Chairman's Corner
Physicians, staff and the community were informed on Friday of the financial situation at Floyd and we received the same letter as posted on the web site under the “Chairman’s Corner” The Chairman's Corner, Floyd Memorial Hospital, New Albany, Indiana
One statement in the letter is as follows:
“Preliminary results show a need to adjust the 2006 financial statements acknowledging a shortfall in contractual adjustments, bad debt reserve and third party settlements. A complete audit is being scheduled and will take approximately 90 days for results to be finalized. The preliminary result is a non-cash entry to the balance sheet showing an adjustment of approximately $11.5 million, which is 3.9% of the hospital's gross revenues for 2006.”
In laymen’s terms, they erred in accounting for $11.5 million that is considered an expense on the balance sheet. This is a culmination of a multi-year problem and further investigation with a complete audit is being scheduled according to his letter.
The new Board Chairman has a tremendous amount of Board experience and banking knowledge and we will await his and the Board’s decision on how to handle this situation.
After more than a year of postings, I’ll let the readers come to their own conclusions about this information and listen to what they have to say.
One statement in the letter is as follows:
“Preliminary results show a need to adjust the 2006 financial statements acknowledging a shortfall in contractual adjustments, bad debt reserve and third party settlements. A complete audit is being scheduled and will take approximately 90 days for results to be finalized. The preliminary result is a non-cash entry to the balance sheet showing an adjustment of approximately $11.5 million, which is 3.9% of the hospital's gross revenues for 2006.”
In laymen’s terms, they erred in accounting for $11.5 million that is considered an expense on the balance sheet. This is a culmination of a multi-year problem and further investigation with a complete audit is being scheduled according to his letter.
The new Board Chairman has a tremendous amount of Board experience and banking knowledge and we will await his and the Board’s decision on how to handle this situation.
After more than a year of postings, I’ll let the readers come to their own conclusions about this information and listen to what they have to say.
posted by Anonymous at 5:59 AM
39 Comments:
HB,
You are being much too kind in just stating the facts.
You know this is a major impact and scandal and will cost employees their jobs trying to save money
If this doesn't show the Board the severity of the problems in this administration, I do not know what will.
It appears you were right all along. You are being much too humble in your remarks.
Paging Diogense, Paging Diogenese. I'm sure his take on this will be interesting...let the spin begin!
That aside, I wish I had a better understanding of corporate finance and accounting so that I could fully appreciate the significance of this information, and moreso, how it could have occurred. Is it purely accounting issues being clarified, or is there more to it?
There is much more to this than stated. It will affect the bond rating, the ability to borrow, and may even involve fraud depending on how it was handled.
This is not simply a paper issue. It involves real money and real people.
Employees will be slashed to compensate for this budget mishap.
There absolutely had to be indications of this well before this and looking back at some of the posts on this site, HB seems to have had a good understanding of the severity of the issues.
Accountability should lie with the CEO.
Accountability should lie with the CEO.
How about the CFO also?
The CFO left as of Jan 1.
Can you say "scapegoat".
Makes you wonder how much was known and for how long.
Regarding: "Can you say "scapegoat"."
The CFO of an organization is just that--the chief FINANCIAL officer. The CFO is the person with primary responsibility for the accuracy of finanacial statements--hardly a scapegoat if they are not correct.
Yes I agree the CFO is responsible for the financial statements. The CEO is ultimately responsible because he is the boss, the buck stops with him. Who knows what part he did have in this and we will probably never know because the CFO is gone.
Can someone explain what this really means? In the letter from the Chairman of the Board,he says,"It is important to stress that this is not a cash issue; it is an adjustment to reserves."
Isn't that the same? If the reserves are reduced, isn't that like reducing a personal checking account of funds? Aren't the reserves similar to a rainy day fund? I understand that it can be said to be an adjustment issue, and be viewed as money the hospital never really had, but bottom line, are we not saying the same thing? We thought we had more reserve money than we did? An analogy to a personal checking account would be to say, "We have the potential of being overdrawn because we thought we had more money in our account than we thought."
Can someone discuss the real potential of all of this? I recall reading in the past that if the bond ratings drop drastically, the contract the CEO signed committed the hospital in a way that puts us in a vulnerable position. We can lose the management to an outside source and the county loses. Is that right? If so, what is the real position we find the hospital in at this point?
