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FLOW MEMORIAL HOSPITAL
Financial Statements and Schedules
September 30, 1985 and 1984
(With Auditors' Report Thereon)
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PLOW MEMORIAL ffOSPITAL
Balance Sheets
September 30, 1985 and 1984
Assets 1985 1984
UNRESTRICTED FUNDS
Current;
Cash $ 11025,659 37,084
Patient accounts receivable, net of allowances
for contractual. adjusLments and doubtful accounts
of $2,0090301 in 1985 and $2,317,945 in 1984 2,867,929 2,623,872
Accounts receivable - other 68,040 63,199
Inventories 431,415 346,032
Prepaid expenses 88,903 56,343
Total current assets 4,4810946 3,126,530
Board designated - certificates of deposit 195,132 195,125
Assets designated for the retirement of
revenue bonds (note 5) 79,512 79,689
Property, plant and equipment (notes 5 and 6);
Land and land improvements 183,242 183,242
Buildings 2,9570271 2,951,987
Fixed equipment 2,1851235 2,119,006
Movable equipment 3 159 107 2,849,987
8,5 8,104,222
Less accumulated depreciation and amortization 5_,3231712 4,921,983
Net property, plant and equipment 3,161,i'4-3- 311821239
Other assets, at cost 74 326 46,364
Total unrestricted funds $ Z~L92~ 42.
See accompanying notes to financial staLements,
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Liabilities and Fund Balance
7i-~ 1985 1984 N
Current:
Note payable to bank
Current installments of long-term debt (note 5) $ 805905
Accounts payable 225,126 )87,370
Accrued expenses 841,045 1,390,662
Due to City of Denton, Texas (note 2) 560,822 530,571
Due to Governmental agencies for settlement. of - 1000000
third-party reimbursements (note 3)
Total current Liabilities 146 751 74,447
1_,773,7 G 1,363,955
Long-term debt, excluding current installments
(note 5)
587,769 709,056
Fund balance:
Board designated
Designated for the repayment of debt 195,732 195,125
Property, plant and equipment, less related debt 79,512 79'689
Undesignated 2,348,248 21285,813
Total fund balance 3,007,656 996 314
51631,148 3, 556,97r]
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Co:mnitmeuts (note 4)
Total unrestricted funds
$ 7 ` 4 £342-i2
FLOW MEMORIAL HOSPITAL
Statements of Revenues and Expenses
Years ended September 30, 1985 and 1984
1985 1984
Patient service revenue (notes 3 and 5):
Inpatients $ 17,6720811 15,3569124
Outpatients 2 320 247 11936,627
Gross patient service revenue 11 ,9~ 9 8 17,292,751
Deductions from patient service revenue:
Contractual adjustments - Medicare and
Medicaid (note 3) 11656,960 1,026,401
Provision for doubtful acconuts 21931,896 21560,181
Charity allowances (net of Denton County, Texas
contributions specifically for indigent care of
$-0- in 1985 and $490,617 in 1984) 110560813 5280411
Other 356,238 319,320
Total deductions from patient service
revenue 6,001,907 4 434 313
Net patient service revenue 13,991,151 1 , 58, 38
Other operating revenue 180 637 160J370
Total operating revenues 1 ,111,7 8 13,_01 , 0
Operating expenses:
Nursing services 414420125 4,8881085
Other professional services 41117,386 40276,867
General services 29085,209 23144,535
General and administrative 20155,445 1,170,870
Depreciation and amortization 459,306 463,108
Interest 116,251 106 748
Total operating expenses 13,375,722 13, 50,21
Excess of operating revenues over
(under) operating expenses 796,066 _ 631 405)
Nonoperating revenue (expenses):
Unrestricted contributions (notes 2 and 6) 10149,900 2549159
Interest income 53,368 36,359
Loss on disposal of assets (2,493)
Total nonoperating revenue, net _1,200,775 M-,518
Excess of revenues over (under)
expenses $ 1.996 841 (340 $$7)
See accompanying notes to financial statements,
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FLOW MEMORIAL HOSPITAL
Statements of Changes in Fund Balances
Years ended September 30, 1985 and 1984
UNRESTRICTED FUNDS
1985 1984
Balance at beginning of year $ 3,556,941 3,837,378
Excess of revenues over (under) expenses 11996,841 (340,887)
Transfers from restricted fund for additions to $ 7
property, plant and equipment
Balance at end of year
RESTRICTED FUND
Balance at beginning of year $
Restricted gifts and bequests (note 6) 77,366 60,450
Transfers to.unrestricted funds for additions to 450)
property, plant and equipment __S77 ___L366) b0.i-
Balance at end of year $ =Y~
See accompanying notes to financial statements.
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FLOW MEMORIAL HOSPITAL
Statements of Changes in Financial Position of Unrestricted Funds
Years ended September 30, 1985 and 1984
1985 1984
Sources of working capital:
Excess of operating revenues over (under)
operating expenses $ 796,066 (631,405)
Item that does not use working capital -
} depreciation and amortization 459,306 463,108
Working capital provided (used) by
operations 112550372 (168,297)
Nonoperating revenue, net 11200,775 290,518
Working capital provided by operations
and nonoperating revenue 2,456,141 122,221
Proceeds from long-term debt 128,645 19,900
`transfers from restricted funds 77,366 60,450
Decrease in assets designated for the retirement
of revenue bonds 177 174
Decrease in working capital $ 2,662 17982 908
Uses of working capital:
Additions to property, plant and equipment, net 438,210 161,395
Current installments and repayment of long-term debt 2490932 195,884
Increase in board-designated funds 607 25,314
Increase in other assets 27,959 -
Increase in working capital $ 11 945 I
Changes in components of working capital:
Increase (decrease) in current assets:
Cash 988,575 (25,111)
Patient accounts receivable, net 244,057 49,520
Accounts receivable - other 4,841 53,441
Inventories 85,383 (25,436)
Prepaid expenses 32, 4 708
1,355, 16 56,522
Increase (decrease) in current liabilities:
Note payable to bank (800905) 80,905
Current installments of long-term debt 37,756 260
Accounts payable (5499617) 630,940
Accrued expenses 30,251 23,288
Due to City of Denton, Texas (100,000) 100,000
Due to Governmental agencies for settlement
of third-party reimbt:esements 72,304 (598 963)
590 211) 23 430
Increase (decrease) in working capital $ O
See accompanying notes to financial statements,
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FLOW MEMORIAL HOSPITAL
Notes to Financial Statements
September 30, 1985 and 1984
(1) Summary of Significant Accounting Policies
The Hospital prepares its financial statements in accordance with the
r~-~ "Hospital Audit Guide" published by the American Institute of Certified
Public Accountants, The following are the more significant accounting
policies used in the preparation of the accompanying financial state-
ments, some of which are unique to nonprofit hospitals,
(a) Restricted funds are used to differentiate funds, the use of which is
limited by the donor, from funds on which the donor places no
restriction or which arise as o result of the operation of the
Hospital for its stated purposes, Resources set aside for
board-designated purposes are not considered to be restricted.
(b) patient service revenue is recorded at list prices, with contractual
adjustments, charity services, allowances and provisions for
doubtful accounts deducted to arrive at net patient service
revenue,
(c) Property, plant and equipment -.:aced at cost, or in the case of
property donated to the Hospital, at the fair market value at the
data of the donation which is then treated as cost, Depreciation
is calculated using the straight-line method over the estimated
useful lives of the respective assets as follows;
Years
Land improvements
Buildings 5-30
Fixed equipment 15-35
Movable equipment 5-30
3-27
Equipment acquired in lease transactions which are in substance
financing arrangements (capital leases) are accounted for as
installment purchases, The capitalized lease obligations reflect the
future lease payments discounted at the interest rates implicit in the
leases and are amortized using the straight-line method over the
estimated useful lives of the related equipment,
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FLOW MEMORIAL HOSPITAL
Notes to Financial Statements
(d) The Hospital's policy is to fund depreciation and losses on disposals
of property, plant and equipment. Cash equal to these annual
amounts is transferred from the operating fund to the board-
designated fund when available.
