Crisis? Maybe Not.

Three things I learned at this morning’s Finance Committee meeting that suggest that the District may not be in imminent danger of default.

1.  An injunction against implementation of the DP/NF reductions has been issued.  You can view the decision here.  The judge accepted the argument of the CHA that these reductions could have an impact on access and quality not considered by CMS when the SPA was approved.  She rejected the argument that distinct part and stand alone SNF beds were interchangeable.   This is just the beginning of what will likely b a protracted process.  The District will continue to reserve at the reduced rates, but needless to say, this would be a major windfall for the District.  (I have stated in the past that I believe the rate reductions will ultimately be implemented, but other than any ego gratification I might get from being right, I am neutral.  On the one hand, more money for the District is a good thing; on the other hand, continued operation of the acute care hospital by the District is not something I am in favor of.)

2.  The loss for November may not, in actuality, be quite as steep as shown.  The percentage of gross revenue recognized by revenue is based on actual collections in prior months.  (I did not get the exact formula, but will probably ask.)  This means that if collections have been favoring low reimbursement providers or the amount of bad debt write-off has increased in prior months temporarily (the key word is temporarily) then it may translate into the appearance of reduced revenue for the current month that is not real.  There has been an ongoing effort to address the revenue cycle so it is possible that if the revenue cycle glitched in the first part of the year, that the net/gross number may be out of whack.  This would be expected, for example, if Medi-Cal billing (and to a certain extent Medicare) was happening without much interruption, but 3rd party payor billing was interrupted.  The lower reimbursement rate would translate into the income statement.  In November, one major reason for the poor financial performance was the net/gross percentage dropping about 2 percentage points below the year-to-date number.  This would not make up for all of the shortfall, but would translate the situation from an emergency to an urgency.  Of course, unless December is very surprising to the positive, the impact on the current ratio remains.

3.  On the other hand, I mentioned in my first post regarding the current ratio, that it was being calculated without reference to restricted assets.  If it turns out that those assets listed on the balance sheet under “Assets Limited as to Use, net” can be incorporated into the calculation of the current ratio, then perhaps the District is not in violation of the revised Bank of Alameda load agreement.

I’m sure more will be revealed at the Board meeting for some of these issues and as the lawsuit by the CHA winds it way through the courts with respect to the first issue.

About egorelick

Gadfly. Former City of Alameda Healthcare District Board member.
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