Is this the reason the CFO was terminated? Does this mean the knowledge of this situation has been in existence for some time? Is that why we have the Board Chairman we now have, because of his background in banking? It was an unheard of move to elect a Chairman who was new to the board. Hmmm...could that be because the issue was on the table and they needed someone like him?
I may not like the CEO and his tactics, but this is a time that we all need to pull together to save our hospital. Let's get the negative out of this blog and start defining some real support to the people we need to help us save our hospital.
Just read the blog, as a retired employee, this situation concerns me. I am afraid cuts will be made to adjust the situation and the employees cut will most likely be those who can afford it the least... Maybe we should start at the top where the BIG bucks are. Proposed cuts in dietary and ancillary departments will only scratch the surface..maybe a VP or two could forfeit their salary so as to adjust this problem. Lets hope no more scandals affect our hospital.......we have great employees that do a good job just need some "housecleaning" starting at the top.
When the CEO is the problem, you cannot fix it unless you get rid of the problem.
The employees have pulled together, worked understaffed, dealt with every problem and yet here we are.
Not replacing the CEO at this point is a mistake that the Board and County Commissioners should be held responsible for.
Can someone please explain?
HB stated, "they erred in accounting for $11.5 million that is considered an expense on the balance sheet."
I am no accounting major, but I did have basic accounting in college. If an error was made on the expense side of 11.5 million that didn't exist, then wouldn't that just make a bigger profit? Wouldn't that make the revenue side actually 11.5 million higher?
can someone please answer the question posed by lawguy?
Lawguy states, "I wish I had a better understanding of corporate finance and accounting so that I could fully appreciate the significance of this information, and moreso, how it could have occurred. Is it purely accounting issues being clarified, or is there more to it? "
Maybe the staff cuts could start with the enthusiastic employees that showed up at the meeting just for food and drink. LOL
Anybody notice that HB never responded to all the critical comments about his inability to recognize a personal conflict of interest?
If the error was underestimating expenses or overestimating what could be recieved, profits would be reported higher.
But that is not what happened.
As for the ongoing attacks on HB, it just shows how much certain people are willing to ignore the facts.
Stick with the issue at hand. It is very serious and real individuals are going to lose their jobs
The hospital has been a breeding ground of dishonesty for years and now the chickens are coming home to roost.
Not only has the hospital been a breeding ground for dishonesty for years, you can also add to that the elected officials to that list. Perhaps that is why New Albany is so behind other towns that surround New Albany and has been stagnated for years. All of their energy and money is spend on covering their butts and making up more lies to cover their lies and the money is spend on their own interests and not what is really important.
"Breeding ground for dishonesty"??
Sweeping, unsupported statements like that have no meaning at all. If you are going to make a charge like that you should give some specific examples of dishonesty that have occurred "for years." Otherwise, go back to your corner with the rest of your negative, non-constructive friends.
I believe this is the answer you all are looking for. Yes. Profits have been overstated by $11.5 million.
It sounds as though accounting estimates were used that were overly optimistic, resulting in assets - accounts receivable - being overstated by the $11.5 million.
Okay, I'm still scratching my non-accounting head and trying to make sense of all of this...
If the last post simplified the issue (which I appreciate) to "profits being overstated by $11.5 million", I suppose I then need to know the amount of total stated "profits" to put this into relative context.
Does this "readjustment" now mean the hosptial is taking a loss for 2006?
I saw the figure quoted as 3.9% of gross revenues, but gross revenues are not equal to profit.
So....what is the "profit" now that the books might be closer to correct? Is it a RED number or a BLACK one?
One example is giving the Hoosier Hills employees, that Floyd absorbed with the home health takeover several years ago, the same Christmas bonus that the FMHHS employees received for working the same year. I sat in at a " President's meeting " and heard the CEO deny it. The reason I knew of it was a friend, who was a Hoosier Health employee, received the same bonus as I did.
Well I've tried for some time to get find the financial statements online but have been told they're rather closely guarded. However the Chairman's letter said that profits would have been $3.6 million for 2006. HB stated that the $11.5 million overstatement has been racked up over multiple years. I would agree that "appears" to be the case.
Maybe this is why the CFO "resigned."
This is a large adjustment. A couple of questions that come to mind: If this has been incurred over multiple years, where has Blue & Co been. What type of opionion have they been expressing on the financials? Have erroneous financial statements been used in the issuance of bonds? Just in the last month, FMHHS spent $2.8 million investing in the Kleinart Kutz surgery center -- was this known at that time?
