Audit finds Quincy hospital lacks cash flow

Steps already taken to improve situation

QUINCY — Quincy Valley Medical Center is not making enough money to cover its financial obligations, according to a report from the Washington State Auditor's Office.

The audit report covers January 2005 to February 2007.

"The (hospital) district lacks the necessary cash flow to meet daily operating expenses," the audit report states. "If the district cannot meet daily operating expenses, it may have to curtail or close some operations."

Quincy Valley Medical Center is using registered warrants to cover daily operating expenses, the report states. When an agency is having budget shortfalls, they use registered warrants to fund daily operating expenses and long-term debt, according to the report.

"As of Dec. 31, 2006, the district had outstanding registered warrants of approximately $1.05 million," according to the report.

In a response included with the findings, Hospital Administrator Mehdi Merred wrote about steps taken to improve the hospital's financial health.

"The Board of Directors and management of Quincy Valley Medical Center are very aware of our financial and cash flow challenges," he wrote. "We have taken steps toward reducing our costs during 2005 and throughout 2006. We anticipate other measures we have undertaken to favorably impact fiscal years 2007 and 2008 as well."

Merred said in an interview Wednesday, changes include coming to an agreement with physician Wallace Newkirk to cover emergency room shifts starting in September 2006. Quincy Valley Medical Center previously contracted outside the hospital to meet a requirement that it provide emergency room coverage 24 hours a day, seven days per week.

The agreement saves the hospital more than $93,000 per year. Increased Medicare reimbursements stemming from the arrangement save the hospital an additional $25,000 per year according to the hospital's consultants, he noted in the response.

The hospital reduced the number of temporary agency nursing staff from 60 percent in January to 25 percent, making them permanent employees, Merred said Wednesday.

"Temporary agency nursing staff cost twice as much as hospital employees," Merred wrote to the state.

Employees' benefits were reduced by $18,000 per year.

Staffing was reduced from 111 employees in November 2005 to 83 employees, saving the hospital $448,000 from November 2005 through June 2006, Merred said in the interview. The hospital is now up to 93 employees.

New services are going to increase profits, including endoscopy services starting at the hospital June 26, and a new outpatient physical therapy location at 406 S. Central Ave. in Quincy, which opened Monday, Merred said.

"Our budget indicated by the year of 2009, we're going to be profitable," he said.