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Hospital hides Cerner problem in state application

Hospital hides Cerner problem in state application

From the Glens Falls Hospital series
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Months after Glens Falls Hospital admitted it lost money for nearly two years due to a catastrophic billing system roll-out, hospital officials instead chose to offer an alternative explanation for its losses to the Department of Health.

The Department of Health asked the hospital to explain why it lost $34 million in 2017 and a “normalized” $35.2 million in 2018. (The state calculated the 2018 loss by discounting the sale of assets, which are one-time revenues.)

The question came up as part of the hospital’s application for approval to affiliate with Albany Medical Center.

In its response, the hospital did not mention that its new billing system from Cerner did not work for 20 months.

Instead, the hospital wrote that fewer people got surgeries between 2015 and 2018, for a reduction of 24% over those four years. Also, the hospital blamed its losses on the percentage of patients with Medicare. Neither issue can explain why the hospital was in the black prior to 2017, nor why the hospital’s independent auditors blamed its loss entirely on the billing system problem.

“The applicant indicated that the reason for the losses are as follows: Glens Falls Hospital has experienced rapid decline in volume for key service areas (e.g., surgical volume decreased 24% between 2015 and 2018) and continues to experience a disproportionate share of government payors compared to its peers due to demographics of the hospital’s primary and secondary market. The decrease in volume and shift in payor mix has led to serious financial challenges,” state officials reported in the application.

That’s exactly what hospital CEO Dianne Shugrue told the public in late February last year, a few days before an audit showed the real problem. She also tried to minimize the billing issue as a “one-time system conversion” when asked about the loss before the audit was released.

While she’s correct that the hospital did fewer surgeries during that time period and has a high Medicare population, the hospital averaged a profit of $3.6 million a year from 2008 until the billing crisis in 2017.

It posted deficits three times during those years, but none of them was close to the $34 million loss in 2017.

By comparison, in 2015 the hospital had a loss of $650,000. It had a profit of $6 million in 2014 and $2.9 million in 2016.

An independent audit of the hospital’s 2017 financials blamed the billing system entirely for that year’s loss.

The new system caused “collection issues,” that lost the hospital $38 million, auditing company KPMG wrote on page 14 of the audit. That is 12 percent of the hospital’s annual revenue from patient services.

The bills for $38 million worth of health care were sent out very late or not at all, so the hospital was unlikely to collect, KPMG wrote. Another $12 million in bills were sent out but were not paid for other reasons, such as a patient’s inability to pay.

The hospital closed services and laid off workers, and the belt-tightening helped to some extent: It finished the year with a $34 million loss.

State officials appeared to accept the hospital’s explanation and have not responded to a request for comment.

They approved the affiliation partly on the grounds that it would help the hospital with its cash flow.

The following are stories written by Post-Star staff members concerning finances at Glens Falls Hospital.

You can reach Kathleen Moore at 742-3247 or kmoore@poststar.com. Follow her on Twitter @ByKathleenMoore or at her blog on www.poststar.com.

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