Well it has been an extremely busy day in the office and here on the blog.
There are some very good questions brought up here and unfortunately, there are not many good answers.
Hopefully the new Board will look at some of your questions and begin asking them at the next meeting.
I can tell you that this is a very serious issue. Time will tell how it affects Floyd in the long-run
How come nobody says anything good about Mr. Hanson? He has brought Floyd Memorial a long way in his years as CEO, I have been employed at Floyd for many years and i have seen nothing but improvment, just take a look at our hospital how much growth since Mr. Hanson has been CEO, with the competition across the river he had Floyd always operating in the black, so why not get off his back and give him some credit.
I'm thinking why some are not happy with Mr. Hansen is that he has allowed more of the competition to come across the river. This is a good thing for everyone, and he is to be commended.
Having read the article in the Courier Journal yesterday, I have a question. And I hope someone can answer. The article said " board members "had signals" that the financial statements for last year included inadequate reserves." They then requested an accounting firm to examine the statements.
What were these "signals"? Were the financial statements received by the board last year altered prior to giving to the board? Why were these "signals" just now realized? Were the "signals" first realized by the new board members?
You couldn't possible have worked long at Floyd to think that Mr Hanson has been good for the Hospital. If you had been an employee during the time that Mr White was CEO than you would know what was good for the hospital and the employees, and community.
yes,I agree their's some issues.ButHB what about the adminstration staff that continued to sign off on BIG ticket items.?THAT IF YOU ASK AROUND YOU'LL FIND LOTS OF MONIES SPENT NEEDLESSLY!ITEMS THAT WERE DELIVERED MONTHS IN ADVANCE,that cost the hospital thosands of dollars(freight charge)to be stored for months.The timeing method on getting these pieces was at whatever cost,it didn't matter. Now the little people have to pay the price because certain indiv.in nursing has to have things when they want it,not when it's actually needed.You hear about layoffs?But why doesn't the board look at where all the messes started?Most of us need our jobs,and loved our jobs.But when you talk about the CEO,don't stop looking at who else has created this mess.From what I have heard they(all adminstration)knew this was going on.And now we have to hire a consulting firm to tell us how to manage this hospital?What is the roles of Adminstration? I can't wait to read your reply to this.
I was there when Mr. White was there, I was also there when Mr. Fender was administrator,SO I think i have been there probably longer than you have.
There is lots of 'extra' staffing on some nursing units. Double charge nurses when our bigger medical and surgical units do not have two charge nurses on at one time. What a waste, why isn't anyone looking at that.
Maybe the ex-CFO can comment on the problem.
When the AR issue came to light (last year), written off, and discussed at the highest level, the CFO should have been asked to leave (and was), and the Director of Finance should have been terminated. Now the prior Director of Finance is the Interim CFO? Does this make any business sense?
Someone comment please!
ToThe Annonymous posting on2-22-07 that was sent at 9022.What exactly is your point?That you were there when the previous CEO"s and the current one was?Hmmm,You must be one of the old timmers they want to help leave.Or your one that got in because your related to someone.I'm not trying to be unkind.I just was wanting to know what point you were making.
The person who made the statement that i must not have been there when John White was there, i was commenting on their response. Read all the articles and you could have known what it meant.
Statement is true, the Director of Finance had first hand participation in the destruction of the hospital finances and while she may have been directed by the ex CFO, she did not do anything about it. Others brought up Red flags and nothing was done about it. The Director of Finance cant be trusted and should not be in any role, including interim CFO
Have just read the comments of the individual who has worked with the 3 administrators, I too worked with all 3 and I can tell you the morale now at the hospital is at an all time low....maybe Mr.Fender was not the most educated but we stayed afloat. Mr.White was a breathe of fresh air and left way too soon....as far as Mr.Hanson....its a joke. what a mess we are in....
I am also one of those long timers with Mr Fender, Mr White and Mr Hanson, believe me everyone was better than Mr Hanson. Mr White was the best all round person. With the public, hospital, employees, did alot for the hospital. He will also be missed, if you knew him. I am sure Mr Hanson would love to get rid of me so he wouldn't have to pay my retirement, pension, and pay. That's what they are looking for longer timers.
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