OKANOGAN – The North Valley Hospital District Board met with the Okanogan County Commissioners and county treasurer on Tuesday, Jan. 26 to discuss their plan to pay off the $3.2 million in warrants they owe the county.

According to an audit finding from the county treasurer, “the district has been paying its bills with registered warrants since 2005. Registered warrants are short-term, interest-bearing loans used to cover daily operating expenses and long-term debt obligations when an entity experiences cash shortfalls…the district’s registered warrant balance at Okanogan County was more than $1.6 million at the end of 2007 and more than $1.7 million at the end of 2008. By mid-2009, the district owed Okanogan County more than $2.2 million for its registered warrants.”

The hospital board, along with Chief Financial Officer Bomi Bharucha and North Valley Hospital District Administrator Warner Bartleson, presented charts and a payment schedule to the commissioners and County Treasurer Leah McCormack.

“We’re estimating paying $500,000 a year,” Bartleson said. “We do know that we will get the warrants paid down but we recognize we’ve put enormous pressure on the county by getting them over $3 million.”

Bharucha explained the plan for the elimination of the registered warrants.

“The biggest payback for us will be the Charge Master Program where we’ll review every service we charge for and get them routed properly as well as raising our prices,” Bharucha said.

This plan states the updating of the Charge Master Program prices and codes should be completed by March 31 and the impact on the budget should start around May 2010. The district plans to reduce the number of days in their accounts receivables system by ten days and to see an impact from this by Dec. 31, 2010. When they reduce the number of days in their accounts receivable system by an additional ten days, they expect to see the impact from that by Dec. 31, 2011. The district expects to see the impact of reducing their expenses over February by March.

“The new hospital addition, which has been funded through an excess special levy, will be paid for by voters of the district who approved this in September 2007 with a 72 percent majority vote,” the audit finding states as the district’s response to the situation. “The depreciation and interest expense for the addition building will be paid by Medicare and Medicaid under the Critical Access Hospital cost-based reimbursement system. As of 2011 this is estimated to bring an extra cash flow of about $400,000 to the district each year. This extra cash flow will enable the district to start paying down the registered warrants in substantial amounts each year and also enable it to put away modest amounts for capital replacement.”

The district expects to see $21,250 in a total increase of reimbursement and receipts which they will use toward paying down the warrants. In total reductions in salaries and wages, the district expects to save $29,135 by eliminating two people from the Health Care Resource Group, cutting hours in the administration department, cutting support services, eliminating the retirement contribution of one percent, cutting salaries and wages for professional employees by five percent, and cutting salary and wages for management employees by five percent. Added to these reductions is $19,890 which will be saved by cutting the supply expense by ten percent, cutting the travel and education fund by 50 percent, eliminating the Clarius Language Interpretation service, cutting advertising by 50 percent and ending the contract with Mid-Valley Hospital general surgeons. These increases in reimbursements and cuts in salaries, wages and expenses are expected to bring in $913,219 which will be used to pay off the warrants.

“Having seen your plan, I feel it is a plan we can look forward to and rely on money coming in from,” McCormack said. “I do appreciate the fact that the goal is to get the warrants down to $2.5 million by the end of 2010.”

The district ended the meeting by planning to meet with the commissioners and treasurer again on Monday, Feb. 22 at 11 a.m. and to continue meeting with them on a monthly basis for the foreseeable future.

The hospital district’s situation has also caught the eye of state auditors. A Jan. 25, 2010 Washington State Financial Statements audit report states “North Valley Hospital has insufficient funds to cover current operations and its financial position continues to decline.”

The state auditor’s office recommended the hospital district establish a formal, written comprehensive plan to address its cash flow issues. “The plan should address the district’s financial condition including client services, future operating income and cash flow. We further recommend the plan be approved by the district’s governing body and the district closely monitor and evaluate actual results compared to the plan to ensure the district’s financial condition improves. The plan should be revised if expected improvements are not achieved.”

The district responded that it had a plan in place to address the issue and it follows most of what was outlined to the county commissioners and treasurer when the hospital board met with them Jan. 26.