Struggles lead to strategic plan

By Anna Jauhola
After determining Kittson Healthcare has lost almost $1 million each in 2020 and 2021, the organization and its governing board acknowledged the immediate need for a strategic plan.
During the annual Kittson Memorial Hospital Association meeting on Thursday, Feb. 23, Interim CEO Everett Butler told a gathering of about 30 people the finances are incomplete. He said they have a complete picture for 2022 through June 2022 when former Chief Financial Officer Jeni Schwenzfeier resigned, but the last three months of that fiscal year are soft numbers using projections from the previous nine months. The fiscal year ends Sept. 30.
“We had hired another CFO who came into the position, sort of worked OK for a couple months and then sort of drifted off and really left us at a really bad time,” Butler said.
On top of the lack of complete financials, the former CFO left before completing cost reports for Medicaid and Medicare.
“That has some cash flow implications for us as an organization because when you don’t file your cost reports in a timely manner, Medicaid at Jan. 31 starts to withhold 20 percent of all your payments,” Butler said. “If you don’t file your Medicare cost report on time, it’s a 100 percent withholding from any future Medicare payments until that report is filed.”
The good news is Butler filed a request to reduce that 100 percent to 50 percent withholding, and that has been approved. Now, Kittson Healthcare is working with its auditors, Clifton Larson Allen of Minneapolis, to gather correct financial information to complete the cost reports. Once those are submitted and approved by Medicare and Medicaid, Kittson Healthcare will recoup the withheld funds, but that can be a 30- to 60-day period after the reports are filed.
To expedite this process, Butler called Curtis Bach, of Wheaton, Minn., who had interviewed for the CFO position and asked him to assist the auditors and finance personnel, to which he agreed and arrived in Hallock on Tuesday, Feb. 14. By Thursday, Feb. 16, Butler offered Bach the CFO position, which he accepted and started on Monday, Feb. 27.
“At the beginning of his term as an employee, he will be here on a full-time basis for a few weeks to get everything organized, everything structured,” Butler said. “And then he will meet with staff. The other thing we need to do is we need to basically reconstruct our whole finance department.”
Because there will likely be changes in the financial statements presented at the meeting, Butler said the board will hold another Association meeting later this year to present final, concrete numbers.
“This financial is what drove the decision by the board – from last year’s financial and a repeat of this year’s financial, and the fact we’ve lost almost a million dollars,” Butler said.
That loss is half depreciation of the facility and its equipment, and half loss of revenue. Butler’s concern is the depreciation without a plan to replace the equipment that’s depreciated. Kittson Healthcare needs new X-ray equipment, for example, that’s about $400,000.
“Sooner or later, that depreciation expense, if you’re not funding it – which we don’t fund it because we use it to pay salaries and day-to-day expenses – where is that money going to come from?” Butler asked.
The board approved hiring Eide Bailey, an auditing firm in Fargo, N.D., to begin the planning process. They are scheduled to begin in mid-March. Butler said the governing board allocated $20,000 from the general fund to hire Eide Bailey, but has also applied for a grant to fund the implementation of the strategic plan. Butler said the grant isn’t awarded until June and the board felt the planning process couldn’t wait that long.
Eide Bailey will hold six internal meetings for different sets of employees and five community public meetings countywide. There will be two in Hallock, and one each in the Karlstad, Kennedy, Humboldt and Lancaster areas. Anyone from the county can attend any of those meetings, Butler said.
“Eide Bailey will gather that information plus internal information and come back to the board with a presentation,” Butler said. “After that’s approved by the governing board, our plan is then to have another public meeting to have Eide Bailey make that presentation and recommendations.”
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Butler said Eide Bailey hopes to have all the meetings within one week, and then take three weeks to gather all the information into a report for the governing board. He expects that report will be ready for the board’s April meeting.
While the board and Kittson Healthcare work to develop and implement the strategic plan, they do have a little padding to work with. Butler said they have a cushion of about $3.4 million – mostly leftover COVID funding – that will help float the organization for the next three years. However, that money is not being replaced, hence the strategic plan.
“There’s nobody out there who’s going to come and keep putting money in the coffers to keep the doors open,” Butler said. “So it’s going to be the people who live in this county to make a decision when the time comes as to what they want and what they’re willing to do to keep Kittson Healthcare’s doors open.”