(e) inventories, consisting primarily of pharmaceuticals and supplies,
d are stated at the lower of cost (first-in, first-out method) or
market.
(f) Investment income, unrestricted gifts and gains or losses on
disposals of equipment of the unrestricted funds are recorded as
nonoperating revenue (expense).
(g) Certain reclassifications have been made to the 1984 financial
statements to conform to the presentation of the 1985 financial
statements.
(2) Ownership
The Hospital is jointly owned by the City and County of Denton, Texas end
operates under the authority of Texas Civil Statute Article No. 4494(1)-1
through a joint City-County hospital board without taxing powers and,
accordingly, is exempt from Federal income tax. The Board is composed of
seven members; four appointed by the Commissioners Court of Denton County
and three appointed by the City Council of the City of Denton. The
County of Denton, Texas contributed $699,900 in 1985 and $615,617 in 1984
to the Hospital. The City of Denton, Texas contributed $450,000 in 1985
and $125,000 in 1984. At September 30, 1984, the Hospital was obligated
to the City for a note payable of $100,000 which was retired in 1985. '
(3) Due to Governmental Agencies for Settlement
of Third-Party Reimbursement Programs_
Contractual adjustments under third-party reimbursement programs represent
the difference between the Hospital's established rates and the amounts
reimbursed by Medicare and Medicaid; they also include any differences
between estimated third-party reimbursement settlements for prior years
and subsequent final settlements. At November 8, 1985, final settlement
has been made by Medicare for all years ended through September 30, 1983
and by Medicaid for all years ended through September 30, 1982.
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FLOW MEMORIAL HOSPITAL
Notes to Financial Statements
Effective October 1, 1983, the Hospital became subject to the Medicare
Prospective Payment System under which the Hospital is reimbursed for
inpatient acute care services rendered to Medicare patients at
prospectively determined rates-per-discharge. These rates, which vary
according to a patient classification system that is based on clinical,
l~ diagnostic, and other factors, are not subject to retroactive adjustment.
The Hospital's classification of patients under the Medicare Prospective
Payment System and the appropriateness of the patients' admissions are
` subject to a validation review by the Medicare peer review organization.
The Hospital's Medicare cases have been reviewed through September 1985.
For noninpatient acute care services rendered to Medicare patients and
defined "pass through" costs such as capital costs, the Hospital
continues to be reimbursed on the basis of reasonable costs. The
percentage of patient service revenues attributable to Medicare and
Medicaid patients was 25% and 4%, respectively, in 1985 and 26% and 3%,
respectively, in 1984,
(4) Pension Plan
The Hospital sponsors a money purchase pension plan with an insurance
company. All full-time employees who have completed one full year of
continuous service and are at least 25 years of age are eligible to
participate in the plan. Under this plan, the employees must contribute
at least 2% of their earnings and the Hospital contributes an amount
equal to 5% of the employee's earnings. The Hospital's pension plan
costs approximated $58,000 and $57,600 for 1985 and 1984, respectively.
(5) Long-term Debt
A summary of long-term debt at September 30, 1985 and 1984 follows:
1985 1984
Denton County'- City of Denton, Texas
Hospital Board revenue bonds;
1975 Series $ 240,000 250,000
1975-A Series 1d0 000 160 000
00,000 10~ 000
Obligation under capital lease 161p,453 217)772
Notes payable, collateralized by equipment 251 268 654
2s1 ,895 98,I'
Less current installments 225,126 187,370
Long-term debt, excluding current
installments $ 7.769 709,056
(Continued)
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FLOW MEMORIAL HOSPITAL
Notes to Financial Statements
The revenue bonds were issued in connection with a major facility
improvement and expansion program between 1975 and 1977. The related
bond agreements contain various restrictive covenants, including first
lien on all revenues of the Hospital, limitations and additional long-
term obligations and designation of funds ($79,512 and $79,689 at
September 30 1985 and 1984, respectively) to comply with the redemption
provision of the bond agreements.
The repayment provisions are as follows:
f (a) 1975 series - payable annually each July 1 in amounts of $10,000
through 1986 with the remaining balance of $230,000 subject to
mandatory redemption annually from July 1, 1987 through 2000 in
amounts ranging from $10,000 to $25,000. The interest rate is
6.98.
(b) 1975-A series - payable annually in amounts of $20,000 beginning
July 1, 1987 through 1994. The interest rate is 7.25%.
Scheduled payments of principal and interest on long-term debt, excluding
capital leases, are as follows;
Amount
Year ending September 30;
1986 $ 220,858
1987 155,739
1988 60,469
1989 55,429
1990
As of September 30, 1985, the Hospital is obligated under a five-year
capital lease for computer equipment and software which was entered into
during 1983, The amount of capital leases included in property, plant
and equipment at September 30 was as follows:
1985 1984
Fixed equipment $ 281,232 281,232
Less accumulated depreciation $ 157,877 93000
(Continued)
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FLOW MEMORIAL HOSPITAL
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Notes to Financial Statements
The present value of future minimum capital lease payments as of
September 30, 1985 are as follows:
Year ending September 30:
1986 $ 87,456
1987 87,456
1988 43 728
i Total minimum lease payments 218 0
164
Less estimated executory costs 30'9
60
Net minimum lease payments 187 680
Less amount representing interest 26,227
Present value of net minimum -
capital lease payments $ 16145
(6) Flow Memorial Hospital Foundation, Inc
Flow Memorial Hospital Foundation, Inc., a tax-exempt, not-for-profit
organization, was established to preserve quality hospital and medical
care for the residents of Denton County, Texas, The Foundation's bylaws
provide that all property and money given to the Foundation be dis-
tributed to or held solely for the benefit of the Hospital. In the
absence of donor restrictions, the Foundation's Board of Directors have,
discretionary control over the amounts to be distributed to the Hospital
and the purposes for which the funds are to be used. Since the
Foundation is a separate entity and is not controlled by the Hospital,
its financial statements are not included herein; however, at
September 30, 1985, the Foundation's total assets amount to approximately
$1,060,000.
