WhidbeyHealth passes its 2016 financial physical

Independent audit finds no flaws or fixes needed

WhidbeyHealth passed its yearly financial physical Monday.

An independent audit firm told hospital administrators and board commissioners that it found “no material or significant weaknesses” in the health system’s 2016 financial reports.

“We’re on good sound financial footing here,” said Whidbey Island Public Health District Commissioner Eric Anderson during the board’s monthly meeting.

Commissioner Nancy Fey called it a “feel-good” report, “considering all that’s going on in the health care industry.”

The public health system ended the year with a 1.3 percent operating margin.

That means it made slightly more money than it spent, marking its second year of profit after years of losing money.

By comparison, the average operating margin of Washington hospitals is 1.89 percent; nationally the average is 1.79 percent.

Operating margins are part of the data used by financial analysts when determining business credit outlook.

A 3.9 percent operating margin is needed to earn the best A rating of Moody’s Investment Service.

Since the health system is a not-for-profit business, any money taken in over expenses is not technically profit but termed “more revenues taken in than expenses,” explained chief financial officer Ron Telles. It must be reinvested in the system.

The audit firm Moss-Adams looked at economic indicators, such as cash on hand, investments, revenue and expenses.

It also compared WhidbeyHealth data to other regional publicly-funded health systems.

All face the same struggle of delivering quality services as costs rise, resources are stretched and the future of health coverage is an unknown.

“Uncertainty is really the driver here,” auditor Mary Wright said of national hospital trends.

“As expected, they are deferring some capital projects in general and paying off debt.”

WhidbeyHealth scored best in the category of accounts receivable category that looks at the number of days it takes to get paid by insurance companies and others.

Its tally of 44 days beat out Evergreen Health, Skagit Regional Health, Valley Medical Center and Grays Harbor Community Hospital.

It also had 44 days worth of cash on hand, which is 10 times more than it did just a few years ago.

“I remember when we were down to three days cash on hand,” Commissioner Grethe Cammermeyer said in an interview. Switching to an electronic medical data system to comply with federal law led to the lean times, she explained.

“We were really uncomfortable. It was scary times. We’ve come a long way.”

Wright explained the more cash on hand, the better.

“More organizations are trying to build cash as much as possible because of the uncertainty of the industry,” Wright said.

Commissioners learned that 2017 is also off to a good start. Telles told the board, “we had a spectacular first quarter.”

To date, WhidbeyHealth shows $735,000 in revenues over expenses for the year, he said.

However, a loss of about $80,000 occurred in April, Telles said. He described it as either “a blip” or a trend to last a few months because of the impact of the new patient wing, slated to open July 7.

Training staff to operate new equipment, such as a new paging and communication system and new bed lifts, is adding to hours and employee paychecks. About 55 percent of WhidbeyHealth’s costs is payroll.

“Some of the cost is overtime and some of the cost is bringing in part-time staff to work more hours to cover those in training,” Telles explained. “June and July we will continue to see more training hours.”

“The pressure will be, ‘Do we have the budget to cover that?’”

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