By Rich Heiland
Free Press Publications, LLC
For Walker County News Today
THE WALKER COUNTY Hospital Corporation (dba Huntsville Memorial Hospital) received a $2.9 million cash infusion from the Walker County Hospital District board Thursday night. The hospital corporation has fallen millions in debt to vendors and the District and rumors it might go bankrupt have surfaced.
(NOTE: The WCHC is a private non-profit that operates Huntsville Memorial Hospital under a contract with the WCHD, a state-created taxing entity that owns the land and building and is charged with providing a hospital and indigent care)
The vote came after interim Chief Operating Officer Michael Morgan, an employee of the contract firm Healthcare Management Partners, said the “bridge” financing was necessary for Huntsville Memorial Hospital to ride out revenue losses until February. At that point, Morgan told the Board, the hospital would be in its best cash flow position in three years. That, he said, would significantly improve the possibilities the hospital could attract a new capital partner.
The $2.9 figure is a bit misleading, however, since it involves shuffling some back rent payments to allow the District to have funds to use as a Medicaid match. In the end the District would really be handing over $1.2 million.
Currently the WCHC/HMH is in default on rent payment. Under this plan the District would give $1.7 million to the WCHC/HMH. It then would give the money back and the District would send it to the state, which then would send it to the Federal Government which basically would match it and send back $3.4 million. that amount, which would come back in January, is key to the cash flow position Morgan outlined.
The remainder of the money – the $1.7 million – would bridge a funding gap tied in large part of a lawsuit challenging a state formula for reimbursing for children’s care.
The District Board voted 4-1 to approve the action, with Dr. David Toronjo voting against it. Dr. Toronjo made it clear, in series of questions and comments, he felt not enough time and detail had gone into planning how the money would be used and creating accountability measures.
Morgan, and District Administrator Ralph Beatty, himself a former CEO of the hospital, said Morgan has detailed the needs clearly. Morgan said he would meet weekly with each board member and work with them to monitor how the funds are being used.
MORGAN, IN A report to the board, said the hospital has made significant operational improvements in almost all areas of revenues and expenses, which is why he feels if it can get over the next few months, it will be solvent in terms of daily cash flow.
He cited two key areas that have created a current bind for the operation.
“We were supposed to get $500,000 income from the state,” he said. But, children’s hospitals around Texas filed a law suit challenging the formula for those funds and that has led to the hospitals around the state not getting those payments.
“We were notified three weeks ago we were not going to get the funds,” he said. “We looked at the projected formula and under it we may have to refund $50,000 rather than getting $500,000. It is not just us.”
He also said one operating unit in the hospital has been experiencing serious losses. He declined to name it because he said “it is a very good department” that was impacted by loss of a key person. He said solutions are being sought and at some point, that will turn around. That loss is $500,000 a month.
Taking out those problem areas, Morgan said the future picture is good. He cited improvements such as:
- The EBIDA figure is 46 percent improved over last year. EBIDA is short for “Earnings Before Interest, Depreciation and Amortization.” Those items are accounting procedures that may vary based on situations and thus, taking those out gives a more accurate picture of how daily manageable operations are doing in terms of cash flow.
- Operating income is up, expenses are down. Some of that goes back to closing clinics in outlying rural areas. Morgan said it’s not unusual for hospitals to add clinics to increase volume, but in the case of HMH, it didn’t work. Services offered in outlying locations now are being offered in the Rural Healthcare Clinic behind the hospital;
- Admissions are up 22 percent;
- CCU admissions are up 18.4 percent;
- In-patient and out-patient counts are both up;
- By hiring pre-natal nurse practitioners in the rural clinic to work with Medicaid pregnancies, then paying doctors to deliver, the hospital is recapturing Medicaid pregnancies lost to other area hospitals.
Morgan told the District Board that he could not make their decision for them on his request for the $2.9 million, that he was just delivering the message.
TORONJO SAID he felt that in this instance, as in others, he had gotten critical information at the last minute without time to digest it. He said he felt there should be some caveats placed on the money and he said the District should have fallback plans if this bridge doesn’t work.
“I would like to see a written proposal,” he said. He also said he would like an Attorney General’s opinion stating that giving tax dollars to a private corporation is legal.
Anne Carr-Woodard, Board chairwoman, said it was. She cited the state enabling act that creates hospital districts. Given that one of the charges is that the District provide for, and maintain a hospital, these funds are a part of that. One reason for giving the hospital the money is that it would be illegal to make a loan of taxpayer dollars.
Still, Dr. Toronjo said he wanted to know what the fallbacks would be.
“What other options do we have?” he asked. “If this is Option A, then what is Option B, Option C and Option D? Would D be the District taking over the operations? That is fraught with problems. Would Option C be to get our own operating partner, also fraught with problems?”
Dr. Toronjo said he wants terms in writing, in exchange for the bridge funding, that would spell out consequences.
“One, if you (WCHC) cannot continue as the operator then the license comes to us. We get all the billing numbers, no negotiations; Two, we should meet with that board. We don’t talk to them. Let’s sit down and talk turkey; Three, we want to know the game plan, and if their plan fails, we need to have our plant; Four, there is an Oct. 1 deadline to have a capital partner. Is it going to happen? And if it doesn’t, what do we do.
“We need a timeline,” he said. “If ‘A’ does not happen by a certain time, then ‘this’ happens and then ‘this’ happens.’ I don’t want to be sitting here in January in worse shape.”
Morgan said if the hospital reaches February with positive cash flow then some of the problems Dr. Toronjo envisions might be lessened. Morgan said it is likely some other entity will be operating the hospital.
He said out of more than 30 entities invited to consider taking over operations, nine expressed interest. That has been whittled to two.
“The current corporate board is going to go away, and they know that,” Morgan said. “What you will have is a partner that either will operate the hospital on a lease or would buy the land and the building. Of the two interested one is interested in a lease and one is interested in buying.”
Dr. Toronjo asked for input from fellow board members but did not get any detailed suggestions. Woodard, Jerry Larrison, Judy Emmett and Dr. Curtis Montgomery agreed with him that accountability and transparency should be expected. But all said the primary issue facing the Board was “saving the hospital.”
No information on the bailout subject or any of the other documents voted on at tonight’s meeting were available for public review at the meeting or on the district’s website prior to the meeting.
Rich Heiland, former publisher of the Huntsville Item and owner of Free Press publications, LLC, a reporting/writing firm working with media, has been a reporter, editor and publisher at several daily papers. He was part of a Pulitzer Prize winning team. He taught journalism at Western Illinois University. He can be reached email@example.com or 936-293-0293.