Audit report indicates PAHCS is in good shape financially

This article submitted by Michael Jacobson on 12/27/00.

Paynesville Area Health Care System got good financial news at its yearly audit report.

PAHCS's bottom line showed profits up from a year ago, and Deloitte and Touche gave the operation a clean bill of health in its audit, which was presented to the hospital district's board of directors on Wednesday, Dec. 20.

For their 2000 fiscal year – which ended on Sept. 30 – the system posted an operating profit of $653,000, up $75,000 from a year ago. This operating margin ranked the system well above the national average and right at the state average.

An increase in patient services drove the system's profits. In the last decade, PAHCS partnered with a group of physicians and added six clinics to its operation. Revenue from providing patient services increased by nearly $2 million this year, from $12.6 million in 1999 to $14.4 million in 2000.

The main concern for PAHCS continues to be cash flow. Jesse Heft of Deloitte and Touche said cash flow is not an unusual problem for an expanding business. "As long as the proper amount of research is put into any venture…then it's not a problem," he explained.

The system did increase its cash through the year, but that was partly due to the release of an escrow account. Over $300,000 had been held in reserve to insure payment of the 1970 bonds for the construction of the nursing home.

Even with this increase, the number of days PAHCS could cover its expenses with its available cash went down slightly to 26 days (due to increased expenses brought on by expansion.) "It's something to watch," said Heft. "Twenty-six days isn't a lot. It doesn't provide much of a cushion."

Because of the cash flow concern, PAHCS puts emphasis on getting payments in. PAHCS continued to do much better than the state and national averages in collecting its accounts receivable.

The average age of PAHCS's facilities also is two years lower than state or national averages. This was helped this year by the completion of a new clinic in Richmond.

The system's healthy financial year came despite having 200 fewer patient days in the hospital this year than last. With discharges about the same, this brought the average length of stay down to 2.7 days.

With reimbursement based more and more on the type of procedure – and not on actual cost – efficiency in treating patients is beneficial financially. Dr. Bob Gardner, who is a member of the board as chief of staff, said a ratio of 2.7 was healthy. Too long of stays would indicate indecisiveness in sending patients home, while extremely short stays would indicate patients were being sent home too soon, he explained.

"The bottom line is good care in the clinic and the hospital because if you don't have that you won't do any procedures," said Gardner later. "They'll go elsewhere."

Administrator Willie LaCroix agreed, saying, "You practice good medicine and with good management the numbers will fall in line."

Heft did make some suggestions to PAHCS management: to continue to work on a corporate compliance plan; to prepare for upcoming changes in health insurance portability; to develop better standards for monitoring the pharmacy now that it is being done in-house; and to look at its self-insured employee health care plan.

Physician reappointments
The board approved four medical doctors as having completed their provisional period: Heidi Malling (family practice), Steven Bollinger (gastroenterology), Joe Nguyen (cardiology), and Hans Serleth (general surgery).

The board also reappointed a slate of doctors to the medical staff. Physicians need to have their credentials reviewed and be reappointed to the medical staff every two years.

Randy Nelson, D.O., and Randy Zimmerman, M.D., were reappointed to the active staff. Gene Beavers, P.A., Greg Friederichs, O.D., Laura Odell, Pharm.D., and Wendy Worner, CRNA, were reappointed to the ancillary staff.

Medical doctors reappointed to the medical staff were: Bernard Erickson (cardiology), Robert Glesne (urology), Albert Hammond III (gastroenterology), Richard Jolkovsky (cardiology), Keith Leavell (pulmonology), David Lindgren (Obstetrics/gynecology), John Matsuura (urology), Manuel Moran (general surgery), Hoang Nguyen (radiology), David Roberts (gastroenterology), Timothy Schuchard (cardiology), Tereasa Simonson (radiology) Ahmed Soliman (ear, nose, and throat), and David Webster (neurology).

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