DMHS: We should have communicated better
Drew Memorial Health System board members learned Wednesday, Feb. 27 that DMHS employees had not received their discretionary 401(k) contributions from 2018 that were expected by employees to be deposited in September of 2019.
DMHS Administration stated that in early February the Health System had sent out letters to employees informing them that low cash flow in September, caused the administration to put off the contributions until the hospital had improved cash flow and planned to meet the discretionary obligation in June of this year.
Seth Givens, DMHS employee, explained to the board how the contributions worked.
The way DMHS figures and pays the contributions is based on an audit DMHS undergoes every year, at that time, normally in September, the employer contributes their discretionary part, up to $2,500 per employee, of the employee’s 401(k). After the audit is complete, DMHS historically has made the deposits. But not this year. Due to many factors, including high expenses and critical low cash, DMHS was not able to make the contributions, which again, are discretionary.
Board members were not happy with the way the administration handled the issue, questioning why the administration did not speak up sooner or inform the board in September.
“Didn’t it come up in a board meeting?” asked board member Robin McClendon.
The answer was no.
“I take full responsibility for it. This should have been communicated in September or October,” said Melodie Colwell, “because of the situation we in. I will be one hundred percent honest. It didn’t cross my mind. I will take full blame for it. It should have been communicated that is the number one thing we did wrong here.
“As far as legally,” Colewell continued, “and what we have to do as an organization we have the discretion not to pay it but it should have been communicated and that’s the bottom line. “
“Yes,” said McClendon. “That is why we are here to help with these issues.”
“That’s right, that’s right,” said Colewell. “I take full blame for not communicating it. But I will tell you, I was worried about whether or not we could pay the bills we had coming in and whether we could make payroll. That’s where we are.”
But the board was not fully satisfied with Colewell’s answer.
“Scott, I don’t accept her response,” said Board Member Carl Lucky. “I think it’s your fault. I think it is a big mistake. I think it is a serious mistake that the board, not just the board, the employees should have been told about the same time that contribution would have been made. ‘Here is where we are, here is what we think, here is what we are going to do.’ I don’t know how you let this happen but I am disappointed to put it mildly.
“Then a letter went out,” Lucky continued. “I think I saw a copy a couple of days ago. I didn’t know a letter was going out. I don’t think the letter did a very good job of explaining what took place, that is my opinion. I’m not happy about anything that took place. I’ll just be upfront.”
The rest of the board members echoed that sentiment and stated they needed to figure out what they were going to do.
“You are right, the buck stops with me,” said Scott Barrilleaux. “I am the guy, leading the charge, if there was a mistake, it is my fault. I did not know Melodie was going to make that statement. It is my fault. We did not have the money to fund this and there are a lot of reasons why we didn’t have the money to fund this, it’s not just one reason. Yeah, staff are upset about certain things and a lot of it has to do with our inability to be competitive in some areas when it comes to compensation. How did we fix that? We need money. How do we get money? We need volume. What comes with volume is overworking staff which is a double edged sword.
“We have 350 something people working here, right?” He continued. “And 344 of those are worried about their paycheck that they get every month. There are six of us that worry about 350 paychecks every month. That is what we are worried about and we are trying to make that happen. And that is not an easy task. And the way I see the board, I see the board supporting us. And when things happen I hope, and to some extent, I expect some level of support for us because we are doing our dead level best. Now you know, if there is a thought that someone else should captain this ship, we can have that conversation but as long as I am here and as long as I sit in that chair, I am going to support this staff and I am going to do everything I can to make this a place people want to work.
My thought, my plan here, I told them to send the letter. I approved it. Because we have been transparent with our staff.”
According to Barrilleaux DMHS communicates with their managers about everything, including financials and they expect that to be taken back to the staff.
I can go through what happened to our cash. There was not one thing that made the cash drop,” said Barrilleaux, “In hindsight, we probably would have made different decisions.”
Not having the cash to make the contributions is troubling but, according to Carl Lucky, DMHS is doing a lot of good things, as they grow.
“Hospitals this size are in a catch-22,” said Lucky.
He went on to explain that medium size rural hospitals, that are more that just the emergency room, are too big to have in house coders to bill the insurance agency and they have to outsource. Unfortunately, the old coding company did not do a good job.
Since 2016, revenue has jumped 44% from $62 million to $89 million, however net revenue has only grown by 13% with 28 million in 2016 compared to 31 million in 2019. Net income though, has reduced drastically with a net income of 1.8 million in 2016 compared to $638,000 in 2019.
The problem is a combination of the cost of growth, in terms of construction and equipment costs, combined with changes to how insurances want everything coded, added to the vendor that DMHS was using before switching to HRG. The administration has reported to the board throughout the switch that the original company was costing the hospital millions by not coding and billing correctly.
At the beginning of the meeting, HRG was there to report to DMHS the progress they have made on collecting for current revenue as well as collecting on past accounts.
January was the highest month in volume and revenue seen by the hospital with over $4 million for the month.
DMHS plans to fund the 2018 401(k) contributions by the end of June.