The Redwood Area Hospital is healthy, and for a medical facility that is a good thing. While the kind of health being discussed at the Redwood Falls city council meeting Tuesday night focused on the financial position of the hospital, the council members heard from Darryn McGarvey, a CPA with CliftonLarsonAllen just how well the hospital is doing. That information was submitted as part of the audit presentation provided by McGarvey.
“We were out on site at the end of February,” said McGarvey, who said despite some turnover in the finance department at the hospital the audit process went very well this year. “The city folks worked very hard and the process went as smooth as it possibly could.”
McGarvey said the hospital has a very clean set of books, with the audit showing a net income for 2012 of $1.3 million. Adding non-operating income into the equation, the bottom line is $1.9 million for 2012.
McGarvey said the revenue growth for 2012 at the Redwood Area Hospital was approximately 2 percent, with the expense growth at 5 percent. That difference, he added, was due to some capital improvements made in the hospital in 2012 added with annual depreciation.
The hospital shows a 6.1 percent operating margin in 2012, which reflects operating income as a percentage of total operating revenues - a return from operations.
While that number is a decrease from the 8.9 percent operating margin in 2011 and a decrease of 4.1 percent in net margin (12.4 percent in 2011 to 8.3 percent in 2012), it still reflects a strong financial position.
The overall financial health of the hospital considers the net position looking back at the assets and liabilities over a three-year period, and that net position has continued to grow.
That sustained in-crease has ranged from eight to 14 percent over the past years which were considered.
McGarvey said the hospital, a critical access facility, has once again been named one of the top 35 hospitals in the nation based on its financial performance placing it on the gold standard list.
The gold standard designation is actually based on numbers from the previous year, in this case 2011, and takes into account reports from 1,300 hospitals.
McGarvey said the hospital’s discount percentage for 2012 is 28 percent, which in essence means it is getting 72 cents of payment for every dollar it actually charges.
McGarvey said those who pay hospital bills, including public and private entities, are getting more aggressive in discount payments, and he does not expect that to change in the future.
The hospital’s overall position with strong revenues and low debt is good as one looks to the future, said McGar-vey, especially as it relates to health care changes which are go-ing to be implemented very soon.
“You have positioned yourself very well to weather the storm coming in the next couple of years,” said McGarvey, adding that is not going to be the case with all hospitals.
Page 2 of 2 - The change in fin-ances the hospital and the health care industry are going to experience reflects a different mindset that takes away the fee for service concept and offers payment on value-based services.
The payments are going to be based on a lower costs and higher quality paradigm.
McGarvey said the philosophy of the new model is that there is too much cost in health care and the best way to reduce costs is to reduce the payment.
McGarvey called the changes in health care coming over the next 18-24 months seismic, but he reiterated because of the overall health of the municipal hospital it ought to be able to make it through to the other side.
Following the presentation, the city council approved the audit as submitted.
In other action during its meeting Tuesday the city council:
• Adopted a resolution changing Valley View Road to North-wood Drive.
• Approved a series of change orders for the hydroelectric powerhouse project with an estimated cost of $30,000 to address groundwater runoff.
• Approved a general service maintenance contract with Master Link-Sports for the RACC fitness center at an annual cost of $1,500.
• Approved an HVAC maintenance agreement for the RACC with NAC Mechanical and Electric-al Services at an annual cost of $3,540.