A summary of the contributions made by the Foundation to the Hospital for
the years ended September 30, 1985 and 1984 is as follows:
1985 1984
P Restricted contributions - recorded in
the Hospital's statement of changes
in restricted fund balance $
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Schedule 1
FLOW MEMORIAL HOSPITAL
Patient Service Revenue
II
Years ended September 30, 1985 and 1984
1985 1984
Routine services I
Special serviceat $ 20686,025 20800,880
Psychiatric unit
Intensive care 1,018,655 963,934
Nursery 492,019 361,200
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ursery 924,860 861,980
Obstrics 781
Labor and delivery 950496,230 444,53
Operating room ,481 840,453
Recovery room 884,693 545,266
Emergency room 158,648 112,716
Central supply 680,658 651,188
Laboratory 198670222 11512,368
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Blo
abod bank 2,239,513 1,945,097
Radiology 168,723 128,511
Nuclear medicine 1,194,242 19048,614
Pharmacy 1090580 95 267
Intravenous therapy 10996,501 12517,798
lneathesiology 1,402,405 ],0569760
Electrocardiology 636,607 458,748
Physical therapy 261,491 258,951
Inhalation therapy 193,637 221,146
Home health services 1,459,105 1,]3 952
]71,703 335 952
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$ 1_?_293_.0&8
See accompanying auditors' report,
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Schedule 2
FLOW MEMORIAL HOSPITAL
Operating Expenses
Years ended September 30, 1985 and 1984
1985 1984
Nursing services;
Routine care $ 1,561,007 21005,123
i Intensive care 268,474 266,123
Nursery 439,098 482,807
Obstetrics 2680603 268,114
Psychiatric unit 4910287 471,328
Labor and delivery 490,025 439,481
Operating room 271,642 3130140
Recovery room 104,665 92,421
Emergency room 547 324 549 548
~i, L 2,125 r►, ff;OBS
Other professional services:
Central supply 675,500 864,177
Laboratory 8610536 767,361
Blood bank 95,912 80,443
Radiology 627,932 520,407
Nuclear medicine 48,548 45,488
Pharmacy 664$48 631,499
Anesthesiology 283,493 320,117
Electrocardiology 94,237 143,474
Physical therapy 125,924 131,647
Inhalation therapy 293j999 324,257
Home health services 171,243 258,958
Medical records 174 514 189 039
,1~ 17h,3$6 7-
General services:
Dietary 664,225 670,566
Plant operation 1,0121426 1,025,942
Housekeeping 285,695 3380123
Laundry 132t863 109,904
2,0 5,209 211 ,5 5
(Continued)
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Schedule 2, Cont,
FLOW MEMORIAL HOSPITAL
Operating Expenses, Continued
1985 1984
General and administrative services; W
Administrative $
Fiscal 950,230 880,873 Patient accounting 1419720 1090058
106,560 148,455
Credit and collections
Data processing 272,833 129,921
ng
Admitting 77,541 83,523
Purchasing 162,012 610693
Communications 66,047 47,851
Personnel 172,090 165,212
Health promotion 68~376 79t357
138 036 64 927
2,15 , 45 18-
,__.L_7 7700
Iepreciation and amortization: i
Land improvements
Buildings 4x321 41263
Fixed equipment 82,406 88,826
Major movable equipment 62,554 611119
310,-025 308 900
459,306 _ 4 3, qg
Interest
116,251 106.748
$
See accompanying auditors' report,
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FLOW MEMORIAL HOSPITAL
Letter to Management on Internal
Control and Accounting Procedures
November 8, 1985
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PEAT Pent, 1Iar"16' h111chell R Co.
MARWICK Certified Public Accountwis
Suite i400
Ilh a nk sgivi ng 'rau er
1601 Elm Street
Dallas, Icsiis 75201
The Board of Directors
Flow Memorial Hospital:
We have examined the balance sheets of Flow Memorial Hospital as of
September 30, 1985 and 1984 and the, related statements of revenues and
expenses, changes in fund balances and changes in financial position of
unrestricted funds for the years then ended, Our examinations were made
accordinglyan included such tests generally the accepted auditing
ads such other
auditing procedures as we considered necessary in the circumstances.
In our opinion, the aforementioned financial statements present fairly
the financial position of Flow Memorial Hospital at September 30, 1985
and 1984 and the results of it operations, the changes in its fund
balances and the changes in financial position of its unrestricted funds
for the years then ended, in conformity with generally accepted
accounting principles applied on a consistent basis,
Our examinations were made for the purpose of forming an opinion on the
basic financial statements taken as a whole, The supplementary informa-
tion included in Schedules 1 and 2 is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing proce-
dures applied in the examinations of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole,
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November S, 1985
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n PEAT E'eal, 11arNick, 1111chr11 R
f U MARWICK Ccrtirrd hinllr,,eeounhinl5
Suite HN
'Ruanksglving -rover
1601 Elm Slrecl
Dallas,Texas 75201
November 8, 1985
Board cif Directors
Flow Memorial Hospital
Denton, Texas
Members of the Board:
We are presenting, for your consideration, our comments and recommendations
regarding internal accounting controls and other matters. These came to our
attention during the course of our examination of the financial statements of
Flow Memorial Hospital (Hospital) for the year ended September 30, 1985. We
have not reviewed internal accounting controls subsequent to November 8, 1985.
As a result of our examination,-we did not identify any condition that we
believed to be a material weakness in internal accounting control. This
information, however, should be considered in light of Exhibit 11 which
describes the purpose of our study and evalua:~Lon of internal accounting
controls as part of our examination, and such information is intended solely
for the use of your management in assessing the control environment.
During our examination, we did note certain matters which we believe warrant
management's attention. The comments and related recommendations presented in
Exhibit 1 are intended to improve the system of internal accounting control or
result in other operating efficiencies,
We would like to take this opportunity to acknowledge the courtesy and
assistance extended to us by the personnel of the Hospital during the course of
our examination.
Yours very truly,
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Exhibit I-1
CASH MANAGEMENT AND CONTROL
Our review of cash balances revealed certain areas where improvements should be
considered:
• As a result of improved operations, the Hospital has experienced a
significant increase in available cash, We noted significant
amounts of cash on deposit in noninterest bearing bank accounts at
various times during the year. Other bank accounts with large
balances were noted earning interest at passbook rates. Although
balances in these accounts fluctuate during the year, management
should investigate short-term investment opportunities available
through banks or investment companies to maximize the Hospitals'
Interest earnings such as government securities, repurchase agree-
ments or overnight time deposits,
• The Hospital should give consideration to reimplementing its policy
regarding funded depreciation accounts, Investment earnings on
amounts designated as funded depreciation do not have to be offset
against allowable costs on the Medicare cost report and,
accordingly, results in increased reimbursement under the Medicare
program.
MI;nICARE
In order to prevent manipulation of the Medicare Prospective Payment System,
the Federal government has established Peer Review Organizations (PRO) to be
responsible for auditing the appropriateness of Medicare discharges. PRO
reviews in the current fiscal year have resulted in denial of Medicare
discharges in excess of the rate allowed under Federal regulations, which has
resulted in a 100%, review by the PRO of the Hospital's Medicare discharges.
The majority of such denials are due to inappropriate admissions such as the
admission of a patient which is not considered medically necessary, All
Medicare claims denied by the PRO due to inappropriate admission are not
reimbursed by the Medicare program, It is our understanding that the Hospital
is making a concerted effort to reduce the error rate by organizing an
outpatient observation room and other preadmission testing procedures. We
encourage the implementation of these procedures and recommend the Hospital
review and determine whether the employment of a part-time registered nurse in
the admissions department would be cost beneficial.
PHYSICIAN niSCNAROE 9I7MMARIES AND ATTESTATION STATEMENTS
The Prospective Payment System requires that physicians attest to diagnostic
and procedural information of Medicare patients prior to billing the Medicare
intermediary, Our review of the Medicare billing process indicated that
although much improvement has been made over prior years, certain physicians
are still not completing medical record discharge summaries and attesting to
diagnostic and procedural information on a timely basis,
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Exhibit I-2
Current y
Hospital policy allows physicians twenty-eight days subsequent to
discharge for completion of medical charts before medical
suspended, We recommend that the Hospital consider decreasingrthelallowedrtime
period for completed discharge summaries and physicians'
to ten days after discharge. The Hospital must reiterate the importance of
timely discharge summaries to physicians, attestation statements
agreeable
and attempt to develop mutually
to
comply with more t ngentdchart tcompletionorequirements.onnel and physicians
ACCESS TO BOOKS AND RECORDS
On December 30, 1982 the Health Care Financing Administration (HCFA) passed
highly controversial regulations regarding access to a hospital subcontractor's
books and records, The regulations were modified slightly on April 6, 1984 but
remain retroactive for services rendered after December 4, 1980.
Under the terms of the regulations, if a hospital enters into a contract for
services, the coat of which exceeds $10,000, it must include language, signed
by the other party, granting federal government access to its books and
records, If the language is not present at the time of the Medicare audit,
' costs associated with the contract will not be allowed for reimbursement
purposes. A recent interpretation by HCFA indicates that a grace period to
obtain the access clause will not be provided.
