In its regularly scheduled monthly meeting, the Board of Trustees for Phelps County Regional Medical Center reviewed and approved on Wednesday an independent audit of the hospital’s financial statements for 2008.
According to the audit, completed on May 28 by Deloitte & Touche, LLP, a St. Louis company, the hospital’s “. . . financial statements present fairly, in all material respects, the financial position of the Company . . . and the changes in its net assets and the cash flows . . . .”
Although the audit revealed no discrepancies in the hospital’s financial statements, a required report entitled “Management’s Discussion and Analysis,” included within the audit, stated the financial position of the hospital was strong; however, the “unfavorable financial performance during 2008” resulted in a decrease of net assets to $103.2 million at the end of 2008 — a decrease of about $3 million, or 2.8 percent, from December 2007.
However, the total assets of the hospital increased from $165.2 million at the end of 2007 to $178.3 million at the end of 2008, the audit noted.
Total liabilities increased from $59 million in 2007 to $75.1 million in 2008, primarily because of the debt incurred by the purchase of new imaging equipment and upgrade projects at a cost of $15 million, the report stated.
Also, management’s report indicated the hospital’s “financial performance during 2008 was not satisfactory and unfavorable when compared to previous years.” Reasons for the decrease in net assets included an increase in the Medical Center’s operating expenses, loss from operations in the Medical Group and a $1.6 million loss on investments because of significant market declines.
In citing financial statements for the calendar years of 2007 and 2008, the audit referenced three primary documents: Combined Balance Sheets, Combined Statements of Revenues, Expenses and Changes in Net Assets and finally, Combined Statements of Cash Flows.
Additionally, Deloitte attached a separate report with recommendations on how the hospital could improve internal controls associated with financial reporting, stressing it did not express an opinion on the effectiveness of its present internal controls.
Recommendations included documenting specific evidence in calculating the estimate of a patient accounts-receivable, contractual-allowance reserve fund; performing a documented review of the account reconciliation on a regular basis; performing a documented review of the journal entry before posting to the general ledger; reviewing investment statements on a monthly basis and performing a detailed reconciliation of investment activity; implementing a process to log all instances of access to the Meditech production environment; more quickly change employees’ user privileges when they transfer within their departments; periodically review user-access lists to ensure non-administrators are restricted to single-user accounts; perform an analysis-by-physician of the Medical Center admissions and revenue to determine whether losses are justified; obtain an actuary’s report that includes estimates of potential worker compensation claims incurred but not reported; document a formal policy of when interest is capitalized; create a formal process to grant physical access to the data center; and also create a formal policy to document required password characteristics.
Highlights of the audit revealed the following financial information:
• Combined Balance Sheets (compares resources and assets to liabilities for 2008/2007):
Total net assets decreased by approximately $3 million from 2007 to 2008 at $106.18 million to $103.2 million, respectively;
Total liabilities increased by $16.12 million, from $58.97 million in 2007 to $75.09 million in 2008.
• Combined Statements of Revenues, Expenses and Changes in Net Assets (Income Statement):
Total operating revenues in 2008 stood at $159.76 million; in 2007 revenues were $155.69 million;
Total operating expenses in 2008 were $161.89 million; in 2007 expenses were $147.36 million;
Nonoperating revenues (investments and other) totaled $3.98 million in 2007 and a minus $847,168 in 2008.
