Auditors note ‘price war’ for healthcare personnel

By NICOLE CARTRETTE
Staff Writer

While the Columbus Regional Healthcare Board of Trustees received a clean audit report, they were reminded the healthcare industry could be downright dirty sometimes.

At a Feb. 5 audit presentation before the Columbus County Board of Commissioners and hospital board a representative with Dixon Hughes accounting firm said costs will continue to rise and personnel retention is a key issue in the industry.

“Expenses are going to continue to grow on you,” Don Mcneill said, pointing out that the hospital’s total operating expenses increased 11 percent in 2006 and the ability to find qualified employees will drive up salary expenses. “It costs money, it’s not cheap.”

Net patient revenue for 2006 totaled more than $62 million, with operating expenses of $58.1 million.

Personnel costs and contract labor accounted for 56.9 percent of the hospital’s operating costs and the number of full-time employees rose to 637.

The average non-physician rate per hour rose from $20.35 in 2005 to $21.49 in 2006 but the facility continues to be dependent on contract labor, especially during peak periods.

Bad debts owed to the facility are up from last year. Bad debts totaled $6.1 million in 2006 –compared with about $5.9 million in 2005.

“Bad debts are an operating expense,” Mcneill said. “I dare say you’ll not see that number go down. A lot of times self-pay means no pay.

“It’s not just you, it’s the industry itself, you are not alone,” he explained.

Medicare and Medicaid revenues accounted for 72 percent of the hospital’s net patient service revenue in the fiscal year 2006. “Medicare will only pay so much,” he pointed out and warned, “we don’t see reimbursements going up.

“Hopefully I’m not scaring you too much but we are primarily dependent on two large payers.”

Competition is getting tougher, he said, pointing out “in Brunswick (County) they’re getting ready to put up a brand new hospital.”

Changing focus to the positive, he said the hospital has “a good bottom line” with net cash provided from operating activities of roughly $2.9 million despite the federal government not releasing Medicare payments totaling $1.2 million for the last 10 days of the fiscal year until October.

Mcneill described the hospital’s leadership as “conservative” and applauded the group for “paying out of pocket for infrastructure.”

“It’s going to get harder,” CRH Chief Executive Officer Bill Clark told the board. He echoed that Columbus County’s high population of poorer individuals contributes to the hospital’s high percentage of patients that are Medicaid recipients. Medicaid and Medicare are “tough reimbursements.”

“We lose on Medicaid and break even on Medicare,” Clarke said.

“Another bill problem is so many uninsured,” Clarke added.

“The reason for that is small businesses can’t afford insurance for employees and they pass it on,” Clarke explained. The county-owned hospital cannot turn people away, he pointed out. “Any person could come in off the street and we will not turn them away.”

Clarke said the nursing turnover rate was high last year and he hoped the problem could be fixed in order to save money.

Keeping costs down is an ongoing challenge the administration continues to tackle with turning to consultants for productivity models and keeping supply costs down with purchasing power through a group plan, he said.

Supplies are the second largest expense to personnel and represent slightly more than 20 percent of operating expenses. He said the hospital is improving clinical documentation in order to increase reimbursement, as well. The hospital is also working on negotiations with insurance providers.

The hospitals assets totaled $80.8 million in fiscal year 2006, with net assets totaling $62.6 million. Liabilities decreased to $18.2 million.

At the end of 2006, the hospital had a total net investment of $33.6 million in land, buildings, equipment and furniture.

CRH is a nonprofit acute care hospital. The hospital facility is owned by Columbus County and the annual rent payment is $1. The current lease expires on November 30, 2016.

In 1996, the county entered a financing contract to provide $7.4 million for building expansion and again in 1997 for $4.6 million for expansion purposes. CRH makes semi-annual payments covering the cost of the $491,560 debt service payments. The total debt scheduled to be repaid by 2017 totals $7.8 million in principal and $2.5 million in interest.

The hospital has a management contract with Quorum Health Resources to provide managements services and a chief executive officer and chief financial officer whose salary, payroll taxes, fringe benefits and relocation expenses are reimbursed by the hospital. Management expenses were $694,000 in 2005 and $836,000 in 2006.

In 2002 the Columbus County Hospital Foundation was organized and in 2006 Columbus Regional Properties (CRP), LLC was organized.

CRP was formed to be a joint venture between the hospital and local physicians. The LLC and physicians will own the property and building where Columbus Regional Same Day Surgery Center, LLC will be located.