It is our understanding that the Hospital is considerin man
next fiscal 8 y projects over the
year which would result in service contracts with third parties in
excess of $10,000. We recommend that all applicable contracts, both future and
current, be reviewed for compliance with such regulations,
RATES SETTING
The Hospital made significant changes to its charge structure during the 1985
fiscal year which resulted in increased patient service revenue, n our
review of the 1983 preliminary Medicare cost report, we noted thatDallocated
costa in certain ancillary departments exceeded the related charges as follows:
Recovery room
Physical therapy $ 21,670
We recommend the Hospital review its present charge structures for these
areas,
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Exhibit II-l
BASIC ELEMENTS OF A SOUND SYSTEM OF INTERNAL CONTROL
As part of an examination of financial statements, we perform a study and
evaluation of the Hospital's system of internal accounting control to the
extent we consider necessary to evaluate the system as required by generally
accepted auditing standards, The purpose of our study and evaluation is to
determine the nature, timing and extent of the auditing procedures necessary
for expressing an opinion on the Hospital's financial statements, Our study
and evaluation is more limited than would be necessary to express an opinion on
the system of internal accounting control taken as a whole,
r The Hospital's management is responsible for establishing and maintaining a
system of internal accounting control. In fulfilling this responsibility,
estimates and judgments made by management are required to assess the expected
benefits and related coats of control procedures, The objectives of a system
are to provide management with reasonable, but not absolute, assurance that
assets are safeguarded against loss from unauthorized use or disposition, and
that transactions are executed in accordance with management's authorization
and recorded properly to permit the preparation of financial statements in
accordance with generally accepted accounting principles.
Basic Elements
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The basic elements of a sound system of internal control have been enumerated
by the Committee on Auditing Procedures of the American Institute of Certified
Public Accountants. They include;
"a, A plan of organization which provides appropriate separation of
functional responsibilities,
b. A system of authorization and recordkeeping procedures adequate to
provide reasonable accounting control over assets, liabilities,
revenues and expenses,
c. Sound practices to be followed in performance of duties and
functions of each of the organizational departments, and
d. Personnel of quality commensurate with responsibilit.les,"
Internal control is further subdivided into accounting controls and
administrative controls.
Accounting control comprises the plan of organization and the procedures and
records that are concerned with the safeguarding of assets and the reliability
of financial records and consequently are designed to provide reasonable
assurance that;
a. Transactions are executed in accordance with management's general
or specific authorization,
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Exhibit II-2
b. Transactions are recorded as necessary (1) to permit preparation
` of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such
statements and (2) to maintain accountability for assets,
c. Access to ass<,.ts to permitted only in accordance with management's
authorization,
d. The recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences,
Administrative controls includes, but is not limited to, the plan or organi-
zation and the procedures and records that are concerned with the decision
processes leading to management's authorization of transactions. Such
authorization is a management function directly associated with the
responsibility for achieving the objectives of the organization and is the
starting point for establishing accounting control of transactions.
Because of inherent limitations in any system of internal accounting control,
errors or irregularities may nevertheless occur and not be detected, Also,
projection of any evaluation of the system to future periods is subject to the
risk that procedures may become inadequate because of changes in conditions or
that the degree of compliance with procedures may deteriorate,
A study and evaluation made for the limited purpose described above would not
necessarily disclose all material weaknesses in the system, Accordingly, an
expression of an opinion on the-system of internal accounting control taken as
a whole cannot. be made.
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FLAW MEMORIAL HOSPITAL
MANAGEMENT PLAN
FISCAL YEAR
1986
1
T A B L E OF C O N T E N T S
1. FINANCIAL CHANGE
11. OPERATING BUL)GET
2 B
ITT. STAFFING
IV. CAPITAL BUDGET 10 20
"I MEMORIX4 HOSPITAL
FY 1986 BUDGET
Statement of Changes in Financial Position
Net Income from Operations $ 330,710
Plus Depreciation 550,000
Plus City/County 21000,000
Plus Other Non-Operating Revenues 50,000
Net Increase in Financial
Position $ 2,930,710
Capital Requirementst
Equipment and Repair $ 2,312,040
Medical Office Building
(Master Plan) 2,900,000
Renovation -(Master plan) 12,950,000
Total Capital Requirement $ 18,162,040
r
Net Capital Requiring Financing $ 15,231,330
~lti
tt -.y
P{
"I MEMOML HOSPITAL
MICOME STATTMMIr
PISC.NL YEAR 1986 M)CGET
FISCAL YEAR 1986
BUDGET
Revenue from Patient Services
inpatient (page 3) $ 17,6120050
Out Patient (page 3) 2,3981510
Total Patient Revenue $ 20,010,560
Deductions from Revenue
Contractual Allowance (page 4) $ 11503,620
Bad Debts (page 4) 4,378,300
Other (page 4) 10085,490
Total Deductions 6,9671410
Net Patient Revenue $ 130043,150
Other Operating Revenue (page 5) 514,600
Total operating Revenue $ 13,557,750
Operating Drpenses (page 6 & 7)
Salaries $ 51987,470
Benefits 856,210
Professional Fees 11756,050
Supplies 212900780
Other 1, 786, 530
Total Operating Expense $ 12,677,040
Income Before Depreciation $ 8800710
Depreciation 550,000
Net Profit (Loss)
from Operations $ 330,710
Non-Operating Revenues 21050_,000
Net Profit $ 2L380,710
.2-
X
rLal Mf°.I`70RIAL. flospiTAL
PATIENT RE&Wr COMPARATIVE
rISCAL YEAR 1985-1986
RE,'t/=E rISCAL YEAR 1985
CENTER ESTD1ATED FISCAL YEAR 1966 VARIANCI
