[Editor's Note: This is the first of a potential several articles on the Gila Regional Board of Trustees meeting on March 20, 2024. It primarily covers the audit report.]

By Mary Alice Murphy

Gila Regional Medical Center Board of Trustees Vice Chair Betty Vega led the meeting in the absence of Chair Dr. Fred Fox.

With no board comments or chair comments, Vega announced the recognitions. Although none of the recipients was present, Dr. Norman Ratliff received recognition for his 10 years of service as a cardiologist at Gila Regional. Kerri Henderson was recognized for her five years of service in nursing, and Meagan Kuehnlenz for five years of service in EMS (emergency medical services).

In public input, EMS Director and County Commissioner Eloy Medina said he missed the chance at the county meeting to tell Chief Executive Officer Robert Whitaker how much he appreciated his support of EMS personnel. "A couple of weeks ago, we had a rough Sunday, with 26 calls, and some of them were bad, including a child's death. I had a young crew that day and some of them were really rattled. I called Mr. Whitaker at home and told them that I was sending some of them home, so they could rest. He immediately agreed and offered any help the hospital could give. I just wanted to acknowledge the appreciation of what he did for us. The crews appreciated getting a few hours off to recuperate. On Monday, we did a 'would of, should of, could of' review. I think everyone is doing well now. Thank you for your support."

In the approval of the consent agenda, members approved the regular board meeting minutes of Feb. 28, 2024 and also approved a resolution of agreement for PET (positron emission tomography) scan services.

In old business, the board members heard from the auditor Tom Dingus of DZA. Whitaker explained that at the last meeting the state had not yet approved the fiscal year 2023 audit, but now the audit is approved, and Dingus would give a report.

Dingus said this was the eighth year his firm had done the hospital audit and the state requires rotation of auditors after eight years, so the FY 2024 would have to be done by someone else. "It will be at least two years until you can consider us again."

He noted that the DZA CPA firm does about 100 hospital audits a year, mostly in the western U.S. "We primarily do critical access hospitals, rural health care and not-for-profit, with 90 percent of it health-care related."

Dingus said the audit was completed on Jan. 17 and submitted to the state. "Nothing changed in a substantive way from the draft you saw last month in executive session."

He attended by video and shared his screen. "It was an unmodified report, with noting unusual in it. Please ask questions." He noted the report stated the hospital is part of Grant County and that a few auditing standards had changed during the year, but didn't have much impact on the report.

The first section addressed the financial statement, the second the balance sheet. The balance showed about 132 days of cash in investments, so, even if no revenue came in, the hospital could continue to operate for at least that many days. Net patient revenue as of June 30, 2023 represented about 43 days of cash. "That's in the realm of good revenues you would expect for a facility of your size."

The third part addressed the receivables, with it being mostly the Medicare cost report settlement for FY 2023. The hospital gets paid throughout the year and the cost report trues up the actual costs. There's always a receivable or payable at the end of the year, he said.

"The most unusual thing you'll see is the CARES Act payment, the $2.8 million, showing up throughout the report. It wasn't completely paid by June 2023, so you'll see that as a receivable. We'll come back to that later," Dingus said. "It is significant."

On the liabilities he said there was nothing that was very significant, "but what stands out the most, because standards changed, is not much debt shown in the organization."

He said, moving onto the statement of revenue, expenses and changes, "the key takeaway is that net patient revenue was up 7 percent, because of collections and continued patient care. Supplemental payments decreased by more than $1 million, just from the previous year, because of changes in the New Mexico program. If you go back 5 or 6 years ago, this used to be multiple millions of dollars. Expenses increased by about 6 percent during the year, leaving a positive number of about $1.7 million compared to a $5 million the previous year. There won't be as much in the future because in 2022 was when the last of the Covid relief came in. In 2023, you did receive an employee retention credit of $8 million, but it was a one-time thing."

In the non-operating revenue section, except for the above mentioned, the hospital doesn't receive much non-operating revenue. "You are a county-owned hospital, and you don't receive any tax support. You have gotten a lot of grants over the past couple of years, which adds to your margin rate of $11 million, compared to $10.5 million in the previous year, when there was a lot of Covid relief, so this is good."

With no questions, Dingus continued his report.

He noted the financial audits are basically designed for those outside the organization. including the citizens, the state in this case, insurers and Medicare.

Skipping ahead to net patient revenue to talk about, he said that about 44 percent of GRMC revenue comes from Medicare, 18 percent from Medicaid, "so almost two thirds of your revenue comes from the two. The employment retention credit was a significant number for you." He noted that it's been in the news a lot that the IRS and other agencies are concerned that some of the money was sought by organizations that were not due the money.

"Yours was in well before that," Dingus said, "and your report was unique, along with some other hospitals, that you paid a premium to insure that if the government demands the $8 million back, you will not have to pay most of it, but only the deductible of about $640,000."

The second auditing report is required every year. "The takeaway is that there are not significant findings. The third auditing report is specifically on federal awards. If you receive more than $750,000 in federal funding, you have extra reporting. No finding in this report."

There were a few findings that he touched on briefly. "The first one was the state audit rule requires a physical capital asset inventory be done, particularly the equipment, every year at the end of the fiscal year. It was not done. Related to that is the accounting of the leases and the right-of-use asset leases and keeping that updated on a regular basis."

He said the second deficiency is a significant one related to some accounting reconciliations that needed some adjustments.

Another deficiency was related to the federal awards, which require and place a lot more compliance reporting burdens on the organization. "This finding showed it was not as systematic at the monitoring. There was nothing done wrong with the compliance itself, just the monitoring process needed some improvement. It's an internal control finding related to making sure no one finds a compliance finding in the future."

Another compliance one relates specifically to the New Mexico compliance rule to approve the budget, and the budget amount is the expense number. If you exceed the expense number, it is a finding. The way to avoid it is in June or whenever is to review the actual expenses to make sure any additional expenses are approved by the board.

"And then, by state law, the audit is mandated to be prepared and submitted by November 15, which is a good practice, but we work in a lot of states, and this is the strictest due date we see," Dingus said. "It was not met, but really everybody who worked with the budget changed over during the audit process."

Vega had some questions. "I am concerned about the audit not being done on time because it could have a detrimental affect on the county."

County Manager Charlene Webb, an ex officio member of the Board of Trustees, said: "Our audit was late because your audit was late, but it does not affect our bonding capacity. Your audit being late compounded ours being late."

Vega said: "That's just something we have to take care of."

Whitaker replied: "Yes, we have people and processes in place."

Vega also commented: "I'm sure we've put corrective actions in place." Whitaker confirmed that.

Board Member Seth Traeger asked what corrective action was in place.

Whitaker replied: "We have a member on the accounting team who oversees the tracking and recording for the state and federal grants, as well as expenditures and payments of reimbursement for those. We've set up all the protocols."

Traeger thanked Dingus for helping several board members review the draft in executive session in February, and for being able to see it before the final version.

Board members approved the audit.

With no new business, the next article will begin with administrative staff reports and updates.