As the May 11 election approaches, many voters remain undecided on at least one ballot item. The proposition that could lead to the formation of a local hospital district — and new taxing entity — has led to questions regarding Glen Rose Medical Center finances.

For some residents, two questions — is the hospital in a financial crisis and who (or what) is to blame — are at the center of the debate.

While certain community members are pointing a finger at poor hospital management, Ray Reynolds, CEO, said the problems plaguing GRMC are not only a local problem.

“We do not believe there has been any mismanagement of funds,” he said. “When the hospital authority board was formed, an operation assessment by Community Hospital Corporation identified no significant management issues.”

The authority board, formed in 2010, also has an independent accounting firm specializing in healthcare finances performs an annual financial audit.

Currently, Somervell County owns and operates the facility and is required by law to allocate eight percent of its total budget to indigent healthcare funding. The county is also responsible for making payments on hospital debt and administrative costs. In the current fiscal year, the county budget included more than $1.3 million in healthcare funding, plus a debt service payment of $935,000.

While he said GRMC currently “manages” payroll and loan obligations and is able to pay the bills “within 60 days of the due date,” Reynolds said the hospital is simply “living from one payroll or loan payment to the next.”

“The real issue is that we have no financial reserve,” he said, explaining the hospital’s patient and payment revenue sources. “The majority of our patients are on Medicare. Our main source of funding comes from the federal government.”

According to Reynolds, almost 60 percent of GRMC patients are on Medicare, 12 percent are on commercial insurance, 15 percent use Blue Cross/Blue Shield, 10 percent are self-pay, 3 percent are Medicaid and 1 percent are workers’ compensation claims.

“The budgeted net revenue — what we get paid, not what we charge — for patient services for fiscal year ending Sept. 2013 is $15,452,637,” Reynolds said. “Our budgeted expenses for the same period are $18,030,470.”

He said the hospital is also budgeting non-operating revenue of almost $3 million for the implementation of a required electronic health record system.

“We have a loan we will have to repay when we receive the budgeted payment,” Reynolds said, adding the budget also includes services provided to Luminant, contracted laboratory services and Somervell County support.

“This budget gives us a budgeted profit of $377,561 with no provision for equipment purchases or creation of a needed reserve,” he added. “If one of our major insurance payers — such as Medicare or Blue Cross — failed to pay us on a regular basis, we would have difficulty making payroll or loan payments.”

One concern is currently playing out for the hospital, as Reynolds told Somervell County commissioners Monday $1.5 million in federal funding was expected to be delivered in Dec. 2012 and still hasn’t arrived. See associated story on A1.

A few months ago, GRMC obtained a $500,000 line of credit from First Financial Bank to continue operations, and $100,000 in credit remains available to the hospital.

“That Medicaid payment date has been delayed until at least May 2013,” Reynolds said.

Add to that concerns related to a two-percent decrease in Medicare payments, effective April 1, following the recent sequester, and financial concerns are increasing.

He said a cut in Medicare funding also means a decrease in other insurance payments.

“Anytime we get a cut in Medicare funding, we get a cut in the payments from our insurance payers since most of them tie funding to a percentage of Medicare,” Reynolds said.

There are some patients who simply do not pay for services.

“We are required to treat any patient who comes into our emergency room regardless of their ability to pay,” he added. “We cannot even mention payment until the patient has been evaluated and provided basic care.”

Reynolds said the formation of a hospital district would allow for financial security through the accumulation of cash reserves and also allow the hospital to replace basic hospital equipment, which is in many cases “fully depreciated or antiquated” and in need of replacement.

Without the formation of a district, Reynolds said hospital administration and the Somervell County Hospital Authority Board believe the services currently provided by the hospital are at risk.

“We will not be able to continue to provide the same level of services if we do not receive tax support,” he said. “We are a basic-service hospital now. Any significant reduction of services will make it more inconvenient for patients and more difficult to generate enough revenue to survive. At some point, as you lose services you will lose physicians. Physicians need hospitals to treat their patients and will leave if they are not able to properly care for their patients.”

While the petition for the upcoming election allows for a cap of 17.5 cents per $100 valuation, members of the Somervell County Hospital District Political Action Committee have said they expect the rate to be set at about 12 cents per $100. If the district passes, that amount will not be solidified until after property appraisals are complete.

While the local issue is puzzling for many community members seeking answers, Reynolds said the problems are common for locally-operated facilities.

“Glen Rose Medical Center is not the only hospital facing these financial issues,” he said. “There are currently 134 hospital districts in the state of Texas, most of them located in rural counties.”