I/P BUDCRI 0/P PERCENTII
O/P I/P
Med/Burg (2A/2C) $1,885,450
Med/Burg (3A) $ -a-
$.112921830
979,040 -0- $ -0- .4;;
Med/Surg (2B) 3521590 -O- (2626.4
422,190 -0-
Ob/Cyn 383,100 -0- ( 9.2
468,640 21960 588,800
Nursery/NICU 785,550 -0- 51950 26.1
ICU/CCU 547,920 968,150 -0- 23.2
Mid-Wives -0` 634,500
-0- _ `0- 15.8
Labor & Delivery 774,7 _0 192,000 480000
10 85,430 884,250
OR/RR 669,880 146,840 87,450 13.0
Emergency Room 821,160 198,240 24.8
96,630 584,300 99 680
Central Supply 1,500,100 ' 612,320 4,6
142,350 11673,760 192,040 13.0
Pharmacy/IV 3,154,900 67,OG0
Lab/Blood 3,619,200 187,920 18.2
2071,320 183,040 11736,670
Cardiopulmonary ].,439,020 201,530 ( .19.0 J
Radiology 64,870 118320690 92,540 767,420 428 090 640,960 376,140 28,0
Behavioral mod f Z4.9 ]
971,620 -0- 1,118,290
Anesthesia 458,440 69,430 0- 15.1
Physical 'therapy 132,340 665,580 10.1,220 45,3
43,200 208,000 46,20o
Homo Health Service -0- ( 12.2 ]
Health Promotions 169,7.0 -0- 235,680 38.9
13,000
0'. 23, 280 79.1
TOTAL .$16t6250120 $2000,340 517612,050 $2 398,510
r
°3-
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is
H
f
FLOW MEMOIZIAT., HOSPITAL
DEDUCTIONS FROM REVENUE
FISCAL YEAR 1986 BUDGET
PERCINTAGE
OF PERCENTAGE
TOTAL REVt IUE COLLECTIBLE
r^~ Ccmnercial 42.0%
Blue Cross 5.0% 94.0%
Self Pay 22.0%
Medicare 27.0% 12.0
Medicaid 4.0% 76.08
76.0%
Blue Cross= Fixed pricing with a Projected 148 Rate Increase
1984 Blue Cross Revenue $ 864,637
Rate Increase - 14%
Blue Cross Reimbursement
Revenue Budget $20 $ 985,690
Blue Cross Revenue percent y,010,560
Blue Cross Revenue 58
Blue Cross Allowance O__1J -01,532
Medicare and Medicaid Contractual Allowance Estimated at 24% $ 14'840
Revenue Budget $20,0101560
Revenue Percentage 31%
Medicare/Medicaid Revenue
Allowance Percent $6,203,270
Medicare/Medicaid Allowance
TOTAL CONTRACTUAL ALLWAN=. 1 488,780
Bad Debt X03,6 0
Revenue: Budget $20,010,560
Commercial Revenue Percent 42%
Camoercial Revenue
Ccmmercial Bad Debt Percent $8,404,430
Cannercial Bad Debt 6$
Revenue Budget $20,010,560 $ 504,260
Self Pay Revenue Percent 22%
Self Pay Revenue $4,4020320
Self Pay Bad Debt Percent
SelE Pay Bad Debt 88~
TOTAL BAD DEBT $3 8__i____z74 090
Other $4,378,300
Projected 6$ Increase
Fiscal Year 1985 Estimates? $1,024,050
Increase
Fiscal Year 1986 Budget
$1P,111 49,
0
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P:
FLOW MEMORIAL HOSPITAL
OTHER OPERATING RLVF Ur COMPARATIVE
FISCAL YEAR 1985 - 1986
Fi.sa31 Year 1985 Fiscal year 1986 Variance
Litimates Bir qe1. Percentile
Cafeteria $119j330
'410"10 400
Medical Records 7,640
61900 10.7)
Gift shop
21,420 19r300 ( 11.0 J
Recovery of Bad Debts 3600160
375,000 4,0 r
Miscellaneous 6 840
6,000 L111 .1 J
Total $515,390 _
$514,600
[ 2$J
,
i
i
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F(
f~
FWW MUMORIAI, HOSPITAL
OPERATING EXPENSE COMPARATIVE
FISOIL YEAR 1986 BUDGET
! FISCAL YEAR 1985 FISCALY.tMR 1986 VARIANCE
COST CENTER ESTIMATED BUDGET PERCENTILE
i
Nursing Administration $ 151,200 $ 167,250 10.68 i
Med/Sung (2A/2C) 855,940 617,050 ( 27.9 J i
Med/Surg (3A) 320,770 279,600 ( 12.3 J
r Med/Sung (2B) 278,450 267,930 ( 3.8 J
( OB/Gyn 253,800 252,420 ( .5 J
Nursery/NICU 3910230 406,320 3.9
ICU/CCU 281,910 277,980 ( 1.4 1 I
Labor and Delivery 425,650 427,740 ,5 f
OR/RR 357,940 364,930 2.0
Emergency Room 540,260 562,800 4.2
Central Supply 839,070 999,240 19.1
Lab/Blood 907,860 7894060 ( 13.1 j 1
Cardiopulmonary 380,020 357,280 [ 6.0 J
Radiology 582,730 659,640 13.2
Pharmacy/IV 610,280 597,160 ( 10.9 j
Behavorial Medicine 4590830 447,920 2.6
Anesthesia 291,470 241,240 ( 17.2 ]
Physical Therapy 124,860 112,320 ( 10.0 J
Medical Records 163,300 160,850 [ 1.5 j
Dietary/Nutrition 658,620 541,440 [ 17.8 j
Plant/Security 334,900 334,680 0
Housekeeping 276,300 250,200 [ 9,4 1
Laundry 120,000 126,840 5.7
Mid-wives 67,200
Fiscal Affairs 230,000 242,970 5.6
Business Office 4110470 352,560 ( 14,3 3
Administration 228,500 212,280 ( 7.1 j
Purchasing 50,600 67,320 33.1
Personnel 640420 64,060 ( 16 j
Ifealth Pramtions 97,890 104,940 7.2
Quality Assurance 71,810 58,980 [ 17.9 j
time Health Service 167,380 169,410 1.2
Auxiliary 23,850 30,240 2618
Benefits (14.3%) 9300690 856,210 ( 6.0 j
Utilities 640,020 665,040 3.9
Telephone 115,050 126,000 9.5
TOTAL $12,698,070 $12,259,100 [ 3,51
wr
11
+`s
r
s
r,
.r
rWil M3MORIAL HOSPITAL
GENERAL AND ADiti=STRATIVE EXPENSE COMPARATIVE
FISCAL YEAR 1986 BUDC2T
FISCAL YEAR 1985 FISCAL YEAR 1986 VARIANCE
ESTIMATE I3tz= PEX:WILE
Interest $108,930 $ 980000 ( 108 ] S
Consultants 139,650 50,000 ( 64 j
r~ Rental 76,850 84,540 10
Insurance , Liability 61,680 107,900 75
Insurance » Other 22,550 23,700 5
Dues 18,880 19,800 5
Postage 30,950 31,000 10
Total General and Admin. $4591490 $417,940 9%
-7-
H Ji..Y, ty
tYr.,..., raa'
l
F-CW MMRIAL HOSPITAL
NON - OPERATING REVENUE
FISCAL YEAR 1986 BUDU-,T
FISCAL YEAR 1986
BUDMT i
E
Interest Inane $ 541000
Capital.Funds fran City/County _2j000,000
s
i
TOTAL Y2,o5o,000
i
i
"F
FLOW PEWRIAL HOSPITAL
S'T'AFFING - PIT'S
FISCAL YEAR 1985 - 1986
April,'1984 FISCAL YEAR 1986 ACTUAL
to BUDGET VARIANCE
March 1985
Nursing Administration , . F -T--_ t
" Mod/Sung (2A/2C) 57,6 J
Med/Sung (3A) 10.8 27,J [ 29.8 J 1
CU/CCU/PCU 10.3 [ .5
I ]
I, CU/ 27,5 19,2 ( 8.3 ]
12.1 10.3 1 8
~ Nursory/NICU 19.1 14.6 ( 4.5 ]
[ . J i
Labor and Delivery 14,8
Operating and Recovery Room 13,0 111.3 1.3 f 2 ] {
&aeargency Room 9.8 [ 1.7 ]
9.5 [ .3 ] i
Total Nursing 170.7 123,1 ( 47.6 J
f
Central Supplies 8.3 3,5 [ 4.8 ]
Cardiopulnnnary 14.9 9,0 [ 5,9 J
Radiology 10.5 7.0 [ 3.5 ]
Pharmacy 8.3 5.0 [ 3.3 ]
Behavioral Medicine 22.3 17.3 [ 510 ]
Physical Therapy 5.2 3.0 [ 2.2 ]
Medical Records 911 7,0 ( 2.1
Dietary/Nutrition 31,9 22.0 ( 9,9 ]
Plant/Security, 18,1 10.5 Housekeeping 28,7 20.0 [ 7.6
Laundry 6.6 1.0 [ 8.7 )
Fiscal/Business off-ice 34.9 25,0 [ 5.6 ]
Administration 3.8 4.0 I 9.9 ]
Quality Assurance 2.9 2,5 '2
Auxiliary .7 [ . ]
Purchasing 2.6 . 2.5 [ .2 2 ]
Personnel 2.5 [ . ]
3,7 2.0 ( 1.7 7 ]
Health Promotions _ 2,3 1,5 ( ,8
Total Non Nursing 214,8 143,3 -[-71.5
J
Total M. 385.5 266,4 - 118,6
FTC / Patient Day 4.2
Im5 9.5 5.5 [ 4.0
CRNA 5.0 3.0 2.0
r Midwives 0,0 2.0 [ 2.0 ]
Total lisp, I'm 400.0 276,9 ( 122,6 ]
F'M- / Patient Day 4,4
-n-
t
i
FLOIJ MEMORIAL HOSPITAL
1986, 1987, 1988
Three Year Capital Equipment Budget Summary
OVER $500
Dept. Name/
Priority Description Cost 1985-86
1986-87 1987-88
Home Health
A Chart Storage $ 1,070. $ 1,070.
