Evans Memorial needs help

Hospital seeks OK from County to draw $700K from bond debt reserve funds

EMH owes vendors nearly $1.3 million

By way of a letter, Evans Memorial Hospital requested permission last week from Evans County Board of Commissioners to borrow $700,000 of excess funds in a debt service account that is currently servicing a series of 2006 hospital bonds to pay down nearly $1.3 million in vendor bills and equipment leases, some of which are 120 days past due.

The BOC took no action on the matter last Tuesday, choosing rather to discuss Evans Memorial’s proposal at a later date when a full board and County Attorney Jay Swindell were present. (Commissioner Irene Burney and Swindell were absent from last week’s meeting.)

Hospital administrators say something must be done by the end of the month in order to satisfy vendors.  Chief Financial Officer John Wiggins reported Monday that leasing agencies for hospital equipment that generates a good deal of revenue are threatening to confiscate the machines. “That’s why we have to do something this month,” he said.

Of the hospital’s $1.3 million in accounts payable (AP) owed to vendors and medical suppliers, $600,000 is more than 120 days outstanding.  EMH is paying interest rates to vendors on unpaid invoices ranging from 1.5 percent per 30 days outstanding up to 18 percent per year. 

“When you keep adding on to that, if you’re not able to pay, then you’re paying late fees, paying all this interest … it gets harder and harder to manage. You’re making the same amount in payments but not getting anywhere with it,” said CEO Nikki NeSmith.

Some vendors will agree to knock off late fees and interest for immediate payment in full, which the hospital would be able to do if granted access to the debt reserve funds. 

If the AP balance is reduced to $500,000, essentially eliminating all invoices more than 120 days past due, Evans Memorial would be able to sustain operating expenses, administrators say. But, county officials have their doubts. “One hiccup and they’re back to where they were,” County Administrator Casey Burkhalter said last week.

Evans Memorial must reserve $484,600 (essentially one annual payment) in the debt service account as of December 31, 2018. The excess funds of $700,000 remain from the hospital’s 2012 sale of Glenvue Health and Rehabilitation in Glennville. 

In 2014, private management company, ER Hospitals (ERH), requested the debt reserve funds be utilized for hospital operations, but NeSmith says the funds were never drawn down. “They wanted to, but we didn’t get approval for it,” she said. 

If approved by the BOC, hospital administration intends to pay back the funds drawn from the debt reserve account with pending donations from the rural hospital tax credit program which was increased to 100 percent in the recent legislative session and will take effect July 1. 

Tax credit donations can be utilized for any purpose that sustains hospital operations, including paying down AP, purchasing equipment or renovating facilities. The only restriction is that funds cannot be used to pay bonuses to hospital administrators.

Since January 2017, Evans Memorial has received nearly $1 million in tax credit donations, earning distinction as one of the top recipients in the state. Now that the tax credit for contributors has been increased to 100 percent, EMH expects the donations to increase.

Currently, the hospital has received pledges of more than $100,000 to be contributed after July 1, but the next round of funding is expected to be more competitive as hurting hospitals across the state vie for the funds. 

The legislation sets a contribution cap for each facility of $4 million per year, up to $60 million total for qualifying hospitals across the state, and more than 50 facilities qualify for the program. The credit program will sunset December 31, 2021.

EMH proposes paying back the loan to the debt reserve account at a minimum of $150,000 per year from tax credit donations over a five year period, but NeSmith says the hospital is willing to consider any other repayment options for the loan that Evans County wants to proffer. We’re willing to work with the county if they have any ideas on pay back,” she said. 

How did AP become unmanageable?

When the hospital resumed local control from management company ERH in January 2016, the hospital board prioritized reducing AP and the outstanding debt was paid down from $1.4 million to $800,000.

But, the balance has been trending upward for nearly a year, primarily due to $476,000 in Medicare take backs that hit the hospital in 2017 and $200,000 in a Medicare low volume adjustment that was discontinued in October. “We had cut it [AP] in half and when the take backs started, it started slowly creeping back up,” Wiggins said. The low volume adjustment was extended in the most recent federal budget, however, and just last week, EMH received retroactive payments.

While Evans Memorial has continued to offer the same level of service, patient volume this year has decreased from 2017.  “The past couple of years we have been busy up through May and even in to part of June, but this year we dropped off very early,” NeSmith said. “It just hit us harder a little bit earlier, but we have not identified what those reasons are.” Late summer months are historically the slowest season for Evans Memorial.

NeSmith and Wiggins suspect that higher insurance deductibles have caused some patients to delay having procedures done until the end of the year when they have met their deductibles, resulting in a reduction of patient volume at EMH in the first and second quarters of the year.

By Sarah Gove, Enterprise Editor – editor@claxtonenterprise.com