Editor, Commonwealth:
I believe the Commonwealth article dated Feb. 21, which followed the regular board meeting of Greenwood Leflore Hospital where the fiscal year ending Sept. 30, 2017, audit report was presented, is misleading. I would like the opportunity to help clarify our financial position.
The article’s headline (“Audit: GLH lost $22.4M”) and subheadline (“Hospital estimate was only $7.6M”) lead readers to think that the audit found the difference. It is correct that the pre-audit, year-end financial statement reflected a loss of $7.6 million, which was not an “estimate.” The latest fiscal year loss was more than the prior year’s loss of $5.7 million due to a decline in gross revenue of $25.2 million, which translates to a decline of net revenue of $8.2 million. The hospital was able to reduce expenses by $6.5 million in response to the prior year’s loss, which would have put us back in a small positive position; however, the savings were consumed by the additional loss of revenue that could not be predicted in the fiscal year that just ended.
During the audit, the hospital was made aware of impending accounting standards changes that relate to revenue recognition (FASB ASU Topic 606). These standards are intended to improve comparability of revenue recognition practices across entities and industries, including health care. Application of the new guidance can significantly affect the timing and amount of revenue recognized, particularly for self-pay patients. The degree to which an organization’s revenue will be affected depends on that entity’s own facts and circumstances. The standard requires an entity to evaluate whether collection of the transaction is probable. With self-pay balances, this means evaluating the patient’s ability and intent to pay, and if the entity cannot conclude that collection is probable, then revenue recognition is delayed until collected. This essentially requires us to recognize certain revenue on the “cash basis.”
Although not yet required and in order to be proactive, early implementation of the effect of this standard was determined to be a $14.5 million write-down of certain accounts receivable in the latest fiscal year ending Sept. 30, 2017. The cumulative effect of the change in management’s estimate on the collectability of those balances simply fell in the year in which the effect of the standard was adopted — a matter of timing. Other hospitals across the country have not yet implemented these standards but will be required to by 2019 and will likely see similar results to their financial statements.
In conclusion, it was the hospital’s decision to make the adjustment.
In the auditors’ presentation to the board, they emphasized there were: 1) no audit adjustments, 2) no uncorrected misstatements, 3) no disagreements with management, and 4) no difficulties encountered in performing the audit. Also, due to the volumes seen in the hospital during January 2018, we were able to close the month with a positive $343,000.
We continue to address the challenges at Greenwood Leflore Hospital in order to improve our financial stability while not sacrificing our commitment to providing the highest quality health care possible for our community. Thank you for your support.
James H. Jackson Jr.
CEO
Greenwood Leflore Hospital