B IBM Selectric I1 970,
$ 2,040. $ 1,070. $ 970.
Med/Surg
B Bed Scales 3,600. 1
$ 3,600.
$ 3,600, ~
I
Labor & Delivery
8 Corometrics 115
Fetal Monitor $33,000. $110000, $11,000, $ii,U00,
B -Neonatal Care
Unit 81500. 8$00,
B Open Crib w/Infant
Warmer 10,000, 5 000,
C 5,000,
Hugh Sterilizer 24,000,
14,000,
C Birthing Bed 59000.
5,000.
8 Delivery/Surg.
Table 12,000,
12,Otl0,
$82$00, $24,500. $250000, $330000.
Post Partum
V. B Hewlett Packard
Fetal Monitor $ 1,000, $ 1,000,
$ 11000. $ 1,000.
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FLOW MEMORIAL HOSPITAL.
1486, 1987, 1988
Three Year Capital Equipment Budget Summary
OVER $500
Dept. Name/
Priority Description Cost 1985-86 1986-87
1987-88
ICU
B Hewlett Packard
r- Monitor $40,000, $40,000,
C i
Cardiac Output
Monitor $ 5,200, $ 5,200,
E
$45,200, $ 50200. $40,000.
Nursery
I A
Portable Radiant
Warmer $ 3,500,
$ 3$00.
A Bill-Dosimeter 2,100,
2,100,
A Armstrong
Incubator 120000, 30000, $ 66000, $ 30000,
A Stainless Steel
Crib 11,250, 35750, 35750,
B 3,750,
Photo therapy
Unit 11500, 10500,
B Double I4811 C-100
Isoletto 5,800, 5,800,
$36,150, $120350, $17,050, $ 61750,
NICU
A Neo.Trak Spacelab
Monitor $122000, $ 60000, ti ,
A 6,000,
Auto Syringe
Pump $ 11900, $ 1,900,
B Stainless Steel
Crib $ 1,740,
$ 875. $ 875,
D Nelcon Pulse
Oxymeter $ 89000. $ 8,000.
. rll`
FLOE) MEMORIAL HOSPITAL
1986, 1987, 1988
Three Year Capital Equipment Budget Summary
OVER $500
Dept. Name/
Priority Description Cost 1985-86 1986_87 1987-88
NICU cont,
C Ohio IC Incu-
bator $ 6,500, $ 6,500,
$30,140. $ 7,900. 515,370. $ 6,870,
i
i Birthing Center
B Imex Dopplar $ 1,100, $ 1,100.
r
C Day Bed for
Birth. Room r 950, 950
$ 2,050, $ 11100. $ 950,
O.R.
A Olympus Neater
Probe $ 51300, $ 51300.
B Dermatone &
Meshgrafter $ 3,600, $ 31600.
B Mini Fragment
Set $ 40060, $ 40060,
B Flash Sterilizer $13,000, $13,000.
B O.R. Table $17,000, 17 000,
B O.R. Lights $15,000, $ 7$00. $ 71500,
C Cystoscopy 'fable 2$ x,000, 20 000,
$77,960, $20,460, $37,500, $ 20,000,
Recovery Room
A Defibrillator $ 9,370, $ 99370.
C Blanket Warmer 3,000, 3,000,
$ 12,370. $ 9,370. $ 31000,
.12-
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1
G
FLO14 MEMORIAL HOSPITAL
1986, 1987, 1988
Three Year Capital Equipment Budget Summary
OVER $500
Dept. Name/
Priority Description Cost 1985-86 1986-87 1987-88
E.R.
8 Overhead Light
2 Exam Rms. $ 7,000, $ 7,000•
A Pediatric Stret-
cher $ 2,600, $ 2,500.
C Stryker Adult
Stretcher $ 31750, $ 31750.
C Autotransfuser $16,300. $ 16,300.
B Surgi-Bed $ 4,500, $ 4,500.
$34,150. $17,850. $16,300.
X-Ray
A RA & Theon
R&F System $128,000. $128,000,
B 600 MA Generator
Photo-Time 23,680. $ 23,680.
B Tube Stand 35,750, 359750.
B Digital Image Tube
& T.V. 1111000. 111,000.
D Port. X-Ray(NSy) 14,000. 14,000.
B Film Processor 170500. $ 17,500,
B Generator for
Cysto 14,000, 14,000.
A Film Cabinets 960, 960,
C Transducer 4,000. 4000,
$348,890. $1321960. $1849430. $ 31,500.
Behavioral Medicine
A VCR $ 700. $ 700.
A VCR Camera $ 1,000. $ 11000.
~13-
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FLO14 MEMORIAL HOSPITAL
1986, 1987, 1988
Three Year CapiOVERtal $500Equipment Budget Sulmnary
Dept, Manse/
Priority Description Cost
1985-86 1986-87 1937-38
Behavioral Medicine cont.
A VCR Monitor $ 700.
~ $ 100.
A Heavy-Duty
Washer 750, $ 750,
A Heavy-Duty
i .Dryer 600. 600.
8 IBM Corr. Sei,
' Typewriter ..1,200. 1,200.
A. IBM'P,C, 256K 3,500, l
3,500. A Computer Soft-
ware 10,000. 100000.
C 10-12 Passenger
Van 15,000, 15,000,
C Bio-Feedback
Equip, 4,000, $ 4,000.
C ECT Equipment 90000,
9,000.
E Privacy fencing 21500,
x2,500,
$ 48,950, $ 31600. $ 389850.
$ b,500.
EKG 1
A 20 Echo
$ 87,000. $ 87,000.
A Interpretive
Cardiograph 8,000, $ 8,000,
$ 95,000, $ 870000. $ 8;000.
R.T.
A Treadmill $ 40,000,
$ 40,000,
B Equip, Dryer $ 8,000,
$ 8,000.
• -14-
FLOW MEMORIAL HOSPITAL
19869 1987, 1988
Three Year Capital Equipment Budget Summary
OVER $500
Dept. Name/
Priority Pascription Cost 1985-86 1986-87 1987.38
R.T. cont.
A Patient Table $ 800, $ 800,
C Croupette $ 31000, $ 3,000, j
8 Air Compressor . $ 2,500, $ 2,500,
j $54,300.' $.48,800, $ 5,500,
Pharmacy
C Night Locker Decent- 4
ralize Cart $ 19800. $ 11800,
B Memory Typewriter $ 19500, $ 1,500.
C Sargart Unit Dose
Pkg. Machine $ 21100, $ 2,100.
C IBM Typewriter $ 1,000. $ 11000.
$ 60400, $ 3,300. $ 30100,
Physical Therapy
A CAM Lower Ext. $ 3,200. $ 3,200.
A CPIs Upper Ext. $ 3,200, $ 3,200,
B Cold-Pack Unit $ 1,890. $ 11890.
B Parallel Bars Del,
Adj. $ 520, $ 520.
B Galvanic Stimulator 1,100, $ 1,100.
