Hospital discusses concerning shortfall

New River Medical Center
New River Medical Center

New River Medical Center is facing significant financial problems and reports generally low patient volumes.
A report prepared for the Monticello-Big Lake Community Hospital District board’s June 14 meeting detailed the issues. Seven months into the hospital’s fiscal year, a line item in the report called “Gain from Operations” showed a loss of nearly $2 million. The Net Income line, meanwhile, indicated a $2.3 million negative number.
“We looked over the finances, which look a little grim,” reported Board member Bob Dawson, who serves as the board treasurer.
If a shortfall persists, Chief Financial Officer Nancy Friesen said the hospital’s agreements relating to its bonds require the medical center to bring in a consultant to consider operational expenses. After considering operational costs, the bond covenants then require the hospital to consider raising the district tax levy to deal with a shortfall.
When a board member asked if the agreements would require the board to raise the levy, Friesen replied, “We need bond counsel’s input and we need the financial advisers, so I’m not going to sit here and guess. I will call the finance committee together when we have correct information.”
As this story went to press, New River Medical Center spokesperson Joni Pawelk said the situation regarding the bond requirements as they relate to the levy is still unclear. The hospital has two outstanding bonds, a 2003 bond for $7.7 million that paid for a west wing hospital expansion and a 2009 bond for $8.1 million used to refund bonds taken out in 1998 to pay for the master site hospital expansion.
During an open forum, speaker Isabelle Olson said the shortfall could reach $5 million by the end of the fiscal year at the end of September. She noted the current tax levy is $600,000. If the tax levy rose by $2.5 million to cover a shortfall, Olson indicated she believed her taxes would quadruple.
Olson is married to Tim Olson, a physician at Monticello Clinic, but said she was speaking on her own behalf. Monticello Clinic has had a falling out with New River Medical Center.
She accused the board and Chief Executive Officer Marshall Smith of financial mismanagement that could impact taxpayers.
“People are hurting everywhere and property taxes in Monticello and the hospital district will take a big chunk from folks that are working very hard,” Isabelle Olson said.
She called the hospital “very top-heavy.”
She said, “There are few services offered yet you have all these people overseeing very few services. Maybe it’s time to cut.”
All non-contract full-time employees at the hospital have had their hours reduced by 10 percent, Pawelk said. Smith is a contracted employee but donated 10 percent of his pay to the hospital.
Personnel are also evaluating services and expenses, Pawelk said.
“Certainly we are not looking for a $5 million loss,” Pawelk said. “We are doing everything we can.”
The $5 million number Olson used reflects a loss for one month projected as the norm for the duration of the fiscal year, Pawelk said. She said she did not know what the shortfall could amount to at the end of the budget year.
“At this point we are waiting to process what the numbers will be in light of the action we have been taking,” she said.
Friesen said she and Smith are continuing to review the situation. Smith added that the two of them have traveled to the Twin Cities to meet with representatives of the bonding company and have also had telephone conversations on the matter.
Smith said the hospital administrators are seeking to “make sure we’re taking the right steps that are expected in addition to preparing for a operational assessment required by the bonding company in the event there’s questions about the potential for a tax levy (increase). We want to make sure we’re following all those steps, and that’s what those meetings are pertaining to – ensuring we’re following what’s required of us.”
Friesen said she would send information out to the district’s finance committee and would call them in case some action is required.
The performance report states inpatient rehab volumes are near budget and extended care numbers are higher than expected. Overall, though, the report states, “Volumes at the hospital continue to be low.”
The number of births at the hospital in particular fell dramatically, which run through last April. Births dropped from 267 at the same point in the hospital’s 2011 fiscal year to 185 in the current fiscal year. In May, the hospital suspended obstetrical services, including deliveries, C-sections and nursery care.