Sitka Community Hospital has a new CEO, and a new CFO; about a million dollars on hand; and no plans to ask for more money from the city.
Two months after a financial crisis forced it to request an emergency loan from the Sitka Assembly, an event followed by the abrupt departure of its CEO, Sitka’s city-owned hospital is taking stock and moving forward.
When Rob Allen signed on as interim CEO of Sitka Community Hospital last month, he says his first goal was to move the organization from “crisis mode to urgent mode.”
“What really helped was getting that million-dollar line of credit,” Allen said. “It really kind of gave us a cushion and stabilized us.”
That was the $1-millon loan from the City of Sitka, approved by the Assembly on December 23, after former CEO Jeff Comer, on the job for barely three months, discovered the hospital didn’t have enough cash to meet its short-term expenses.
So far, Allen said, the loan has given the hospital the breathing room it needed — and he hopes he won’t have to return to the Assembly for more.
One of his first moves as CEO was to hire a CFO – Chief Financial Officer. The hospital’s longtime finance chief, Lee Bennett, resigned on December 3, just as the financial crisis came to light.
In early February (2-2-15), Allen hired Cynthia Brandt for that role. Based in Anchorage, Brandt will work onsite at the hospital Mondays through Thursdays, through the end of April.
Allen said that for both him and Brandt, goal number one is to stabilize the hospital’s finances. Goal number two is to figure out what went wrong.
“And hopefully we’ll have a much clearer story that we can tell about the past couple years,” Allen said. “Because if you look at past years’ financials, you know, four or five years ago, the hospital was in pretty strong shape.”
But for the moment, Allen said, he’s concentrating on the present.
In the first six months of this fiscal year, from July 1 to December 31, 2014, the hospital lost $1.13-million. In December alone, the last month for which there are complete numbers, the hospital saw a net loss of $143,578.
Some of the problems are clear: the long-term care unit, which provides much of the hospital’s operating revenue, had just nine residents in December, down from the budgeted 12. There were also fewer acute care patients.
And Allen says the hospital’s billing system is a mess. That may be in part because of the switch to electronic medical records in 2014. He says it was not a smooth transition.
“My speculation is there was a real problem there with billing for, I think, a few months, when they were doing the change-over to electronic medical records,” he said. “There was a real problem getting the bills out the door, and that eventually meant that there was no cash coming in. And now we’re just trying to get caught up.”
“That’s why our accounts receivables…is almost $6-million , which is really high,” he said.
That’s the amount the hospital is owed but hasn’t yet collected, whether from insurance companies, patients, or federal programs like Medicare or Medicaid.
And then, there’s the credentialing issue. In order to bill Medicare or Medicaid, providers at the hospital must be credentialed with those programs. But several of the hospital’s provider credentials had lapsed, an administrative snafu that could cost the hospital hundred of thousands of dollars in bills it must either pay back or write off.
Allen says there are a few bright spots. The hospital has contracted with an outside collector to follow up on bills over 60 days old. That money is expected to start coming in this month.
And in the meantime, the hospital is tightening its belt. There have been no layoffs, and so far, none are planned, Allen says.
But positions that open up due to retirements are not being filled. On low-census days, when there are few or no patients, staff that is not completely necessary – including administrative staff – are sent home without pay. The hospital normally gives benefited staff three floating holidays each year; those have been cut. And purchases are on hold unless they are absolutely necessary.
Meanwhile, the hospital is searching for a new CEO.
It has several options: The recruiting firm B.E. Smith, which found Jeff Comer, has a clause in its contract that if a CEO leaves within two years, it will conduct another search without charging its fee.
The hospital is also exploring the idea of a management contract with a company like Providence Health & Services, which could provide a CEO.
A third option is Allen himself. His contract runs through April 17: three months, at a salary of $12,500 a month. But he said he might be open to staying longer.
That will depend in part on his other obligations. When he was hired, he was in the midst of launching a new charter business, R&R Marine, and he’d have to find someone to run it.
But also, he said, he wants to make sure he’s the right man for the job.
“I wanted to make sure that I can do this job,” he said. “I don’t have the medical background, that was my weakness. I think that’s why I was the second choice candidate last summer, because I don’t have that medical experience running any kind of medical operation. So it’s a very steep learning curve…I wanted to make sure it’s a good fit.”
Allen was the runner-up for the CEO position last summer. His family owns the local shipbuilding and tour company, Allen Marine, though he sold his share several years ago. Born and raised in Sitka — and a former Sitka Assembly member — he now splits his time between Southeast Alaska and Massachusetts.
And despite the hospital’s many woes, he’s confident this crisis will pass.
“We’re going to move forward,” he said. “I’m confident the hospital is going to be here. And you know, we’ll work hard on coming up with a credible plan for the community, and see where that process leads us.”
For now, that plan remains in the future. You “have to figure out where you are and how you got there before you can figure out where [you’re] going,” Allen said.
