance personnel salaries should not be paid because they are hospital personnel.
“My argument would be if I contracted something out and you paid the contractor you would pay that expense but you don’t want to pay my personnel for maintenance,” Jones said.
Alexander questioned whether the sales tax has been used to pay the utilities since the beginning, which Jones said it had.
“We haven’t specifically said, ‘I’m taking this sales tax money and using it to pay utilities.’ We pay it and then pull the money out as we’ve needed it for reimbursement because it was maintenance and operation,” he said.
“The original ordinance that was passed says operation and maintenance of facilities but that ordinance also says, ‘whereas the City of Magnolia owns and operates the Magnolia City Hospital.’ I’m not sure that that still applies,” board member Todd Emmert said.
“The new lease says that it will be reimbursed for those expenses related to the hospital building and premises, and not expenses directly associated with providing health care,” he added.
Jones said the lease can’t say for operations because “you can’t collect governmental money to pay a non-profit organization for operations.”
He added that one of the arguments that has been brought up is that the mayor is concerned that there aren’t funds available in that account if there is some catastrophic something that happens to the hospital and there aren’t any maintenance funds in there.
Board member Wally Wood commented, “It seems to me either us or the city, one of the two entities, needs to be saving money for a new roof in 15 or 30 years. Nobody’s really doing that.”
Jones said having a “rainy day” fund was a concern of the mayor’s during the lease discussions.
“I think his concern is that we need to build up a surplus in that fund so that if an HVAC system goes out or the roof has to have a major repair, that there’s funds there for that from a maintenance standpoint to pay for that,” he said.
Wood added, “I understand the need for maybe having a rainy day fund for repairs that aren’t’ covered by insurance, however we need to operate and pay our bills.”
Jones said he met with the plant operations director to discuss potential problems and he felt that most of them could be handled for about $100,000.
Several board members commented that the lease should be amended to be more defined, including the reimbursement of utilities.
“I don’t think the lease said that the mayor and the treasurer are the sole determinants of what’s covered and what’s not,” Alexander said. “The city can’t use that money for anything but use for the hospital. They can’t even use it for collateral for our loan.”
Emmert said he thinks the simplest thing would be to go back to the city council and tell them they want to revise this lease to include that the utilities would be paid from the sales tax fund and that if the city can buy insurance on its own building it needs to do so.
“I think we are 100 percent within our rights to be collecting the money we have asked for reimbursement for utilities, maintenance, insurance, just like has been done in every one of these leases,” Jones said.
He said he’d rather not fight this battle all of the time, “because it’s frustrating and a waste of my time and Roxanne’s time to fight with the city over something that they’ve been paying in the past.”
Jones said he wouldn’t have problem proposing to the city a 10-20 percent reserve each month while the fund built up to $100,000 “with the understanding that if I need that $100,000 I can take it to zero and it can be built back up. Once that fund reaches 100 percent, the withhold stops and every bit of it goes to the facility. If that fund is depleted, the withhold starts again until it’s brought back up.”
Alexander commented that there is nothing in the lease requiring a reserve fund.
“I don’t think I should have to do that, but if that’s what it takes I would do it,” Jones said.
Alexander said it is the board’s job to decide what is maintenance and what is operation.
“I almost feel it’s a vindictive thing, holding the money,” he said. “I’m about ready to call the attorney general and let him know what’s going on. It’s illegal for the city to withhold or use those funds for anything but the hospital and they’re withholding us using the funds.”
Jones said he has scheduled two meetings with the mayor which were cancelled on the days they were scheduled.
“If they don’t talk to us we can’t figure anything out,” he added.
Jones encouraged board members to reach out to City Council members to encourage a resolution to this situation.
Karen Weido said the hospital received its Home Health license last week and have applied for Medicaid. They are still waiting on Medicare change of ownership approval for Rural Health and swing bed.
Jones said there will be no first-year residents from UAMS-South beginning in July.
— Board approved $175,000 to upgrade wireless technology in the hospital. Jones said the wireless technology was inadequate when it was put in. Nurses are having problems taking care of patients in far rooms. He said this would qualify as a COVID allowable expense.
— Board approved $70,000 to upgrade security cameras. Jones said there have been instances where people have come through the screening process, gotten through, should have been screened out and never gotten into the hospital that were COVID positive. “This would allow us to track them through the hospital, see what areas they go to so if we do back tracing we can see who they interact with,” Jones said. This would also be a Covid allowable expense.
— Director of Nursing Stephanie Schmittou said 128 people have received COVID vaccines through the hospital. Jones said MRMC has requested more doses to help the county.
— As a way to boost morale among employees, in December management gifted the with 12 days of Christmas goodies such as candy bars, treats, even a roll of toilet paper from the Grinch one day.
— Jones said MRMC started using Workplace for employees, a type of social media among employees. It gives them the ability to also create groups among themselves. It has a chat feature that allows for real time messaging between employees.
— The MRMC Foundation raised over $13,000 through it’s last “non-event.”
