Hospital $1.3 million in red
One look at the Tahoe Forest Hospital District’s 2000 year-end budget and the obvious question is asked: How did the hospital district go from $3 million in profit in 1999 to a $1.3 million loss in one year?
An audit of the 2000 year-end financial statements by the McClintock Accountancy Corporation show the hospital district incurred a $2.1 million loss in operations, which resulted in a $1.3 million deficit. The report indicated that most of the audit adjustments were made to the district’s contractual and bad debt allowances.
Hospital staff are blaming the deficit mostly on a failed billing and collection system and the inability to collect payments from commercial insurance companies. The district also incurred costs of unbudgeted services as well as an overpayment by Medicare and MediCal.
“Our billing collection system failed,” said TFH CEO/ Administrator Larry Long. He said the problem started with a faulty billing software system, EC2000, that was installed in 1998. The
district had to rely on outsourcing and manual billing practices while searching for better billing/collections software.
Other unexpected costs were in the areas of employee benefit packages and contractual allowances, hiring consultants for billing and collections procedures as well as inflation and the overall environment of the health care industry.
“We had originally predicted about a $76,000 profit (in the preliminary year-end report) and that was far short of where we hoped to be,” Long said. But some of the increased costs became apparent in monthly reports as the financial year progressed. “We ended up with a $1.4 million swing in the budget.”
Long said steps are being taken to remedy the billing system situation. The hospital will no longer outsource billing and collection duties. Last year, a consulting team was hired to look at the billing problems and help with billing and redesign of the system. The district recently installed QMS, a billing management software tool. The district also recently installed a new Electronic Data Interchange (EDI) system, ClaimNet, which takes demographic information and combines it into a bill. District staff are currently working on getting that system up and running. In April, the district hired a Patient Financial Services Director, David Bolton, who has expanded the patient financial services team.
“We think that we have all of the fixes in place to ensure we won’t see a recurrence in increases in contractual allowances and bad debt,” Long said. “It’s taken us this long to sort through the issues and the problem.”
TFH District Board President MaryLou Sullivan said the board knew that the hospital would not see much profit in this year’s budget, but did not know they would be in the red until the year-end audit.
“We knew that the year was not going to be like last year where we pitched a perfect game on the budget and made $3.2 million. Our understanding was based on the detailed monthly financial reports reviewed at the regular board meetings during the course of the year,” Sullivan said.
Hospital staff said discovering overpayment of funds to the district is not an unusual occurrence. Long said with Medicare and MediCal payments, it’s only an estimate and every year the reimbursements generated back to the district will be an underpayment or an overpayment.
Sullivan said the district discovered they were overpaid during the audit process, and because of corporate compliance, the overpayment of funds get sent back immediately.
“There is no mystery to it,” she said.
Budget cuts are not expected to be made, and Long said the fixes are already in place.
“We’re already seeing some benefits and progress,” Long said, adding administration staff expect to see a real turnaround by the end of the calendar year.
Both staff and board members believe the hospital is doing well in a managed health care environment which faces daily challenges.
“It is sobering for all health care entities,” Sullivan said. “The public needs to pay close attention to this. TFH has weathered the storm pretty well considering the difficulty of the various challenges out in the reimbursement arena … The rules for collection of payments due to the hospital change, literally daily, complicating the already complicated business of providing health care.”
The district has not experienced a budget deficit for 14 years, said TFH Director of Community Relations Joseph Ferrerra.
Dr. Karen Sessler, a local physician who is also a candidate for an open hospital board seat, said she was surprised the district is having such financial difficulties and is concerned the administration allowed the problem with billing to go on too long.
“It’s time to deal with it,” Sessler said. “I don’t think there’s any one finger to be pointed, but I do think the oversight was lacking.”
Her concerns include a shortage of money in the working capital fund and not enough money to meet the bills.
“We need to get a handle on things,” she said. “They’re on track to fix it but the board needs to be there to make sure it’s being done.”
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