Hospital board hires consulting firm to aid in dealing with MRH financial issues
by Charli Engelhorn
contributing writer
Sep 20, 2012 | 3405 views | 0 0 comments | 21 21 recommendations | email to a friend | print
Moab Regional Hospital is experiencing financial problems and plans to bring in an outside consultant to help streamline accounting and billing procedures. The new state-of-the-art facility opened for business in February 2011. Photo by Tom Taylor
Moab Regional Hospital is experiencing financial problems and plans to bring in an outside consultant to help streamline accounting and billing procedures. The new state-of-the-art facility opened for business in February 2011. Photo by Tom Taylor
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Moab Regional Hospital is experiencing financial woes and the hospital’s board of directors has agreed to bring in an outside health care consulting and hospital management firm to help the hospital develop a system to better manage finances and work through the current financial shortfall, according to Roy Barraclough, chief executive officer for MRH.

Officials with the Canyonlands Care Center said the extended-care facility is also in the midst of a budget crisis. Officials said that facility is operating $15,000 to $50,000 in the red each month (see related story).

The MRH board’s decision to hire Quorum Intensive Resources (QIR) was based on a recommendation from the U.S. Department of Housing and Urban Development (HUD), which provides insurance on the hospital’s mortgage loan with U.S. Bank. In May 2012, depleted cash reserves forced hospital executives to choose between paying MRH employees or the facility’s mortgage. In choosing to pay the payroll, the hospital became two days past the initial grace period on its then-due mortgage payment, prompting HUD to get involved, Barraclough said.

“We agreed to sign a contract with an outside group skilled in these kinds of turnaround situations to come in and help us continue what we’ve been doing and perhaps raise the bar a bit and look to solutions that will be more effective and would be longer lasting,” Barraclough said this week. “We don’t want to go through this again. Sustainability is a big piece.”

Financial woes began early on

MRH’s financial problems began almost as soon as the facility opened in February 2011. According to Barraclough, the hospital board recognized that the larger facility would result in some “growing pains” for a short time. The business plan took those problems into account and assumed the hospital’s financial side would be up-to-speed with the facility’s growth and operations within six months, Barraclough said.

“We knew that moving into the new hospital with the different plan and relationships between departments was going to change the way we did things... The physical plant drives how you do a job. But we grew so quickly that we didn’t have time make those changes,” Barraclough said. “Our billing got behind and our coding got behind, and when you don’t bill, you don’t collect any money. When you don’t collect money, your cash goes away. That’s basically what started this whole thing.”

With the new facility, the hospital’s mortgage increased significantly as did the amount owed on outstanding accounts with vendors. Barraclough said the administrative staff’s focus became improving the process for collecting payments from insurance companies and for fees for services provided, and making sure those fees were adequate to cover MRH’s expenses. He said the hospital was able to make some headway with those processes until May, when the almost $1 million in reserve funds had been depleted, leaving no money to cover both the payroll and mortgage.

“We didn’t know how far down we were. We lost our CFO [chief finance officer] the day after New Year’s, and we had no financial reports until we hired a new CFO five months later,” Barraclough said.

MRH reached the point of being at one day cash-on-hand, an industry term that Jim Richardson, a executive with QIR, said statistically measures the financial viability of an institution. Being at the one-day cash-on-hand level meant the hospital was spending money as fast as it was bringing it in.

“Today, they are at 20 days cash-on-hand, which is a good number. A standard in the industry is 32 days. So, right now the hospital is stable,” said Richardson. “But tomorrow we may have 15... It’s a moving number, depending on whether a bolus of cash comes in or... is required to go out on any given day. Collectively, the hospital staff is working rampantly to reconstruct and develop a sound and solid financial accounting system.”

Seeking help from city, county

Part of the long-term financial solution could be the Disproportionate Share Hospital (DSH) program run by the federal government, with the assistance of the state as the purveyors of Medicaid programs.

“The DSH fund is intended to provide supplemental payments to rural hospitals, and in some cases larger hospitals, that take care of a disproportionate share of Medicaid, indigent, or uninsured patients...,” Barraclough said. “Typically, in a rural community, we are going to take care of a higher amount of those types of patients.”

In Utah, the requirements to qualify for DSH payments extend beyond the statistical make-up of the patient population. The regulations require that hospitals must be owned by the local governing agencies in order to receive the money. MRH’s predecessor, Allen Memorial Hospital, met that criteria. But in 1995, Moab Valley Healthcare, Inc., a non-profit organization, took over ownership. The hospital was grandfathered into the DSH fund, even though it was no longer district owned, because it was still located in the same building. The move to the new building prompted the state to deem MRH ineligible for DSH funds.

“We didn’t think that was fair. We asked the state, ‘What can we do to get back on the rolls?’ We participated in the past, and we could use those monies to help keep our viability,” Barraclough said. “They said if we could get the state health plan changed from government-owned to government-supported, they could get [MRH] back on the rolls. We completed that process and became eligible again.”

In order to receive MRH’s annual allocation of DSH funds, which is approximately $893,000 for 2012, Moab city and/or Grand County must pony up matching funds totaling about one-third of the DSH payment amount – roughly $280,000 – according to Richardson and Barraclough. The amount would vary, but matching funds from local government, or “seed money,” as Barraclough called it, would be required each year for MRH to continue receiving DSH monies.

Grand County and Moab city discussed the issue during a joint meeting on Friday, Sept. 7, although no decisions were made at that time.

“I desperately want the hospital to survive and keep surviving in the future, but as a county, we need more information before we can put any money their way,” said Grand County Council member Audrey Graham.

MRH has until Nov. 29 to come up with the matching funds from local government, according to hospital staff. But officials emphasized that the DSH funds are not a panacea for the hospital’s financial difficulties.

“Our primary objective is to put into place a set of processes that will allow us to improve our sources of supplemental income, increase our reserve fund, improve our operations, and keep the ball rolling after Jim [Richardson] leaves,” said Barraclough. “There are guideposts as far as ratios and targets of numbers compared with other rural hospitals. As long as we maintain those ratios, we should be doing well. This was a temporary disruption of cash, but the future looks bright.”

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