The City of Arkansas City’s budget may soon receive a much-needed boost if the $1 million it loaned to South Central Kansas Medical Center is paid back.
That might happened soon, according to city and hospital officials. The funds were used to help cover medical centers payroll expenses for April, Many and June as revenue dropped due to the coronavirus fallout.
When the loan was made in early April, officials were unsure whether the hospital would be able to repay it.
City Manager Randy Frazer said that he had visited with CEO Jeff Bowman last week about the possibility of repayment.
“He did mention that he was going to make that recommendation to the trustees this week,” Frazer said. “That will be a decision they will make when it is presented to them.”
Bowman said he discovered Friday that the $1million would not be applicable for FEMA reimbursement. He said the city then requested that the funds be returned.
“After speaking with the Hospital Board Chair and Vice Chair they agreed it would be best to return at this time,” he said. “The repayment of the emergency funds from the city will be repaid from the funds we are currently holding.”
Bowman told the CourierTraveler that repayment would be made this week.
Frazer said repayment of the loan will increase the city’s cash balances, but it won’t solve all of the problems. He said the city still has some tough decisions to make.
“We’ve got some reduced revenues and additional costs this year, but it will be a positive thing for the general fund,” Frazer said.
Board Trustee Duane Oestmann, who is also a city commissioner, said Monday that he was not aware of the medical center’s plan to repay the city.
Repayment of that loan was not discussed during the SCKMC trustee board meeting last week, he said.
“That’s news to me that they’re going to pay it back because we haven’t even talked about it,” Oestmann said. “I’m surprised and I’m happy, because that $1 million will put us back in the black.”
Oestmann said while the hospital is still working to recover financially, the city also has needs and has long way to go to get back on firm financial footing.
The medical center’s financial situation was outlined during the trustee meeting last week.
SCKMC currently has more than $7.6 million in the bank, but is unsure how much it can keep and spend.
That doesn’t include the $1 million from the city.
Bowman said the hospital received an advance payment of $3 million from Medicare-Medicaid Services (CMS) but those funds will be called back by that organization in August.
He said the hospital also received a loan/grant from the federal Payroll Protection Program ($1.5 million), and $3.6 million from Human Health Services.
“It looks nice on paper,” CFO Litisha Johnson told medical center trustees on Thursday. “But it’s really not ours to keep, we’re doing our best not to touch it.”
Johnson said the hospital was still waiting to receive the guidelines that will explain how the funds could be used. If the guidelines were not met, the entities would take the funds back.
The extra Medicare funds were an advance that definitely will have to be repaid.
“They can take every penny we make off Medicare until it’s paid back,” she said. “It’s kind of terrifying because Medicare is our biggest payer.”
Johnson said the hospital is making every effort to avoid using those funds, but some spending has been necessary to keep the hospital going.
The funds are being used as needed to cover operations but not other costs.
“Again, it’s not ours to spend, so we just keep our eyes on it,” she said. “
Johnson said that over all, the medical center’s balance sheet looks pretty much the same as last month. There was a small drop in revenue, but it wasn’t as bad as she had been expecting.
“So you’re saying it’s not as bad as we thought, even including the Ark City Clinic?” board chair Dan Jurkovich asked. “It’s not as bad, but not as good as it should be.”
Bowman said SCKMC has lost $1 million to date because of the pandemic, but things are improving. He said the patient load in June is reaching almost normal numbers.
“The clinics are rebounding and the Ark City Urgent Care is increasing,” he said, referring to a new urgent care program at the Ark City Clinic.
The new orthopedic surgeon, Dr. Suhail Ansari, has completed more surgeries in last few months than most surgeons in larger hospitals will complete in a year, Bowman said.
Amid the improving financial news, however, are some looming costs. Bowman said the hospital would need to replace several critical pieces of equipment totaling more than $1 million.
“The lifespan of equipment in a hospital is seven to 10 years,” he told trustees.
The so-called C-arm used for surgical procedures is more than 20 years old and costs $180,000 to replace.
“We definitely need that with the increase in surgery,” he said.
Other pieces of equipment, including patient monitors, telemetry and a mammogram unit also need to be replaced as soon as possible.