Hospital Audit Report Shows Impact of Cost and Reimbursement Challenges
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on Wednesday, November 6, 2019
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General
Spencer Hospital achieved a positive margin at the conclusion of fiscal year 2018-2019, despite increased cost and general reimbursement challenges. These findings were shared as part of the 2019 fiscal year audit report presented by Winther, Stave & Co., officials at Thursday’s hospital board meeting.
Gary Peters of Winther, Stave and Co. LLP, advised the Spencer Hospital Board of Trustees that the hospital experienced a positive fiscal year in 2018-2019 with an operating margin of 4.6 percent.
“The new normal for healthcare providers is striving to maintain a wide range of services and achieve a positive margin, while managing rising expenses that are not fully recognized by reimbursement updates received from Medicare, Medicaid and commercial insurers,” said Spencer Hospital president Bill Bumgarner. “The hospital’s pharmaceutical costs have nearly doubled over the past five years. Expenses for medical supplies, technology and labor increase while reimbursement rates typically change at rates below the general cost of living.”
Bumgarner said that despite narrower margins, the hospital is committed to investing in its people and technology as needed to provide patients in the region excellent healthcare services. During the board meeting in which the audit report was accepted, the board approved a major technology upgrade for Abben Cancer Center and awarded a contract for construction for the new comprehensive wound care center.
“The cancer center enhancements and the expansion of wound care services are both examples of Spencer Hospital’s commitment to meet our patients’ needs locally,” Bumgarner commented. “While we watch expenses closely, the board of trustees also understand the importance of continuing to invest in new technology, facilities and in our healthcare professionals to provide exceptional services to our patients.”
Bumgarner mentioned that the hospital’s commitment to quality is recognized through Spencer Hospital being named in 2019 as one of the Top 100 Rural Hospitals for the fourth consecutive year.
Winther Stave’s audit report shows the hospital’s revenues totaled $98,686,876 for the year ended June 30, 2019. The revenues included $84,610,628 in net patient revenue, $2,975,148 of other operating revenue, and $11,101,100 of clinic revenue. The hospital does not receive any tax revenues from the city.
Expenses for the year totaled $94,129,620, including $34,275,352 in salaries and benefits, $41,994,205 for supplies, services and other costs, $12,071,427 for prescription drugs, and $5,788,636 for depreciation expense on the hospital’s plant and equipment.
“The audit report also reminds us each year that Spencer Hospital consistently reinvests its net revenues back into healthcare services,” said Bumgarner. “That investment, in addition to the fine work of the hospital’s talented medical staff and skilled healthcare team, results in our medical community being recognized as one of the finest in the State of Iowa.”
Below is a condensed statement of revenues and expenditures for Spencer Hospital for the year ended June 30, 2019 (in thousands):
| Operating revenues ......................................... |
$98,687 |
| Operating expenses ........................................ |
(94,130) |
| Operating income .................................... |
4,557 |
| Non-operating income (expenses) ................. |
1,032 |
| Income before contributions .................. |
5,589 |
| Contributions / Transfer ................................. |
(3,973) |
| Change in net position ............................. |
1,616 |
| Net position - beginning of year ..................... |
103,192 |
| NET POSITION - END OF YEAR ...................... |
$104,808 |
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A copy of the audit report is available for review in the Office of Auditor of State and the hospital administrator's office.