Tehachapi News

Tehachapi Healthcare District firms up finances and future

larger view larger view

The financial health of the Tehachapi Valley Healthcare District is looking up after a year of tough decisions by the board, including firing the designer/builder of the proposed hospital in June, and closing the California City radiology office in July.
Also in recent months, Medicare has withheld reimbursements of more than $1.8 million in what that federal agency concluded were overpayments going back five years; and Medi-Cal payments to the district have disappeared until the California legislature approves a budget.

Nevertheless, Chief Financial Officer Joseph Demont, reporting Aug. 20 to the district's board of directors at the Golden Hills Community Services District meeting room, said, “By our calculations, we have lots of reasons to be happy.”

Demont, with his internal, unaudited projection of $27 million in gross revenues, $13.3 million in expenses and $15 million in contracted allowances for fiscal year 2007-2008, predicts the operating loss for the year will be approximately $752,000, which is less than the fiscal year 2006-2007 loss of $822,886.00.

He reported that the month of June showed an historic all-time record cash collection of $1.5 million — but, “We were a little slow out of the gate in August.”

There are two pieces to the district financial puzzle. The first is the hospital and clinics: “Everything we do in the way of providing medical goods and services to the community,” Demont said. “That piece of the district doesn't make money.”

The second piece of the puzzle is non-operating revenues from taxes, investments, interest and grants.

“We rely on non-operating funds to make money. All in all, the hospital district is in the black,” Demont said.

The completion of a budget for fiscal year 2008-2009 has been delayed for a month by the absence of the controller.

“We are scrambling to put together a budget by the end of September for board approval,” Demont said. “A budget is the blueprint for the kind of business development we plan to do for the coming year.”

Six months ago, the district hired Brenda Magee as the new director of billing.

“We are being more proactive,” she said. “We are taking the initiative.”

Hospital bills that make sense to the patient make collecting payments easier.

“Our focus is on billing accurately, quickly and efficiently,” Demont said. “If the bill is not accurate, that's when people dispute the charge and they don't pay.”

Payment plans include a sliding scale and discount for cash.

“We have a fairly well-established charity policy and a cash pay policy. If you get treated you get a 40 percent discount of the price of any of the services,” Demont said.

The billing department provides a patient counselor to review situations and recommend payment plans, he said.

“Because we are community-based mission, our focus is on fulfilling that mission.”
He said they are also “Getting better at collecting from contract payors,” such as Blue Shield and other programs.

In his report to the directors, Demont — who, like Chief Executive Officer Alan Burgess — came on board as administrators less than a year ago said, “Over the last 10 months we faced some of our most serious challenges — Having the courage to take action on letting go of Aspen Street Architects [hospital design/build firm] and having the stamina and capabilities to absorb large withholds from Medicare for prior overpayments. Letting go of Aspen Street took enormous courage on the part of the board and the CEO. But doing so finally helped set the stage for a new beginning and a positive direction towards our goal of a new hospital.”

He said that with the Medicare withholds, “We weathered and withstood one of our most serious financial hardships ever…but we are happy to report that during this same timeframe:

• We never bounced a check, stiffed a vendor or missed a beat;
• For the first six months of 2008, we raised operating cash by more than $1.5 million vs. the same period one year. While sales were up only 5 percent, cash was up 15 percent;
• We were able to secure a half-million dollar credit line, but never had to borrow a penny;
• We improved our healthcare coverage for our employees…We got better benefits, better coverage and set the stage for yearling savings of $100,000 a year;
• We restored our LAIF [investment] funds to amounts greater than they were one year ago and funded our company match for our employee deferred compensation program;
• We managed to still give a 3 percent across-the-board inflation adjustment increase for the entire 170-plus workforce; and
• We showed significant improvements in all measurable patient care areas, based on LUMETRA Survey on patient safety culture.”
In a later interview with the Tehachapi News, Demont said, “We have a positive story to tell. We are fixing many, many things.”

He said that new reporting methods enable better tracking of expenses for the district's four operations — the hospital in Tehachapi and clinics in Tehachapi, Mojave and California City. Demont emphasized that in California City, only the radiology clinic was closed, and the clinic remains open.

One result of keeping closer tabs on expenses has been a retreat from 24-hour staffing in the respiratory department. In 2006, the hospital began increasing the hours of staffing the department and by September of 2007 the department was staffed 24 hours a day, for an average bi-weekly pay of $11,078.

“We said, 'Let's take a closer look at how the staff was organized. We didn't have many patients between midnight and three to four a.m. There was not enough usage during the night.”

As of June, 2008, the respiratory department schedule is 12 hours “on,” or staffed, and 12 hours “on call,” with staff available at a moment's notice, for an average bi-weekly pay of $8,127.

“There hasn't been a degradation in service levels,” Demont said. “We are staffing the work force to meet the needs of the business. At a 24-hour WalMart, at 3 a.m. there are not a lot of cashiers and bag boys. They put the staff they need for the people they expect.

“Alan and I and the board feel the need to fulfill our community responsibility by doing so intelligently and not wasting money.”

The most recent audit of the healthcare district confirms its correct accounting on three levels: financial statements, internal controls and compliance with federal programs.

The receipt of more than $500,000 in federal money from a variety of payors in the course of a year triggered the need for an audit that was more detailed than previously. The audit dated June 30, 2007, conducted by outside firm TCA Partners, LLP, of Fresno, found that “the financial statements referred to above present fairly, in all material respects, the financial position of Tehachapi Valley Healthcare District.”
The audit also found “no deficiencies in internal control over financial reporting that we consider to be significant deficiencies.”

Finally, the 29-page audit found that “the hospital complied, in all material respects, with the requirements referred to above that are applicable to each of its major programs for the year ended June 30, 2007.”