C Unex 11 Weight
Machine $ 1,060, $ 1,060,
C Arm, Leg, Hip Whirl-
pool $ 1,820, $ 1,820,
f
-15-
FLO14 MEMORIAL HOSPITAL
Three Year Capital Equipment B
Budget Summary
OVER $500
Dept. Name/
Priority Description Cost 1985-86
198687 3987-88
Physical Therapy cont.
C Adj. Nigh Chair $ 570, $ 570.
B Ergometer Adj,
Oel. Clin, 850,
$ 850,
8 _ . . Treatment Table 11600. 10600,
C Ultrasound Port, 1,200,
1 *200,
C Podiatry Whirl-
pool 19200. $ 1,200.
B Tens Unit 1,800,
1,800.
C Tilt Table 11000.
1,000,
C Hot Pack Unit 1,200,
22,210. $ 13,360, $ 39650. $ 5,200,
Medical Records
A Master Pat..Rotary
File $ 60500, $ 6,500,
B Word Processor Acous,
Covers 11000, $ 11000,
C IBM Selectric n 2,000.
2,000.
C Lanier Word Pro-
cessor 14,000, 14,000.
$ 23,500. $ 61500. $17,000,
Plant
A Chillers, Towers, Piping
& E1ec, $520,000, $320,000, $ 200,000,
B Steam Generator $ 48,870,
$ 48,870,
-16-
I
FLOW MEMORIAL HOSPITAL
1986, 1987, 1988
Three Year Capital Equipment Budget Summary
OVER $500
Dept, Name/
Priority Description Cost 1985-86 1986-87 1987-88
Plant cunt.
B Convert Double System
to VAV convert
is mixing boxes $"95,340. 5 95,340.
C Cogeneration
Plant $92,540. $92,540.
8 Resaturate Roof $ 79000, $70000.
B Exit doors by
Maint. $.1,700. $ 1,700.
A Rebuild Air
Handler $ 11500, $ 1,500.
B Replace Refractory in
Incinerator $ 2,500. $ 2,500.
B Resaturate Roof $20,000. $20,000.
A Hospital Van &
Pickup $I5,000, $15,000.
A Building over H2O
storage $ 550. $ 550,
S Seal Visitor Parking
Lot $ 90000. $ 90000.
B Seal Doctors & Directors
Park, Lot $ 6,500. $ 6+500•
A Seal Circle Drive
& Patch $ 2,000. $ 2,000.
8 Copper wiring in Panels
IC,2C,3D,1D,
3A, & BI $ 7,000• $ 71000.
B Doors for Loading
Dock $ 10750. $ I1750.
-17-
i
a
FLOW MEMORIAL HOSPITAL
1986, 1987, 1988
Three Year Capital Equipment Budget Summary
OVER $500
Dept. Name/
Priority Description Cost
1985-86 1986-617 1987-88
Plant cont.
C Motorized Chilling
Tube brush $ 19500,
C Transfer Switch
Generator $ 10,300,
j: g $ 10,300,
Mod/Burg Nurse.
Ca11 System $ 200000,
s 2o,ooa,
C 2B Nurse-Call
System
$ 7,670, $ 7167x.
8 3A Nurse Call
system $14,880,
0 $ 14,880,
3B Nurse call
System $ 9,520,
B OS-L&D Nurse Call $ 91520,
'
system $ 7,620,
8 $ 7,620,
L&D Nurse Call
System $ 7,850,
C $ 7,850,
O.R. Nurse Call
System 89380,
- 8 380.
$ 918,970. $ 403,620. $ 345,840,
$]69,510,
Quality Assurance
C IBM Selectric $ 970,
970 ,
$ 970, $ 970,
Health Promotion
A Kodak Ektagraphic
r Viewer $ 675, $ 675,
A 16mm Projector $ 1,300,
$ i1300.
-10-
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FLO14 MEMORIAL NOSPITAL
1986, 1987, 1988
Three Year Capital Equipment Budget Summary
OVER $500
Dept, Name/
Priority Description Cost 1985-86 1986-87
1987-86
Health Promotion cont.
8 Recording Annie $ 11600, $ 10600,
C Anatomic Annie 420, $ 4. 0.
C- Opaque Projector 790.
190.
1 A IBM Selectric 910, 970,
8 Resurci Anne °80" 570,
570.
$ ,6,320. $ 4,540, 1,780,
Anesthesiology
B Auto B.P. Monitor$ 8,800,
$ 4,400, $ 49400,
B Ohio Anesthesia
_Machine 8000 440000, 22,000, $ 229000.
C Blood Warmer 19280, 640,
640,
C Warming Blanket 40000,
29000, 20000,
8 Criticon Oximeters 3,850. 1,650,
1,100, 1,100,
$ 61,930. $ '6,690, $ 29,500, $ 25,740,
Pathology
A Body Lifter 1,500, 1,500,
$ 11500, $ 19500,
General & Administrative
A Room Furnishings 210 000
$ $150,000 $ 30,000 $•.'30,000
A Refurbishing 650,000 350,000 150,000 150,00
$8601n00 $500,000 $••180,000 $180,000
-19-
I / FLOW M011ORM FISOPITAL
1986, 1987, 1988
Three Year Capital Equipment Budget Sunray
OVER $500
Dept. Name/
Priority Description Cost 1985-86 198687 1987-88
A Cat Scan $ 500,000 $ 500,000
I° A Ccmputer 500,000 500,000
$100000000 $1,0000000 I
HOSPITAL TOTALS $31776,100 ,$21112;090. $ 935,990 $ 528,070 ~
i
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1
y
BLUE RIBBON COMMITTEE ON FLOW MEMORIAL HOSPITAL
MONDAY, FEBRUARY 24, 1986
7130 P.M.
ROOM 402, STODDARD HALL, TWU
DENTON, TEXAS
•
AGENDA
I• Welcome
II• Approval Of Minutes
III. 501(c)(3) Board of Advisors Recommendations
IV. Executive Session to Discuss Personnel
Matters Pursuant to Article 6252-17,
Section 2(g), VATCS, and Legal Matters
Pursuant to Article 6252-170 Section 2(e),
VATCS
V. Adjournment
HOW
20
NIL:MORIAL 1-IOSPII'AI. I~ItoSciiplureb'201
U~mhOS, "I'\ 761
1817) 387.5861
BOARD OF DIRECTORS
R FER t 91986
Thursday, February 20, 1986
7000 p, -r
Medallion Room
fIT
AGENDA
I. Call to Order
II. Reading and Approval of Minutes
III. Report of the Administrator
IV, Committee Reports
A. Finance Committee
1. Financial Statements
2. Review of Pension Plan
B. Medical Staff Committees
V. Report of the Medical staff president
VI. Report of the Medical Director
VII, Report of the Blue Ribbon Committee Chairman
VIII, Unfinished Business
A. Computer Procurement
B. Insurance Policy Renewals
C, Housekeeping/Biomedical Engineering Proposal
D. Physician Recruitment
E. Renovation Projects Update
F. Other
I.Y. New Business
A. Utilization Review Plan Review
B. Capital Equipment
C. Medical Staff Appointments
D• Other
X. Executive Session to Discuss Personnel Matters
Pursuant to Article 6252-17, Section 2(g), VATCS, and
to Discuss Legal Matters Pursuant to Article 6232-17,
Section 2(e), VATCS
XI. Adjournment
i. {
}
r.,
ii1 Scrlprurr SlPCrr
A'IENICRIAL HOSPI'T'AL :h Moll, TX 76201
171 387.5801
L 7 'f f`
SPECIAL MEETING FEB d 1986
r
BOARD OF DIRECTORS
Saturday, February 15, 1986
10:00 a.m.
Room 418, Union Building
North Texas State University
Denton, Texas
A G E N D A
I: Call To Order
II. Presentations Of Proposals by
Management Corporations:
A. Republic Health Corporation
10100 a.m. to 12:00 noon
B. Recess 12:00 noon to 1100 p,m.
C. SunHea,.th, Inc.
1100 p.m. to 3100 p.m.
