This is all AFTER almost 6 million dollars provided as subsidy by the parcel tax.
1. 1.968 million projected loss for this year.
2. 1.452 million of non-cash revenue due to a write-off of a 2006 liability.
3. 2.1 million reduction in reimbursement as a result of AB97.
A total of 5.52 million dollars has to be made up just to break even in the next fiscal year. In addition, there are considerable capitalized costs which will impact cash flow even though they do not affect the income statement. In 2010/11, those costs totaled over 1 million dollars above and beyond depreciation expense (that > 1 million is the net cash flow impact). The question of capital vs. expense is often dictated, but sometimes it is a judgement call and the current management of Alameda Hospital has every incentive to skew their judgement towards capital vs. expense. (For example, I would have argued that some of the seismic work should have been expensed as soon as it became obvious that any construction would be delayed indefinitely. Also, the PACS and EMR implementations were heavily capitalized. This is not to say that management has done anything wrong; it reflects a difference of opinion of how the Hospital finances should best be presented to show their true nature.)
With this kind of unhealthy financial circumstance, the Hospital wants to engage in 2 major projects going forward based on projections which are likely, given the incentives, to be optimistic. The first is the wound care center requiring 900k of capital of which 3/4 will be borrowed from the Bank of Alameda under terms which the Hospital appears not to be able to meet. The second is acquisition of additional SNF beds based on a reimbursement structure that I don’t believe can survive intact given the nature of both the California and federal budgets.
For 2010/2011, the previous Board (which consisted of a majority of its present members – Deutsch, Battani, and McCormick – approved a budget that projected a 540k profit for this fiscal year. That was projected without the benefit of the 2006 liability write-off. If we back out surprises from that projection (1.4 million shorted in IGT funds, benefit and cost from retroactive change in some rates, and the liability write-off) then the 2010/2011 projected results true up to a 1.5 million dollar loss or about a 2 million dollar miss. This is in addition to money spent on seismic retrofit work that had no immediate benefit, but was capitalized nonetheless. There may be some contentiousness at Monday night’s meeting, but based on the numbers I have identified in this post, I will be sticking to my guns that the Hospital needs to present a better plan than they have to date.