2023 operating loss at Ritzville hospital larger than reported

RITZVILLE — East Adams Rural Healthcare lost more money in 2023 than originally reported, according to an audit submitted to EARH commissioners Oct. 15. Joe Lodge, accountant for DZA, Spokane, said Ritzville hospital lost about $5.6 million in 2023. Lodge said the losses were related to higher expenses and revenue that remained relatively flat. 

“(For 2023) it was only about a 1.5% increase in operating revenue. On the other hand, operating expenses increased approximately 26%, so that’s where you see the large change in operating loss. A very much larger loss in 2023,” Lodge said. 

While EARH board members had a financial report at the end of 2023, the hospital’s audits were not completed between 2022 and 2024, said Viola Babcock, EARH chief financial officer. Commissioner John Kragt said the financial report commissioners received at the end of 2023 was substantially different from the audit report and did not indicate the hospital had lost that much money. Lodge said he was surprised that the financial report did not show a large loss.  

The review of the hospital’s finances followed layoffs earlier this year, which resulted in the equivalent of 16 positions being eliminated. The layoffs came after hospital officials said EARH was losing money, enough that the hospital qualified for state funding for distressed hospitals. Because the hospital’s finances were not audited on time, its actual financial position is unclear, Babcock said.  

The completed 2022 audit was filed in August, Babcock said, and the 2023 audit was submitted to the Washington Auditor’s Office last week. The 2024 audit is expected to be completed and presented to commissioners in December.  

So far, the accountants have determined EARH will have to pay back about $513,000 to Medicare, Babcock said. The hospital has already paid back about $248,000 to Medicaid. She estimated the hospital will have to pay back about $342,000 for state-funded programs. 

“In 2025, there will be right at $1 million between (improper payments) in 2023 and what we know about 2024 for paybacks for federal and state,” she said.  

The hospital still finished 2023 about $2.8 million in the black. That was down from a carryover of about $8.45 million in 2022. 

Lodge said a grant that was recorded incorrectly had to be taken out of the revenue calculations, which offset an increase in 2023 patient revenue. Expenses went up dramatically in 2023, he said. 

“Salaries and wages and employee benefits didn’t really change that much. It was about a 4% increase in salaries and wages, so fairly consistent with the revenue increase. The bigger increase (was) in supplies and professional fees,” Lodge said. 

The hospital had to use a lot of temporary nursing staff in 2023, as well as an interim CFO for most of the year. The hospital also paid for a temporary radiology manager while the employed department manager was not working. Expenses also increased in the EARH pain management program. 

“You can see professional fees increased by about 62.5% in 2023,” Lodge said.  

He recommended that EARH speed up its process for getting paid. The audit reported it took about three months for the hospital to get paid in 2023, and Lodge recommended that hospital officials work to reduce that.  

Babcock said there is interest in the hospital district in the audit report, and people who want a copy can email her at [email protected].