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NRMC Board of Directors discuss debt to Long-Term Care
The Nevada Regional Medical Center Board of Directors met in regular session Tuesday evening in the Mezzanine conference room at the hospital.
Discussing his report, NRMC Chief Executive Officer Jason Anglin had several things to note. "In July, the first month of our fiscal year, we had a net operating loss of $81,173 and net income of $11,204," he stated. "Comparatively, a nice improvement over a net loss of $399,151 in June."
The month of July also did not include any revenue recognition for COVID relief from the Paycheck Protection Program (PPP) and Provider Relief Fund Recognition, Anglin noted.
The hospital's bond days of cash decreased from 52.2 days to 43.1 days. The gross accounts receivable increased from 76.2 days to 79.8 days.
Anglin noted that the Senior Behavioral Health Unit held an open house and grand reopening on Monday, with the unit due to be open Sept. 1.
Giving an update on the HVAC project and energy savings, Anglin added "We have engaged ESP for the detailed energy study. Cost of the next phase for the study is $11,540."
Next in his report, Anglin discussed bond refinancing. "We are looking at the process of bond refinancing," he stated. "This week we had calls with Stifel, an investment bank and financial servics company and Gilmore Bell (Bond Counsel). Stifel has provided us with some projections regarding refinancing and is putting together a timeline for us. We discussed with Gilmore Bell what items (other debt, capital) could be considered to include with a bond refinance. Gilmore Bell has drafted a board resolution that would allow us to consider including in a bond refinance capital items purchased between adoption of resolution and bond refinance."
Moving on to the nature of the financial relationship between the hospital and the Long-Term Care, Anglin wanted to clear up the numbers represented as debt the hospital owes LTC, and vice versa.
"In February of 2017, NRMC entered into a capital lease with Moore-Few Care Center for the purchase of 625 and 627 S. Ash properties," he noted. "The terms of the capital lease were for 15 years with monthly payments and ownership transferring to NRMC at the end of the lease. Interest was at 90-day treasury bill rate adjusted every three years, which at the time was a higher rate than LTC was making on CDs."
As it stands, NRMC has paid $490,809.09 in principal and interest on the capital lease through July 31, 2022, leaving a balance of $789,668.83.
In addition, on June 30, 2017, the hospital's bond days cash on hand were 20 and ACA (the bond insurers) worked with the Nevada City Council to change the hospital management company and to transfer cash from Nevada City Nursing Homes (Long-Term Care). On Nov. 30, 2017, Long-Term Care funded NRMC $1,000,000 per City of Nevada ordinance.
On June 30, 2018, the hospital's bond days cash on hand were 11 and ACA again worked with the City Council to transfer cash from Long-Term Care to the hospital. Nevada City ordinance 8261 was approved and allowed the transfer of $650,000 from Long-Term Care to the hospital.
In discussing the financial relationship between the hospital and Long-Term Care, Anglin noted, "Think of NRMC like a vendor to LTC. NRMC provides services to LTC for dietary, maintenance, HR, etc. The largest component of cost is for straight pass through costs such as employee health insurance claims that is billed to NRMC. These costs are passed on to LTC, as NRMC administers and pays for on behalf of LTC and LTC, then, is to reimburse NRMC."
The next largest expense, Anglin added, is cost of meals. NRMC prepares and delivers meals to both Moore-Few Care Center and Barone Alzheimers Care Center and NRMC charges $4 per meal. "This amount has not been adjusted since 2015," added Anglin. "Per 2021 cost report, the cost per meal to the hospital was $6. Since pricing for services NRMC provides has not been adjusted since 2015, NRMC is charging for services provided below cost."
The pass through cost and service costs NRMC provides are referred to as "intercompany charges" and are charged to LTC. NRMC does not charge LTC for NRMC operational costs — only for the cost of services that LTC uses.
Historically, LTC reimburses NRMC monthly for these expenses. As of July 31, 2022, Long-Term Care owes $727,034.44 for February through July expenses. Normally, that balance LTC would owe NRMC would be around $100,000. "The increase from $100,000 to $700,000 does add to financial challenges of hospital and decreases cash days on hand," added Anglin.
In summation, the hospital's liability to LTC is $2,439,668.83. However, LTC owes NRMC $727,034.44 for pass through expenses and services provided by NRMC. This results in a net balance to LTC from NRMC of $1,712,634.39.