Hospital financials nearly rectified

By Anna Jauhola
The Kittson Memorial Healthcare Board of Directors held a special meeting last week after learning of the effects of a cyber attack, and to address the facility’s financial situation.
About a month ago, there was a healthcare cyber attack that impacted Change Healthcare, said Andrea Swenson, CEO of Kittson Healthcare. This cyber attack impacted systems throughout Minnesota.
“Because we’re tied with Sanford on all that, Sanford is leading the charge on rectifying this,” said Bob Jaszczak, board president, after the board’s Wednesday, March 20 special meeting. “They’re coming up with another avenue so that claims can be submitted.”
The cyber attack has created a lag in their ability to submit insurance, Medicare and Medicaid claims, which has led to a half-million dollar difference in the cash balances. Jaszczak said claims are processed through a clearinghouse, which is slowly processing the myriad information coming in from all those affected.
“We usually end up submitting 100 claims per day,” he said. “Just recently, because there was a backlog, we submitted 1,000 claims in one day because of the cyber attack. So those are all in the pipeline and being processed. And obviously there are some delays because everybody’s doing it at the same time.”
There has also been scam activity reported due to this attack, Swenson said. A person contacted Kittson Healthcare last week to say they received a call from someone pretending to be from the Hallock facility.
“The callers even provided the name of one our business office personnel,” Swenson said. “Fortunately the lady could tell the phone call didn’t feel right.”
Despite these interruptions, the organization has been moving forward with remedying its own financial situation. Filing audits, the nonprofit status and cost reports for Kittson Healthcare “has been a mess,” Jaszczak said.
While the IRS 990 form for nonprofits has been filed for 2022, it will likely still have to be amended as the 2022 audit is not complete. Jaszczak said the charitable organization status cannot be updated until that audit is done. Also, the 2023 cost reports for Medicare and Medicaid are on track to be filed by the Monday, April 1 deadline. All information was submitted to Clifton Larson Allen, the facility’s auditor, for this process on Friday, March 15, Jaszczak said. If cost reports aren’t filed on time, Medicare and Medicaid can withhold payments until they are filed. However, once filed, those payments are completely restored to the facility.
“And truthfully, we’re already late,” Swenson said. “But we’re going to see some progress.”
The 2021 audit is complete and the 2022 audit is coming in at a close second.
“This is where we kind of get into the Twilight Zone,” he added. “There were three open items on the 2022 audit that needed to be completed.”
The auditors chose to review an Edward Jones account and the CMS Advance Payments, both of which are completed. However, they are waiting to receive one final document from Wells Fargo Financial regarding a scholarship fund. This information needs to come directly from Wells Fargo, Jaszczak said, and they’ve been working on that for a month but Wells Fargo has not complied.
“We came up with steps today to make additional contacts and get that done,” he said.
The 2023 audit is currently in the process of being completed as well. CLA has received information to complete the audit. They are currently reconciling all major accounts, along with staff accountant, Robert Half, and Eide Bailly, which has been signed on to help get the accounting process under control.
“They’ve given all the information to CLA. Eide Bailly has been helpful to us in getting this stuff caught up,” Jaszczak said. “Is it complete? No. But it is far more complete than we’ve been for quite some time.”
The 2023 audit is supposed to be filed by April 15, but they will miss that date and will file for an extension to Aug. 15.
“We are quite confident, this year, we are going to be able to meet that Aug. 15 deadline,” Jaszczak said.
The 2023 audit will also reflect the sale of the retail pharmacy, which took place in October of 2022, the beginning of Fiscal Year 2023.
“The details of the sale are kind of complicated,” Jaszczak said. “They’re finding that to be more extensive than we expected.”
Once the audit for 2023 is complete, the facility will work to engage Eide Bailly’s accounting services and Half’s position would be eliminated. Swenson will be working with the company to get a preliminary quote for their cost to take on the accounting for Kittson Healthcare. This will be discussed in the board’s regular meeting this week.
At the Kittson Memorial Hospital Association annual meeting in February, the board acknowledged it has not received monthly financial reports for quite some time. As of last week, they still were not receiving complete reports.
“What we end up getting is we are able to review our cash balances,” Jaszczak said.
He added the cash balances are staying consistent – with the exception of the issue with the cyber attack – and this allows them trendline data.
“One of the ultimate goals with having Eide Bailly come on is we’ll be able to have regular, monthly financials,” he said.
The accounting software is another hindrance for completing monthly reports because it doesn’t allow for more than two years to be open at a time. So, until the 2022 audit is completed and closed, Kittson Healthcare cannot open software for 2024 to run monthly reports.
The current accountant works remotely and has spent much of his time on the 2023 audit information such as reconciliations, supporting documentation and so on, Swenson said. While Kittson Healthcare hired Curtis Bach as its chief financial officer last spring, his role is dependent on an accountant to input the information needed to run monthly financial statements.
“We pretty much lost the whole business office at the same time,” Jaszczak said, referring to a period in the middle of 2022.
“We didn’t have an accountant, an office manager or a CFO, so they have key functions of their jobs inputting that information for the CFO to do their job,” Swenson said.
And with the pile-up of audits and other reporting to be done, “It was just the perfect storm.”
In working with Eide Bailly, a company that often works on healthcare accounting, Swenson learned this situation isn’t abnormal for small organizations.
“When there’s any amount of turnover, you don’t have people waiting in the wings to take up the slack. And you end up having issues,” she said. “So they’ll feed us best practices to make sure we’re working as efficiently as a team internally too, just to help smooth everything out in the long-term. It’ll help with the strategic plan.”
The board has its regular meeting this week. Swenson said everything should come together in a short amount of time.