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WRH turnaround team: Huge understatement of 2009-10 loss

At June 28, 2011, meeting Adair Co. Hospital District Board of Directors meeting
  • Hospital representatives meet with 16 representatives of consortium holding debt of WRH to discuss new findings of errors in financial statement under previous administration with negative impact of $9.4 million for fiscal year ended June 30, 2011
  • Hospital is seeking, and hopeful to get additional $4.4 million turnaround financing
  • Dr. Clinton Kiteck will be new Chief of Staff, to succeed Gary Partin
  • Hospital moves ahead with new equipment, reopening of psychiatric unit, physician recruitment, replacing of of antiquated computer system
  • Board receives Kentucky Hospital Association report of Westlake's impact on Adair County. Its $14+ million payroll is 10.3% of county total.
  • Hospital already seeing benefits of major changes on expense side, though initial costs of reduction in force (RIF) delays improvements on balance sheet until August or September

By Ed Waggener

Westlake Regional Hospital will make it and will have a bright future, Ken Doran, the interim Chief Financial Officer told the board last night, but the board was treated to what is hoped will be the last revelation following scrutiny of the records of the fiscal year ending June 30, 2010.

Doran made the information public in a presentation about a meeting with the consortium of banks in Danville, KY, yesterday.

Additional write-downs to the year gave a projected loss of $9,430,000 for the year, not the $551,234.

The figure is "projected," because, Doran said, the final audit is not complete.

The $9,430,000 figure includes these additional adjustments:
  1. To write-down Third Party Receivables to actual balance ($2,340,587/ $551,234 - ($1,788,858)
  2. To record Third Party Payables related to KY Medicaid (2,372,553 +$98,516) - ($2,471.069)
  3. To write off Construction in Progress at June 30, 2010 - No future benefit - ($4,618,839)
For a total projected loss for the year ended June 30, 2010 - ($9,430,000.)

The massive loss came fully six months before Spectrum Health Partners, LLC, took charge of the hospital in February 2011.

Banks have been given general factual comments about the WRH situation

Doran said that the banks were presented general factual information about the hospital's situation, citing Spectrum's emergency takeover of hospital operations when approximately 13 members of the Westlake management team resigned en mass and left the hospital with several patients in-house, an action Doran said is unprecedented in healthcare. Doran was accompanied on the Thursday trip to Danville by Rick Brown, interim CEO; Adair County Hospital Board Chair Jim Evans; Tammy Curry, who is being groomed to become the hospital's new CFO, and Adair County Judge Executive Ann Melton.Doran told last night's board meeting that the consortium of banks was presented with the positive outcomes for revenue generation and expense reduction which will see the hospital begin to show improvements in August and September 2011, with a projection solidly in the black in two years.

Hospital seeking new interim financing

The hospital is seeking loans totaling $4,433,000, which includes these elements:
  • Short term working capital - $1,000,000.
  • FY 2012 CAPEX - $1,933,000
  • Complete Computer Conversion - $1,500,000.
Doran said that the banks' response to their meeting is still up in the air. He said that the outcome of the findings will be shared with the appropriate authorities, which he said, Friday, meant with the independent CPA firms handling the audit.

Board Chair Jim Evans said, "Bad information was given," to the banks by the previous administration of Westlake, and added, " The verdict is still out," referring to whether or not the consortium of banks will continue to work with Westlake on the outstanding loan and the new loans being sought to aid the turnaround.

Despite the new information, the meeting was upbeat.

Rick Brown, Interim CEO, reported that the MRI project is going well. He said installation should occur in mid-August.

Approval of payment to retrieve Fixed Asset Information

The board voted 5-0 in a show of hands to hire an individual with knowledge of the outdated Cobalt computer programming system to transfer the Hospital's Fixed Asset information to Excel sheets. The cost will be $5,500. The motion to do so was made by John Nall, with a second by Josh Harden, who were joined by Chairman Jim Evans and members Bradley Irvin and Russell Guy Perkins. According to Mr. Brown, the Westlake system had been programmed by former CEO Rusty Tungate and he was the only one who had access to the information in the system.

Hospital saving on purchasing

Mr. Brown reported that the hospital will be switching from Amerinet to Net Assets for purchasing office supplies. He projected savings of approximately $20,000 per year on the hospital's $100,000 annual office supplies budget.

New payroll system approved

The board approved the purchase of a payroll computer system from Danville Office Supply which will cost $10,300. The new system will generate checks on Mondays by computer. The old system, which required a lot of hand processing, often meant that checks were cut on Thursdays before hand-out on Friday.Mr. Brown told the board that the hospital will be going to direct deposit, soon, for all payroll.

Board Member Josh Harden, in moving to approve the purchase, said that the system should pay for itself in a short time. The show of hands vote was 5-0.

Moving ahead with 18 bed geriatric psychiatric unit

Mr. Brown told the board that Diamond Health Care's recommendation for reopening the hospital's psychiatric unit was for 18 of the 27 beds to be utilized. He said that Diamond Health Care's projection was for an annual profit of $825,000 per year with an average daily patient count of 8. At 14 patients average, the projected profit would be $1.4 million.

Two new ADA (Americans with Disabilities Act) bathrooms will need to be installed, he said.

Lowered bad debts

Bad debts turned over for collection were down to $31,720 for the month ended June 30, 2011. Write offs unanimously approved by the board were $11,318, also down.

Dr. Clinton Kiteck will be new Chief of Staff

Dr. Gary Partin announced that Dr. Clinton Kiteck will be the new Westlake Chief of Staff following Partin's resignation date of August 10, 2011. Dr. Partin will be opening a new family practice, Family First, in Columbia, where he will practice one day a week. He will spend the other four days in Greensburg, he said, after the meeting. His wife, Dr. Beth Partin, N.P., will be a provider in the clinic.

Kentucky Hospital Economic Importance of Hospital released

Interim CEO Rick Brown briefly reviewed copies of a study of the Economic Importance of Westlake Regional Hospital on the local economy.It reported annual wages and salaries of $14,533,689. According to the report, that is 10.3% of all wages and salaries in Adair County.

To further illustrate the economic impact, the report estimated that increases in regional impact of a 10% increase in net patient revenue could mean $1,453,369 increase in hospital wages and salaries, $3,131,310 change in region wide sales of businesses, an additional increase of $1,770,089 in regionwide wages and salaries, and an $209,135 increase in state and local tax revenues.

This story was posted on 2011-07-29 11:56:54
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