DAYTON—The overall financial picture for the Columbia County Health System is positive, according to Tom Dingus, with DZA and Associates, an independent auditing firm that works with the Hospital District. Dingus outlined the 2017 audit report with the CCHS Commissioners, and administrators at their regular meeting last week.

The challenge for smaller Critical Access Hospitals, like Dayton’s, is getting the cost to provide patient care to not exceed payments, and CCHS is trending in the right direction, said Dingus.

Dingus said there will be future positive impacts to the financial bottom line because of the aggressive swing bed program now in place at DGH, and the daily average census, which is rising. There are also increased patient volumes in both clinics.

Dingus said at the end of 2017, the District had 40 “days cash in hand,” and the industry standard is 90.

“I think you are starting to position yourselves where it starts to be a realistic goal,” he told the commissioners.

Days cash on hand is a measure of total short term and long-term liquidity, and measures how many days the system can operate.

Borrowing capability

Commissioner Bob Hutchens asked Dingus about the District’s ability to borrow funds for future projects.

“You are at the top end of what you can borrow for a while,” he replied. “You have more flexibility than what you had a couple of years ago, just not wide open.”

Dingus added, “You do have significantly leveraged operations, but less leveraged than it was five or six years ago, and every year you are in a little better spot. And as you pay down the debt service without adding more debt to the bottom line, you are showing good trends.”

The District has an Unlimited Tax General Obligation Bond in the amount of $775,000, paid for through a voter approved levy seven years ago, and Limited Tax General Obligation Bonds in the amount of $295,000 each year, which are secured by the $529,000 yearly M&O Levy, along with debt for the new equipment in the Diagnostic Imaging Department.

Dingus said the good news is the levy funds are not just going to service debt, but are going for current operations. However, the long-term debt ratio to net position percentage is still high, at 83%.

“The single biggest thing is the almost $1 million in taxation for the bond principle and interest related to the Unlimited Tax General Obligation bond,” said Dingus.

Payment structures

Dingus also spoke about the District’s dependency on multiple government payers. “There are so many non-routine revenue streams in rural health care,” he said.

He said 67% of the revenue comes from Medicare, 5% comes from Medicaid, 4% comes from Pro-Share, and a smaller amount from the federal government’s 340B contract pharmacy program.

Medicare comes up with a cost per patient per day, for nursing home residents, but Medicaid pays a lesser amount than cost per day. Pro-Share covers half of the gap between the actual cost, and what the District is paid, Dingus explained.

He said Medicare pays a scheduled amount for patients who are seen in the clinics. There is also an enhancement rate provided from the state, which is based on the numbers of patients enrolled.

Payments for 2014, 2015, 2016, and 2017 are just now being reconciled, said Dingus.

“What you got paid for those patients is now getting compared to the number of encounters you had, times the Medicaid rate, and then you either pay back the difference, or get more money, if it was less.

“Having a cost-effective system to estimate Medicare and Medicaid and Pro-Share on a monthly basis is not viable, and as a small organization it changes so fast,” Dingus explained.

“If your swing bed patients go way up you are getting overpaid, and if it goes down, underpaid,” Dingus explained.

All of this causes accounting nightmares for the district’s fiscal agents when trying to complete cost reports and establish budgets.

The Centers for Medicare and Medicaid reimbursed the District $368,000 in September 2016, after the 2015 cost report settled, according to CCHS CEO Shane McGuire.

The interim cost report performed in the fall of 2016 showed a payment of $415,000 was due from CCHS to CMS, which was paid off in April of 2017.

But the 2017 August/September interim cost report shows that CMS owes a payment to the District in the amount of $607,000, said Mcguire.

Payments from Pro-Share have been ongoing since December 2016, for a total of $346,498.00.

Pro-Share will make its payment announcement based on the 2017 cost report sometime in the fall of this year.

“We may go months being underpaid for services, perform an interim, and eventually be caught up, but it is always 9-10 months into the year. Conversely, if costs go down and we are overpaid for services, we will catch it in our interim, and CMS will want payment 30 days after submission of the interim,” McGuire said.

McGuire said that the district performs the interim cost reports because its cash position is sensitive. The need is to know sooner rather than later if there is a payable owed to CMS or the other way around, and an immediate adjustment to the rates can be made.

Financial trends based on the DZA report

Other positive trends for 2017 occurred in the current assets to liabilities ratio, as well as the capital equipment expenditures and annual equipment depreciation ratio.

Dingus said net days in patient accounts receivable showed a positive trend last year over 2016, and gross days in patient AR was “trending positive.”

The contractual adjustment percentage, or the percentage of gross patient revenue that is discounted to third-party payers, is lower, at 18%, which is favorable. The percentage of bad debt was 2.6% in 2017, and the charity care percentage was 0.3% in 2017.

Dingus said bad debt was a little higher in 2013 and 2014, as the Affordable Care Act and Medicaid expansion came into play. But it went down in states that expanded Medicaid.

“We are seeing it edging up a little bit in people who have insurance, but out of pocket payments are rising and adding to the bad debt,” he said.

Salaries and benefits are the district’s largest costs, Dingus said. “FTE’s went up, but your revenue went up way more this year, so that is a positive factor,” he said.

Net income compared to revenue is 4.1%, in 2017, compared to 3.9%, in 2016. The goal is to be in the three to six percent range, said Dingus.

“You have to be financially sustainable, generate revenue, keep moving along and build reserves, and be flexible for the future. So the right direction,” said Dingus.