The Valdosta Daily Times
Recent budget adjustments and employee benefit changes at South Georgia Medical Center have fueled rumors that the hospital is facing financial difficulties. In a recent meeting, those rumors were confirmed by financial consultant and interim Chief Financial Officer Raymond Snead.
Snead has met with members of the Hospital Authority, the administration and key personnel to discuss the problems he has uncovered in the last two months — problems which predate the purchases of Smith Northview and Berrien County, as well as the new construction on the campus.
“The hospital is healthy and it’s solvent, but it’s not as healthy as it should be,” said Snead.
SGMC has several issues, but the largest area of concern is the accounts receivable system, which Snead states has not been updated for 35 years. In addition, a continued over-valuation of the anticipated receivables has led the Authority and administration to believe that the hospital system was in a better financial position that it is.
“The income statements didn’t match the balance sheets.”
Snead said the financial side of the hospital that deals with payroll, invoicing, etc. is fine, but the area that is responsible for patient billing and other receivables is not.
“These issues did not happen overnight,” said Snead. “The problems have been there for a long time, but what we are seeing now is that sufficient evidence has accumulated to make this a serious issue.”
Employees who should have been responsible for around 1,200 accounts per month were actually handling “ten times that amount” or around 12,000, said Snead. Patient billing is several years behind, in many cases, and information on accounts “had been stuffed into drawers, files, etc., often because the employee didn’t know what to do with it.”
The end result is that there are millions owed to the hospital that they will now have to attempt to recover. Snead said all efforts to collect past debts will be made. However, he emphasized that any patient whose account has not been settled in the last few years, often because bills were not issued, will first be contacted by letter to explain the situation.
“We understand that not all of this is collectible, but the portion that is needs to be,” he said. “But that doesn’t mean we are going to turn people over to collections overnight. All circumstances will be taken into consideration.”
Snead added that the deficiencies in the billing process have been ongoing for a number of years, and predated current CEO Randy Sauls, who is being tasked by the Authority to correct issues.
“That’s why I’m here,” said Snead. “I’m a turn-around expert in the field of healthcare, and I’m here to correct serious operational issues that overwhelmed the processes, starting way back. Mr. Sauls and members of the Authority’s financial committee knew something wasn’t right, so they asked me to come in and see what I can do.”
Snead said in addition to the billing issues, repeated overstatements of accounts receivable led to inflated amounts on the balance sheet. This in turn led current administrators and Authority members into thinking that the hospital was on more stable financial ground than it actually is.
“On a financial statement, the value of the accounts receivable is estimated and split into two parts — one is the collectible amount and the other is the uncollectible amount, or reserve. The collectible amounts have been overstated and the reserve should have been increased.”
The reserve or uncollectible amounts include discounts given for insurance providers, Medicare/ Medicaid, etc. and only a small percentage is the amount of indigent care provided by the hospital to those who are uninsured or unable to pay.
According to Snead, the financial picture of the hospital and its overall health is also being affected in other ways, including fewer patients but longer hospital stays, issues with surgical procedures and other services being removed from Smith Northview after the SGMC purchase, and competition from physicians in the community who have built their own operating suites.
“This community has more private operating suites than just about anywhere else I’ve been. That can lead to physicians treating patients who they know will pay in their own facilities and bringing those who cannot pay to the hospital,” he said, putting an additional financial drain on SGMC.
When asked if the new construction of the parking deck and patient tower were responsible for any of the current financial issues, Snead said to the contrary, if those new facilities had not been built, the financial issues would be worse.
“In order to be A-rated, the average age of the physical plant is capped at 10 years. By adding the new assets, such as the electrical plant, the parking deck, the patient tower and the medical offices, it is reducing the average age of the plant below industry guidelines.”
One reason that SGMC had to utilize Lowndes County’s bond rating for the most recent construction is that the hospital could not qualify for an A-rating because the facilities exceeded the 10-year limit. Some parts of the hospital are 50-plus years old while the main buildings are around 30 years old, according to Snead.
“You have to remember too that new facilities, new equipment and new treatment environments mean better outcomes for patients,” he said. Under the new Affordable Health Care Act, patient satisfaction, length of stay, repeat hospitalizations and post-discharge care are all evaluated and the hospital can be penalized for not meeting certain benchmarks.
“The citizens of this community have no idea how fantastic a facility they have here,” he said. “Once this is said and done, SGMC will be in a better financial position than they’ve been in years.”
Snead anticipates staying at SGMC long enough to correct the issues and assist in the search for a new, permanent CFO.
“I love Valdosta, but I don’t want the CFO position permanently. I like challenges, and once they’re fixed, I move on to the next one.”