In May, in-person outpatient visits and surgeries resumed, but resuming operations from the Stay At Home Order resulted in a slower May than budgeted; hence, gross revenues were almost 13% below budget… The entire staff at PSMC continues to work very hard to serve the community and mitigate the financial impacts of COVID-19.
— from the May 2020 financial report for the Upper San Juan Health Service District (Pagosa Springs Medical Center)
Downtown Pagosa Springs has been bustling with people over the past week… flocking to the hot springs, tubing down the river, waiting in line for tables at local restaurants. It feels like an invasion, after three months of ‘sheltering at home’ and businesses limping along with drive-through and curbside take-out services.
A mixed blessing?
Many of the out-of-state license plates identify the visitors as coming from Texas, Arizona, Oklahoma. We are lately hearing reports of increased viral infection rates in such places, but these visitors are also our summertime ‘bread and butter’ — in a town that has sunk nearly all its ‘economic development’ efforts into tourism and sales of second-homes.
New York Governor Andrew Cuomo, New Jersey Governor Phil Murphy and Connecticut Governor Ned Lamont recently announced restrictions requiring travelers from certain states — Utah, Arizona, Texas, Arkansas, Alabama, Florida and North and South Carolina — to quarantine for 14 days upon arrival or face a hefty fine. The quarantine applies to people coming from states with a positive test rate higher than 10 per 100,000 residents on a seven-day average, or with a 10% or higher positive rate over seven days. Some counties in Florida are currently showing a 20% positive rate among people tested.
On Tuesday, Texas Governor Greg Abbott said in a television interview that, given the alarming community spread in the state, Texans should stay at home if at all possible.
Should they visit Pagosa Springs, where we’ve seen very few cases so far? Because we want their money… but we don’t want their infection.
The Upper San Juan Health Service District — the tax-funded district that operates the Pagosa Springs Medical Center (PSMC) and the EMS ambulance service in Archuleta County — has not been immune to the financial health crisis that’s infected so many of the nation’s businesses and government agencies since the arrival of the SARS-CoV-2 virus on American shores.
The District Board held its regular meeting on Tuesday, June 23, and heard a presentation of the annual financial audit performed by certified public accountants Dingus Zarecor & Associates. I did not attend the meeting, so the following information is drawn from the audit report and other financial information included in the Board packet.
According to the audit report, the district’s financial health for the year ending December 31, 2019 looked as promising as the health of a star quarterback on the high school football team. That might be an apt comparison, because PSMC is still young and vibrant and energetic — not yet old and set in its ways, like some of the more mature hospitals in Colorado.
From the audit report on last year’s financial health:
One of the most important questions asked about the District’s finances is, “Is the District as a whole better or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement of Revenues, Expenses, and Changes in Net Position report information about the District’s resources and its activities in a way that helps answer this question.
According to the audit report, the district’s ‘Net position’ increased from $9.7 million in 2018 to $10.9 million in 2019. Net patient service revenue increased by almost $1.4 million year over year “due primarily to expansion of services and charge capture…”
“…Supplies expense increased $786,653 due primarily to expansion of services for oncology.”
As we see in the chart below, Net Patient Revenue had shown a steady upward trend since the Great Recession, as PSMC has gradually added specialists to its team — general surgery, orthopedic surgery, cancer treatments, women’s health, pediatrics — and become profitable as a result. The monthly Net Patient Revenue in 2016 (yellow) was in the $2.25 million range. Last year, the range (lighter blue) was more like $2.75 million per month, with the month of August exceeding $3.25 million
But several years of growth did not necessarily portend a financially successful 2020. Not when a pandemic hits. As we see by the red line shown in the chart above…
The Net Patient Revenues and the number of specialist services were not the only things growing between 2016 and 2019. PSMC also grew it building footprint with a two-story expansion, necessary to house the added specialists and larger staff.
The amount of debt held by the district expanded in a similar fashion.
The facility expansion was a bit of a gamble, though it probably didn’t appear that way a couple of years ago when the revenues where showing a fairly steady upward trend. It would have been less of a gamble, perhaps, if PSMC had asked the voters to subsidize the expansion with a property tax increase, to support the added debt payments. But the district decided to fund the new debt out of expected future patient revenues — and possibly, future state and federal grants and support.
All of those sources — patient revenues, and future federal and state funding — have taken a hit during the COVID pandemic.
From PSMC’s most recent Finance Committee report:
The Finance Committee reviewed May financials. In May, in-person outpatient visits and surgeries resumed, but resuming operations from the Stay At Home Order resulted in a slower May than budgeted; hence, gross revenues were almost 13% below budget. PSMC continued to do a very good job managing expenses with May expenses being about 3% below budget. PSMC managed to keep expenses under budget while, at the same time, continuing to incur unbudgeted supply expense to bring its reserve of most COVID-19 supplies to 90-days on hand…
During May, PSMC received CARES Act stimulus of $3,807,968.19 that has been applied to PSMC’s gross revenue shortfall at the Medicare reimbursement rate… PSMC and the auditor continue to track guidance on this…