The question everyone wants to know — when will Haywood Regional Medical Center run out of money — will be answered by hospital administration next week for the first time since the Medicare crisis unfolded five months ago.

The hospital board voted unanimously to instruct the hospital finance people prepare cash flow projections by the board’s next meeting, scheduled for 6 p.m. Thursday, July 24. The report will show how much money the hospital projects to have coming in, how much going out, and a running tally of how much is left in reserves for the months of August and September. The board emphasized that the report should be simple enough for a layperson to understand.

“Our real near term financial concern is not having enough cash to pay our bills,” said Pam Kearney, a board member and retired high-level financial analyst. “There will come a point in time when we will have zero in reserves. So from an operating standpoint, we will be living paycheck to paycheck.”

The reserves stood at $4.1 million as of July 11. Kearney’s suggestion to provide rolling cash flow estimates was met with support.

“To keep the doors open we need cash. To understand that, we need a report the lay people can understand,” said board member Cliff Stovall. There’s another reason the hospital needs good cash flow projections, Stovall said. Entities engaged in merger talks with the hospital will want to know as well, he said.

The hospital’s financial picture has been murky from the public’s point of view. Media outlets have attempted to cobble together financial predictions based on limited information parceled out by hospital administration. So have board members. So have doctors. And most who put pen to paper come up with the same scenario: the hospital’s reserves could be gone by the end of September, and the money coming in will barely be enough to cover the bills going out.

Kearney said the lack of information is troubling doctors and hospital employees.

“The nurses are nervous and the docs are nervous and they think they are not going to get paid,” Kearney said. “They want the board to provide financial reports that honestly reflect the hospital’s financial situation, the good and the bad.”

When Kearney questioned the hospital’s finances at a board meeting two weeks prior, the hospital administration and board members who were privy to financial data said the finances would have to be discussed in closed session, citing confidentiality. Kearney said that wasn’t appropriate.

“In looking at the statues, I think they mandate we talk about cash flow in open session,” Kearney said last week, citing the North Carolina Open Meetings Law that governs public bodies. “I would like to discuss it openly. The statutes provide that.”

Dr. Henry Nathan, a gastroenterologist and board member, suggested the board make a formal vote calling for cash flow projections to be prepared and made public. Board member Roy Patton made a motion to that affect, and it passed unanimously.

“This is one of the things that we need to know: where are we and can we make it,” Patton said.

Dr. Mark Kinter, a family doctor at Midway Medical, told the board that some physicians might leave if they don’t start getting answers soon. Doctors need to know how financially stable the hospital is, he said. One orthopedist has already left, presumably to be closer to family, but the crisis could have spurred the decision, he said.

“If you have an inkling in your mind to go back to a fellowship, if it is closer to family, why not make the jump now?” Kinter said, citing the next month as “critical” for physician retention.

If physicians are lost, recruiting new ones could be extremely difficult right now, he said.

Nila Wilbur, a radiologist, lamented that the medical community has not been privy to hospital finances. The void of information is making them nervous, she said.

“We don’t really see anything except what’s in the paper so we don’t see how this hospital is going to survive. If you have a secret plan in mind, we’d like to know what it is. If you have a secret stash somewhere, could you please let us know what it is?” Wilbur told the hospital board last week.

“I think the administration and board should make as much information available to the public that the public and medical staff want to know,” Nathan agreed.

A best guess

Unfortunately, there is no secret stash, chief financial officer Gwen Evans reported to the board. But there is a little good news.

“I’m doing cash analysis and revenue analysis every day. As of today, we are generating enough net revenue to cover costs,” Evans said. Theoretically, as soon as Medicare reimbursements start rolling back in — which should happen by the end of July — the hospital could be breaking even on a day-to-day basis, she said.

That said, the predictions are extremely volatile. They depend on the number of patients and the type of care they are getting. It is still unclear to what extent patients might return to the hospital.

