Hospital Audit Report Notes On-Going Financial Impact of Pandemic

posted on Thursday, October 26, 2023 in Public Notices

Spencer Hospital’s annual audit report reflected an operating margin that continues to be negatively impacted by the lingering economic impact of the COVID-19 pandemic, particularly resulting in higher expenses related to labor costs.

Sam Johnson, of Winther, Stave and Co. LLP, assured hospital trustees that despite the negative operating margin, the hospital remains in a solid financial position due to years of fiscal responsibility. “Controlling costs and cash flows has been challenging during the current inflationary environment, but remains a high priority of management, who also displayed integrity and transparency throughout the audit process,” says Johnson.

The hospital ended the fiscal year with a negative 6.9 percent negative operating margin as outlined in the annual audit report presented at October’s hospital board meeting.  The hospital’s overall margin, after considering gains from investments and other non-operating revenues to include capital contributions, was a negative 1.9 percent.

Spencer Hospital president Bill Bumgarner commented, “Higher labor costs continue to be a challenge for hospitals as the labor market recovers from the impact of the pandemic. The hospital has an exceptional healthcare team and we’ve remained committed to ensure the continuity of all hospital services despite the labor cost challenges.”

Bumgarner said Spencer Hospital continues to actively assess its operations and cost structure to improve its profitability.

“The hospital has historically operated with an efficient cost structure,” he said.  “This makes our work more difficult when faced with sudden and non-traditional cost pressures. Low reimbursement updates from payors, in what has been a higher inflation environment, has not made that task easier. We’ve initiated plans to improve profitability over the year ahead and continue to identify additional opportunities while avoiding disrupting services to the community and region as best we can.”

Spencer Hospital’s audited financials shows the hospital’s revenues totaled $112,174,996 for the year ended June 30, 2023. The revenues included $108,690,182 in net patient revenue and $3,484,814 of other operating revenue. The city-owned hospital does not receive any tax revenues from the city.

Expenses for the year totaled $119,895,908, including $54,304,818 in salaries and benefits, $57,731,866 for supplies, services and other costs, and $7,859,224 for depreciation expense on the hospital’s plant and equipment.

“The audit report reminds us each year that Spencer Hospital consistently reinvests its resources back into healthcare services,” said Bumgarner. “That investment, in addition to the fine work of the hospital’s talented medical staff and skilled healthcare team, results in the Spencer medical community being recognized as one of the finest in the State of Iowa and one of the top 100 mid-sized rural hospitals in the country.”

The hospital completed a significant update to its surgery center during the fiscal year and initiated construction of a new emergency department.

Below is a condensed statement of revenues and expenditures for Spencer Hospital for the year ended June 30, 2023 (in thousands):

Operating revenues.................................................................	112,175
Operating expenses................................................................	(119,896)
Operating income (loss).................................................	(7,721)
Non-operating income (expenses)........................................	4,244
Income before contributions..........................................	(3,477)
Capital Contributions.............................................................	1,322
Change in net position...................................................	(2,155)
Net position - beginning of year.............................................	109,468
NET POSITION - END OF YEAR..............................................	$107,313