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The Wyoming County Community Health System is in deepening financial trouble with nearly $7 million in losses through April 30 and the situation is only worsening, according to a report from the hospital’s chief financial officer.
Interim CFO Merlyn Knapp at Tuesday afternoon’s Board of Managers Finance Committee meeting walked board members through the dire financial straits the hospital is finding itself in.
“There has to be more money available to keep this ship afloat,” Knapp said. “This is serious folks. I hope you grasp the intent of my message today, which is to move ahead and talk with the county to get some additional funds. It is imperative, in my mind, that this occurs.”
If WCCHS does nothing, problems will worsen in August, when operational funds would likely go into the negatives. From there, the situation would build itself up to a deficit of more than $3 million by the end of the year, according to Knapp. Payroll is $1.5 million of the operating funds.
Knapp said there are funds available which were set aside in the budget from the county to support the hospital. Altogether there are $2 million left in those funds to help pay bills.
He said to use those funds in June and July. While it isn’t enough to meet payroll and accounts payable until the end of the year, it will help cover costs and meet the budget in July and August, with operational funds beginning to go into the negatives in September instead.
“That’s still not enough to meet payroll and accounts payable,” Knapp said. “There has to be more money available to keep this ship afloat.”
Knapp said they need anywhere from $5 million, possibly even more, as the end of the year approaches. Yet even with an additional $5 million, the hospital would still lose money due to operating expenses, he explained.
“My expectation would be between now and the end of the year we get the $2 million for June and July, and we get $5 million — maybe more — to get us through the end of the year,” Knapp said. “A lot of that depends on how the cash is planned and used over the next five, six months. This is not a wait until tomorrow to make a decision. This is a decision that all of your employees are paid on time, and all your major vendors.”
Additionally, from January to April 30, Wyoming County Community Health System had a net income loss of $6,917,074. The month of April itself saw a loss of $2,717,316 in its net income.
That figure is six times more than the budgeted loss of $433,033 for April. The losses for April alone are also more than the year-to-date net income budgeted loss of $1,915,278 and last year’s to date net income loss of $2,606,116.
Most of this net income loss comes from the operating income.
“We generate roughly $81,000 more operating expenses on a daily basis then what we collect,” Knapp said. “That in of itself is a serious situation.”
WCCHS lost $9,721,655 in operating income from January to April 30 with a loss of $3,266,429 for the month of April alone.
The hospital budgeted a loss of $3,958,698 for January to April, despite losing $4,630,214 last year. For the month of April, officials had budgeted $993,888 in net income loss despite losing $1,609,369 in April 2021.
Knapp also outlined two future issues WCCHS is required to pay back: a bankers alteration note of $2 million borrowed to support the hospital’s capital budget and $2 million borrowed last October from Wyoming County to cover the pension plan.
In the finance committee packet issued for the meeting, additional reasons for the losses were stated:
Contractual allowances were $530,616 less than budgeted even though price adjustments effective in January generated contractual adjustments totaling 51.1 percent of gross patient revenue compared to 50.3 percent budgeted.
Outpatient Gross Revenue was $1,365,588 less than expected due to lower volume of imaging procedures and lab tests.
Clinic revenue was less than budget by $205,424 for the month and is $407,557 lower than budget year to date. Knapp said there were three clinics performing below budget: the obstetrician, orthopedics, and internal medicine. Orthopedics was performing below the budget because they no longer had Buffalo Bone and Joint Surgery. The other two didn’t have the same amount volume they did in previous years.
Total expenses were above budget by $1,373,904.
Salaries and wages were above budget by $613,390 mainly due to retro pay for 2021 and 2022 wage scales totaling $1,682,059.
WCCHS in 2022 planned for agency fees for contract nurses to decline, Knapp said. They planned for $1 million, but the agency fees haven’t declined.
WCCHS spent a total of $842,000 on the hospital and skilled nursing facility in March in staffing agency fees. In April, the total spent was $705,000.
“We spent $2.5 million already this year on staffing agency costs,” he said. “Again we only budgeted $1 million. Now that’s $2.5 million on a year-to-date basis for four months, which is roughly 37 full-time equivalents.”