Franklin Medical Center’s net position increased by approximately $8.4 million for fiscal year ending April 30, according to its annual audit.
The audit, performed by Lester, Miller & Wells, reported an 85.6 percent increase in net position and totaled approximately $18.3 million. Net position is the difference between assets and liabilities. Over time, increases or decreases in net position are an indicator of an entity’s financial health.
Bolstering the favorable net position was net patient revenue totaling nearly $33 million due to an increase in laboratory outpatient charges, central supply and orthopedic clinic.
“Initially, the Hospital experienced significant declines in net patient revenue due to mandatory shutdowns of elective procedures,” wrote auditors. “After the shutdown was lifted, the Hospital’s volume has continued to increase towards the levels it experienced in the previous fiscal year.”
For fiscal year 2021, the audit also listed an operating loss of approximately $1 million.
FMC collected approximately $36 million in 2021 revenue but annual expenses amounted to nearly $37.1 million.
FMC derived majority of its revenue from Medicare and Medicaid programs and patients, according to the Alexandria certified public accountant firm. Revenues from a 13-mill property tax also provided revenues for the hospital.
Net Medicare and Medicaid revenue equalled $21.8 million or 66 percent of total net patient revenues, according to the audit.
Additionally, FMC received some $16.9 million in advanced payments, Payback Protection Program (PPP) loans and Cares Act relief funds.
Expenses, which increased 11.48 percent from 2020, was due to a raise in salaries and payroll related benefits. Salaries and employee benefits totaled $18.3 million for the year.
Non-operating income totaled $9.4 million for the year, according to the audit.
Additionally, FMC’s current assets jumped by 216.1 percent in the fiscal year due to an increase in CD’s from CARE’s Act monies, third-party receivables and Inter-Governmental Transfer (IGT) receivable. Total current assets were recorded at approximately $26.4 million.
The audit showed current liabilities increased 121.5 percent to approximately $8.5 million. The raise was attributed to an increase in current portion of Medicare Advanced Payments due to Cases Act Unearned Revenue at year-end.
Long-term debt increased by approximately $4.1 million or 78.9 percent in fiscal year 2021 to $9.3 million due to payments on long-term debt while adding long-term portion of Medicare Advanced Payments and PPP loans to notes payable, according to the audit.
FMC’s long-term debt at year end consisted of one revenue bond, five capital lease, two note payables including a PPP loan.
During fiscal year 2021, FMC made payments of approximately $5.6 million to pay down revenue bonds, capital leases and note payables, according to the audit.
Meanwhile, Lester, Miller & Wells listed two findings in the audit.
In the first finding titled Third Party Cost Report Settlements, “Management did not record an estimate for the current year Medicare and Medicaid cost report,” according to the audit. “Therefore, third party receivables and patient services were understated by approximately $1.2 million.”
The finding was also listed in 2020’s audit.
FMC’s response was, “CFO compares the estimated effect of current year cost reports on a quarterly basis. Medicare and Medicaid payment amounts were impacted by several changes during the fiscal year, including provider-based billing for some physician clinics and the pandemic shutdown (making RHC cost/visit and outpatient cost to charge ratio go up). Due to these changes, the result of the Hospital’s normal cost report calculation for the fourth quarter did not appear reasonable, and the decision was made to wait for the cost report to be completed. Internal financial statements were stamped ‘preliminary’ and potential changes were discussed with the governing body over the course of multiple board meetings in the presence of news media.”
In the second finding titled Financial Close And Reporting, management did not record an estimate for the Provider Relief Funds grant revenue. Therefore, grant revenue was understated by approximately $8.2 million, according to the audit.
FMC’s response was, “Management will record grant revenues when earned.”
Auditors estimated FMC’s revenues will continue to rise following the COVID-19 pandemic.
FMC’s Board of Commissioners are Paul Price Jr., Greg Kincaid, Nick Poulos, Dr. Jan Hicks and Jesse Young. Blake Kramer is administrator.