LUTHERAN QUILTERS – Members of the Quilts for Comfort Group stand between pews draped with some of the 205 quilts they made, in the Sitka Lutheran Church Tuesday. The group made the quilts for five local non-profits and one in Anchorage. The remaining quilts are sent to Lutheran World Relief which distributes them to places around the world in need, such as Ukraine, as part of Personal Care Kits. Pictured are, from left, Helen Cunningham, Kathleen Brandt,Vicki Swanson, Paulla Hardy, Kim Hunter, Linda Swanson and Sue Fleming. (Sentinel Photo by James Poulson)
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Daily Sitka Sentinel
Sitka Hospital to Ask City for Bailout Loan
By SHANNON HAUGLAND
Sentinel Staff Writer
Sitka Community Hospital, facing a cash flow emergency, will ask the Assembly for $1.5 million in a nine-month line of credit, hospital officials said Thursday.
Sitka Community Hospital. (Sentinel Photo)
“We have zero days’ cash on hand,” said Sitka Community Hospital CEO Jeff Comer. “Today we have negative cash. ... The perfect storm has hit, and we’re getting into cash crisis mode, which is why we’re going to the Assembly.”
The loan request will be heard at the regular Assembly meeting next Tuesday night. City Clerk Colleen Ingman cited the section in the code which states that the loan will require approval by a “super majority” of the Assembly, or five votes instead of the usual four required to pass a measure.
The hospital currently has a $500,000 line of credit that needs to be increased to pay bills and continue operations, Comer said. The hospital’s seven-month projection is for a loss of $1.3 million, Comer said.
“We are in a very difficult situation,” he said. “We need that (line of credit) to get back in place.”
The Assembly met Dec. 9 in an executive session attended also by Comer, two hospital board members, City Administrator Mark Gorman, City Finance Director Jay Sweeney, City Attorney Robin Koutchak and Ingman.
After the 90-minute session, Mayor Mim McConnell read a statement describing the crisis in general terms as a “perfect storm of financial events.” No details were given at the time, and the hospital board held an executive session of its own Dec. 17.
However, the details of the crisis were outlined to the Sentinel in an interview Thursday with Gorman and Sweeney. They said the problems at the hospital are not sudden, but have been accumulating over the past year.
“The important message is we’re getting a clear picture of the situation, and what it will look like for the next nine months, and we’re working hard to put a strategy in place,” Gorman said.
The hospital board is in charge of the operation of the hospital, including the management of the budget and the hiring of the CEO. Comer, an experienced hospital administrator, was hired in September. He said he was aware there were financial problems, but not to the extent that he came to realize in recent weeks.
The total loss in operations between July 2013 to November 2014 is $2.2 million, which was covered by the hospital’s savings account.
Comer compared the situation to a common problem in everyday life:
“You get your paycheck every Friday, and you cash your paycheck, and you pay your bills. And if you don’t have enough money to pay your bills you’re in a negative position. You have to either use your credit card or tap into your personal savings – that’s what we’ve done; we’ve had negative bottom lines, and we’ve continued to spend money. We drawn on our savings and we’re out of cash.”
Gorman said the problems are apparent in an 18-month spreadsheet that Sweeney compiled.
He and Sweeney said the same information was available in the monthly reports the hospital board received and which was also available to the public.
“What this will show you,” said Sweeney pointing to the spreadsheet, “is the look-back for 18 months, when they (the hospital) were barely keeping their heads above water. It didn’t happen all of a sudden. It didn’t happen in November. This has been brewing for months and months. ... What this shows you is clearly an organization slipping down the hillside.”
Comer agreed with the city officials’ observation that the problem has been a long time coming, and was apparent to anyone reviewing financial statistics from the hospital over a long period.
“It’s like the perfect storm of everything coming together, and it’s finally hit us,” Comer said. In the fiscal year that ended last summer, the hospital posted a $2.5 million loss in operations, and a decline of $1.3 million in cash. “We spent $1.3 million more than we had in cash coming in,” he said.
Comer said there are a number of problems surrounding the current crisis, including issues that are affecting small hospitals nationwide. But he said some problems are specific to the current crisis. One of the most glaring is the very low 87 percent collection rate on bills.