A little more than 40 patients per day are in the hospital, Evans said. That’s a little over half of what the hospital saw on average prior to the crisis. But the hospital had capped its patients due to a shortage of nurses.

Now the hospital is ramping back up its nurse and staff levels to accommodate more patients. The hospital is currently staffed to accommodate 54 patients. By Aug. 1, the hospital will be staffed for 68 patients, and by October it will be fully staffed for 89 patients, Evans said.

Payroll is creeping back up as a result. It was trimmed to as low as $1 million during the crisis, but will soon be back up to its prior number of $1.3 million. The hospital has been drawing down reserves every two weeks to make payroll. It will have to do that again this week, but hopefully by the next pay period Medicare payments will be rolling in and it will no longer be necessary, Evans said.

If more patients don’t materialize, the hospital will be stuck with more payroll then it can afford. That happened last year when there was an unexplained drop in patient volume.

“We saw times when nurses were being asked to take holidays because census numbers were low,” said Mark Kinter, a family practitioner at Midway Medical. “I would hate to see us reopen 60 beds and see the census at only 40 beds.”

Cash flow projections are also dependent on how much and how quickly the hospital gets reimbursed from insurance companies, Medicare and Medicaid, and the patients who pay out-of-pocket.

Evans said the hospital should make $3 million in revenue from the month of June — including Medicare, Medicaid, private insurers and out-of-pocket payers. But there is a natural lag time before the hospital will see that money. Evans said she has teams in the billing department working around the clock to get claims coded and billed.

“Right now our financial strategy is who is going to pay us the fastest and who is going to give us the most cash back,” Evans said.

Cash coming in

Although the hospital passed its Medicare inspection on May 22, two separate hang-ups blamed on government bureaucracy and out of HRMC’s control have delayed the arrival of Medicare reimbursements. The turn around time is supposed to be just 14 days. But it will be nearly eight weeks by the time HRMC gets that first payment.

Evans said she expects a minimum of $1 million and possibly $1.3 million to arrive by July 28 at the latest. After that, Medicare reimbursements should roll in daily.

The hospital got two small windfalls from odd sources that will help it along in the meantime. The state reimbursed the hospital for $400,000 that it spent so far on the creation of a new psychiatric wing. The hospital also got $300,000 in a sales tax refund.

Cash going out

Evans said the hospital is only paying its most “critical” bills. Those that could be put off have been. That’s created a backlog of in the hundreds of thousands that one day must be paid.

Kearney also pointed out that the hospital will also have to cough up what is known as the Medicare overpayment sometime this fall. The phenomenon happens ever year, where Medicare is reimbursed by hospitals for over-payments. It has ranged between $500,000 and $1.5 million in past years for HRMC.

And there’s yet another piece of bad news. Every October, there’s a two-week gap in Medicare payments, meaning for two weeks the reimbursements stop flowing. That could prove troublesome if the reserves are gone by then and the hospital has nothing to weather the gap, Kearney said.

If the hospital runs out of reserves and doesn’t have enough coming in to cover payroll or overhead, the hospital’s chances of getting a loan are unclear. Wachovia this month asked Haywood Regional to pay off $5.3 million in outstanding loans and bonds the bank held, which was not a good sign, Kearney said.

“Wachovia asked us to collatorize it in cash. They didn’t allow us to collatorize it in bricks and mortar,” Kearney said. “It tells me the financial institutions are looking at our financial situation.”

Glenn White, hospital board chairman, suggested Wachovia’s own financial problems could have prompted the recall on the debt as well.

As early as March, prior to being seated on the hospital board, Kearney made the prediction that a cash shortfall would be at the hospital’s doorstep by September.

“Any reduction in patient population from 2007 levels could cause a cash shortfall by September,” Kearney wrote to county commissioners on her application for a hospital board seat in March.

Despite Kearney’s background as a financial analyst, she was not put on the hospital board’s finance committee. Instead, she was assigned to the building and grounds committee and the by-laws committee. The board chairman, Glenn White, makes the decision as to what committee board members are assigned.