An inaccurate e-mail being circulated claims Allen County Hospital is not profitable.
The e-mail also says financial information supporting that contention was collected through October of this year, while it was for a 12-month period ending in December 2008.
Information in the e-mail taken from the American Hospital Di-rectory shows a net loss of $381,699 for the 12 months of 2008.
Joyce Heismeyer, ACH’s chief executive officer, explained why the 2008 information is misleading and also noted that financial information made available to the Hospital Facilities Commission and the county’s consulting firm, Hospital Facilities Group, Wichita, clearly showed annual profits approaching $1.5 million. Plans for financing construction of a new hospital depend on hospital profits.
“ACH is charged significant pass-through ex-penses by HCA each year that would not occur with the county as owner. Those charges include things such as legal counsel, risk management, marketing consultation, etc.,” Heismeyer said.
Another factor that affects the bottom line is depreciation, which may be shown as an expense that affects profit-loss statements, but doesn’t affect cash accumulation that may be used for debt service. The 2008 net income figure includes depreciation, Heismeyer said. While equipment is depreciated annually, it is not replaced every year, rather is replaced when technology and needs dictate and bottom line supports replacement.
Depreciation, therefore, is not a cash expense. The money remains available for payment of debt or any other business purpose.
“Typically, investor-owned hospital organizations (such as Hospital Corporation of America, which operates ACH for profit) also prefer to look at earnings before interest, taxes, depreciation and amortization, because it is a much clearer picture of cash flow and shows an organization’s ability to make payroll and meet other financial obligations,” she said
Additionally, as noted in several of the meetings to discuss ACH as a critical access hospital, Medicare pays an estimate based on past history for each Medicare patient treated, Heismeyer said. Then, at the end of the year the hospital submits a cost report. Medicare reviews that data and makes an adjustment to the payments received.
“I know the 2008 cost report resulted in a substantial payment to Allen County Hospital in April 2009, which will not be available for public access until the 2009 data is released early in 2011.” That prospective payment was not included in the income reported in the e-mail, she said.
Under privacy protocols, Heismeyer is not permitted to divulge specific financial information before it is publicly released by HCA.
“Hospital Facilities Group, the external consultants, reviewed actual financial data from ACH over the past five years,” she said. “Based on that data they concluded ACH can earn an average annual income of $1.5 million.
“2008 was not our best year and I can assure you 2009 and 2010 are both better,” she said.
Further, Heismeyer noted, it is significant that HFG has no stake in the potential new hospital. It would have no motive to exaggerate the hospital’s annual income. To the contrary, it has every reason to be accurate since it depends on its accuracy to establish its reputation.
VOTERS will decide a countywide quarter-cent sales tax in the Nov. 2 general election, with estimated annual proceeds of $400,000 supporting construction, equipping and operation of a new Allen County hospital. The issue would run 10 years.
Iola commissioners also have committed up to $350,000 a year for 10 years from sales tax money the city collects.
After the first 10 years, most of the money to retire the debt will come from hospital profits and Medicare payments for construction available due to the hospital’s critical access designation.
