Interim CFO reports on hospital finances

Sierra View District Hospital has ended 2012 in a strong fiscal position.

However, the first six months of operation, for fiscal year 2012-2013, resulted in a $511,000 loss for the hospital.

In a report to the Board of Directors of the Sierra View Local Health Care District, Interim Chief Financial Officer Michael McGinnis offered statistical highlights from November and December, as well as stats that compared the hospital’s December 2011 finances to those of December 2012.

“Liquidity remains our strongest element,” McGinnis said. “We continue to exceed the benchmark of days cash on hand.”

Sierra View District Hospital ended December with 479 Days Cash on Hand, well above the 2011 Fitch Median, or benchmark, of A-Rated hospitals.

In other words, the hospital has enough cash on hand to continue operating for 479 days.

Profitability, however, has been running low.

Sierra View’s total operating revenue for the first six months for the current fiscal was budgeted at $65.1 million, but the actual amount gained was $62.5 million.

Fiscal year to date, the hospital has paid out $34.9 million in salaries and benefits, $5 million in professional fees, $10.7 million in supplies and $12.3 million in other expenses.

“In terms of overall finances, we are seeing a continuance of a trend,” McGinnis said. “Volume continues to run below budget, of where we were a year ago. The lower balance experiences are symptomatic of what we’re seeing in the industry as a whole.”

The current flu season has resulted in more medical admissions, however the number of patients in the hospital, deliveries and surgeries were all down in November and December.

McGinnis pointed out several examples, stating 11 pacemaker surgeries were performed in October, but only four in November, which contributed to the lower numbers.

Deliveries in November and December were down from the projected amounts by 2 percent and 5 percent, respectively.

The total number of surgeries performed in November were 383, down from the 414 budgeted for the month. In December, the number was 389, down from also a 414 budgeted amount.

There were several reasons contributing to the lower numbers, McGinnis said, including no surgeries for three days in November due to holidays and physicians being gone.

One surgeon was out of the country for three weeks, he said, and another out for several days.

“That’s one of the reasons why our volumes were significantly low during the month of November,” McGinnis said. “Procedures drive revenue.”

The only department experiencing high volume was the Emergency Department, he said. But even so, it was only in December.

E.D. visits during November were down by 1.7 percent. In December, the hospital had projected 3,666 visits but saw 3,753 visits, or a 2.4 increase in volume.

One positive occurrence, McGinnis said, is that discharges from Medicare patients were up. The hospital receives a higher revenue for MediCare patients.

Also on a positive note, though only down by 1 percent, the hospital’s total operating expenses for November and December were down.

Supplies and operating expenses, including salaries and benefits, were down both months, however, professional fees were not.

“Professional fees continue to remain an issue,” McGinnis said about traveling and contract staff.

Kathleen Widlund, vice president of patient care services, explained the traveling staff being utilized are professionals in highly-specialized areas, such as labor and delivery nurses and staff for surgery.

When it comes to capital structure — the way the hospital finances its assets — McGinnis had a few words of advice.

“There’s not an immediate concern through December, but if we continue to run like this, the Debt Service Coverage will become an issue and it is something you should watch carefully,” McGinnis said about its 1.66 ratio, comparing it to the 2011 Fitch Median benchmark of 3.7 ratio.

The Debt Service Coverage Ratio is the ratio of cash available to pay interest, principal and lease payments. It is a popular benchmark used in the measurement of the hospital’s ability to produce enough cash to cover its debt payments. The higher the ratio number, the easier it is to obtain a loan.

Contact Esther Avila at 784-5000, Ext. 1045. Follow her on Twitter @Avila_recorder.com.