Kittson Healthcare: Deficit for fiscal year ’25

By Anna Jauhola

As Kittson Healthcare continues to complete its 2025 audit, officials presented estimated numbers during the Kittson Memorial Hospital Association annual meeting Tuesday, Jan. 27.

Approximately 20 stockholders attended and heard an update on the facility’s overall operations. Neil Frizzell, Kittson Healthcare’s CFO, presented the financials. It is estimated the facility will post a deficit for 2025 of $809,502, but that amount is expected to go down.

For reference, the net operating revenues for Kittson Healthcare in FY 2025 were $17,106,354. The operating expenses were $18,460,570.

The facility had a loss of $1,354,216, but also received $544,714 in non-operating income to bring that final number up to $809,502.

“In the state of Minnesota, all hospitals – urban and rural – 70% of them have a loss from operation,” Frizzell said. “That is not ideal, but with … costs going up, staffing shortages, contracted staff.”

He added, traditionally, hospitals are lucky to pull a 1% to 3% positive bottom line.

But remember, these are estimated numbers. The facility’s auditors, Clifton Larson Allen, feel the estimates were too conservative, Frizzell said, so they plan to adjust that estimated loss number down by $250,000. So, in the end, the estimated deficit for FY 2025 will likely be closer to $560,000.

“This has to do with the way we project what we may have to pay back to Medicare in our subsequent year’s cost report,” said CEO Andrea Swenson.

Each year, facilities like Kittson Healthcare that rely on Medicare reimbursements have to submit a cost report to the Centers for Medicare and Medicaid Services (CMS) after their audit is complete. The cost reports are due in February, and Swenson said the annual reporting sets Medicare cost-based reimbursement rates for the following year.

“If your volumes go up or down, either we end up owing Medicare or they end up owing us at the end of that year,” she said. Volumes are reflective of numbers of tests, visits or patient/resident days.

Frizzell said Medicare pays less than cost, which immediately puts any facility in negative. He noted a 99% reimbursement rate is an overstatement, and that Medicare typically reimburses around 90% to 95%.

As the fiscal year ends Sept. 30, Frizzell said the auditors will likely complete the audit around March. Frizzell and Swenson both said some major challenges continue to be staffing with contract employees and handling an aging facility.

“Contracted staff is nearly double of what an employed person is paid,” Frizzell said. “Because it’s a purchased service and there’s a company running it. If we could find 10 CNAs to help with the nursing home, we’d hire them in a heartbeat. But trying to find 10 people for that type of work is very difficult.”

The entire facility also is about 95% depreciated. Swenson said they have a facilities assessment completed of the entire building and the physical layout. The hospital board of directors will get a full report on that in February to have a better idea of building needs over the next five to 10 years.

One additional piece of good news is Kittson Healthcare qualified for $2.2 million in one-time money for Employee Retention Credits. This program came about just after COVID for facilities that could prove they had retained employees, which allowed them to receive credits toward what had already been paid in federal withholdings.

To read the whole story, see the Feb. 4, 2026, edition of the Kittson County Enterprise