“We should’ve been collecting 100 percent of what we’ve been billing out,” he said. “We haven’t been doing a good job collecting our cash for two years. At the same time our accounts payable (our bills) have been going up. We’ve continued to buy things and increase spending. We don’t have cash any longer.”
The hospital is also having problems collecting Medicaid payments due.
“It’s always difficult dealing with reimbursement for long-term care,” he said of Medicaid. But, he added, “That is starting to come in.”
Another problem is a debt owed to Medicare, resulting from the failure of the hospital to credential a group of providers in early April. As a result the hospital will have to reimburse Medicare for the amount Medicare has already paid for the services from those providers, Comer said. He realized the error and directed the hospital to stop billing Medicare until the error could be fixed.
“What we’re doing is we’re working with Medicare, and we’ve notified them of a solution to pay them back this money,” he said.
He said one of his biggest concerns is the increase in accounts receivable.
“We have $4.4 million in accounts receivable we’re working on collecting,” Comer said. He said about 30 percent of those have been outstanding for 120 days, which is well over the average 5 percent.
“We haven’t handled cash collections well – that’s money that we’re owed and should be receiving,” he said.
Comer said he understands that the line of credit from the city is not “free cash” and as in past situations where the hospital has asked for help, the money will have to be paid back to the city general fund.
Gorman said this is an important point, and stresses that the city’s financial assistance will not be an outright grant to the hospital.
“The bottom line is there is going to be a limited tolerance, on the part of the public, to subsidize operations at the community hospital, given the acute demands for funding in the Sitka School District and other services provided to the residents of this community,” Gorman said.
When asked if hospital services would be affected by the financial situation, Comer said:
“The quality has not changed; we’re not cutting anything related to patient care,” he said. “We have a cash crisis. We want to get the cash evened out through the city’s line of credit.”
“Our goal is to take care of the people of Sitka, and that hasn’t changed at all, and we don’t want it to change” Comer said. He expressed confidence that the hospital’s plan to increase collections and reimbursements will close the financial gap.
Comer said he remains optimistic about the future of the hospital, but getting there won’t be easy.
“I’m very optimistic about the long-term strategy,” he said. “In the next 12, 24, 36 months – it’s going to be tough. We’re changing the culture, we’re looking at things differently – trying to do things smarter. I do remain optimistic. I think we can do this but it’s going to be tough.”
He said the $1.5 million from the city will help the hospital through the next nine months.
Gorman said city staff has been working with the hospital at the direction of the Assembly.
“We’ve been working closely with Jeff Comer to clearly understand the magnitude of the issues, the financial challenges, and work with him on solutions,” he said.
Comer said he is grateful for the help from the city.
“I’ve got to say publicly that Jay (Sweeney) has been fantastic,” Comer said. “I’m appreciative of Jay. ... We requested him to come in. We weren’t able to create a cash projection; we didn’t have the tools to make these decisions. He’s worked with us to set up a format I’m accustomed to working with. He’s welcome, and we appreciate it. He’s been a fantastic help.”
Comer added that solving the problem will take the whole community’s help.
“That’s the really the really important part,” he said. “We can solve this but it’s going to take the work of the city, the community, the board, employees and doctors.”
Hans von Rekowski, the chairman of the hospital board’s finance committee, agreed and expressed his support for Comer.
“The only thing I can say is since Jeff has come, I think he’s doing a great job, and we support him 100 percent,” von Rekowski said. He said he also appreciates the help from the city.
Comer, who is currently out of town on a family matter, said he plans to attend Tuesday’s meeting by Skype.
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20 YEARS AGO
March 2004
Advertisement: Tea-Licious Tea House & Bakery 315 Lincoln Street Grand Opening! Freshly Baked Scones, Cakes & Pastries Innovative Salads, Soups & Sandwiches Harney & Sons Tea. Lunch * Afternoon Tea * Supper.
50 YEARS AGO
March 1974
Photo caption: National Republican Chairman George Bush takes a drink of water offered by Jan Craddick, Sitka delegate, during the Republican convention held here. Mrs. Craddick explained to Bush that the water was from Indian River, which means, according to local legend, that he will return.