D. Health Management Professionals, Inc.
3:00 p.m. to 500 p.m.
E. Recess 5100 p.m. to 5115 p.m.
III. Report by Management'Subcommittee of the
Blue Ribbon Committee on Flow Memorial
Hospital
IV. Adjournment
r
;r! FEB 51986
BLUE RIBBON COMMITTEE ON FLOW MEMORIAL HOSPITAL
MONDAY, FEBRUARY 10, 1986
7:30 P.M.
ROOM 402, STODDARD HALL, TWU
AGENDA
1. Welcome
11. Approval of Minutes
112. 501(c)(3) Board of Trustees
Recommendations
IV. Other
V. Adjournment
ti
.
HOW !C! ID Sc rlplur~ Slrccl
n~'8 TX 76201
MWORIAL HOSPITAL 1
(a 1 171 387. 186 (
Wes. i .....,•..r
JAN27M6
BOARD OF DIRECTORS a(Y liu
SPECIAL MEETING
Friday, January 31, 1986
700 a.m.
Medallion Room
AGENDA
1''
I. Call to Order
It. Consideration of Request to Establish Position
of Medical Director of Nursery
III. Executive Session to Discuss Personnel Matters
Pursuant to Article 6252-171 Settion 2(g), VATCS
IV. Adjournment
7
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1310 Scripture S(rc.eq
F10 l
MEMORIAL HOSPITAL Demon. TX 76201
(817) 387.5861
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ON
OH SOFFI f
MEETING NOTICE
FLOW MEMORIAL HOSPITAL BOARD OF DIRECTORS
MANAGEMENT ENHANCEMENT SUBCOMMITTEE
BLUE RIBBON CMMITTEE
MNAGEMENT SUBCOMMITTEE
MONDAY, JANUARY 10, L986
7.30 a.m.
MEDALLION ROOM
FLOW MEMORIAL HOSPITAL
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FLOW 1310 Scripture Street
78201
, TX
MEMORIAL HOSPITAL Denton
(817)387 •JB6t
WC 111a I
DEC
MEETING NOTICE
EXECUTIVE COMMITTEE
AND
SUBCOMMITTEE CHAIRS OF THE
BLUE RIBBON COMMITTEE ON
FLOW MEMORIAL HP~RPITAL
Wednesday, December 41 1985
700 p.m.
Roam 402
Stoddard Hall
Texas Woman's University
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NOV 419&'i :j
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CITY
AGENDA
BLUE RIBBON COMMITTEE ON FLOW MEMORIAL HOSPITAL
ROOM 902, STODDARD HALL, TEXAS WOMAN'S UNIVERSITY
NOVEMBER 18, 1985
730 P.M.
Meeting #5
1. Welcome
II. New Business
A. Format and Procedures for Final
Recommendations
B. Subcommittee Recommendations
i
III. Adjournment
i
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9
i
1
201
FIDW 1310 Scripture Benton 6Street
MEMORIAL HOSPITAL , 5881
{817) 387-5881
NOV - 1985
MEETING NOTICE
BLUE RIBBON COKMITTEE
ADMISSIONS SUBCOMMITTEE
Monday, November 11, 1985
7:30 p.m.
Texas Woman's University
313 Stoddard Hall
Chairs Frank Davila
r'<
F.
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I
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F10W 13 10 Scripture Street
MEMORIAL HOSPITAL Denton, (817) 38776201
-.BB68861
Nov !
MEETING NOTICE
BLUE RIBBON SUBCOMMITTEE
ON
INSTITUTIONAL DEVELOPMENT
Thursday, November 7, 1985
8100 a.m.
Flow Memorial Hospital
Medallion Room
i
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i
MEMORIAL HOSPITAL 1310 Scripture Street
Denton, 76201
(81 TX
71387.6881
BOARD OF DIRECTOk5 f SS, 2 11985
( Thursday, October 24, 1985 CilYtfl i°
7100 p.m.
Medallion Room M
AG~NDA
I• Call to Order
II, Service Recognition.
f
III, Elect'" of Officers
IV, Reading and Approval of Minutes
V• Report Of Administrator
VI, Reports of Committees
VII, Report of the Medical Staff President
VIII. Report of the Medical Director
IX, Report of the Blue Ribbon Committee
X. Unfinished Business
A. Financial Admission Pol
B• icy
Awning/Walkway to CT Scanner
C, Croup Purchasing
D. Physician Recruitment
XI, New Business
A. Preferred Provider Suites
B, Short Stay Beds
C. Capital Equipment Request
D, Revision of Medical Director Contracts
E, CRNAs Call Coverage
F, Cammittee Appointment
0• Applications for Appointment to the Medical Staff
XII, Bxecutive Session
Pursuant to Article 6252-170 Section 2(g), VATCS
XIII, Adjournment
-~~ll~~~~ ~I"ilk
i I
FEB a 1986
CI DELI "0
C IY M GEVS Url I: t
PDI 110SPTIS, BLUC '11"BON C011MITTEE ON FLOW 11E11ORIAL
FROItl J- RILLMOMORT11, CHAIRMAN
_SUBJECTI BOARD SMECTIOId pROCESS
-BAT EI JANUARY 29, 1986
_r.r_ry
The Slue Ribbon Committee net in full session
1100daYr January 27, 1906. Pursuant to its
make recommendations taandate, "to
to the City Council and the County
Commissioners court for i
the
Board of Advisors andinthetialBoaapdiPxntrr.to both(bR
Recommendations, )ago 13), the commit' ustGer.,
codure t~jbereby the recommendations uou2d defined a pro.
.
As a first stop, tho Committoe agreed to proceed with
the Board of Trustees.
2, s AOII`rr3SZ There must be standards for comparing
persons proposed as Board of Trustees members. The
follOWing standards Were deomod acceptable by the
Committee rtembersl
2.1 Trustees should bring arith themselves both
credibility and influence in Denton County,
2,2 Trustees should bring expertise '(various
forms) to the Board.
b 2.3 Trustees should 2ivo in Denton County and
ring community reprosentation "to the Board, including
ethnic considorations.
2. Truses modical4communityeOf Dentold bring
n county.support for/from the
2,5 Trustees
characte should reflect Demon's special
ristics (2 univarsitiest heavy onacia
tiant the hospital s pnton si traditional market sorvice areas).
2,6
dati The 91ue Ribbon
and their conc Committoe has made recammon-
the Cionsty and the epts have been accepted r co both
reflect a commitmeent nt to county, as
members proposed should'
thono positions,
30arCi of Tructoes
page 2.
3, ilech___zn Q 13lue Ribbon Committee 11anbers, free to
Speak with whomever they wish, are to propose in writing
names for consideration by the full Committee by
5100 Pool„ February 7th, 1986. 'these names are to be
submitted to tho Blue Ribbon Committee Chairman either
by mail or left in sealed envelopes for collection with
the Secretary of the Blue Ribbon Committee, Mr. Yoder,
at Glow Plemorial Fospital. It f:eas+bt ach name
Witted should inct +de atongsici tr L'e' n to.:,n
~I]S1I.C.ds or to outer. aerr+nan _ ,~:,rts hf o ~ . nr~g__._~
Gorr d o,g Mir 1 gs utem - There should be reasons for
the proposal of a person's name, obviously.
The Committee Chairman will compile these proposed names
for use in their discussion at the next meeting of the
Blue Ribbon Committee, Feb tare 1Q. 86 (announcement
and agenda to bo mailed in week before February 10th).
The names submitted will be hold in strict confidence,
with all materials generated in this process destroynd
after the completion of the Committee's work.
Since somo Committee members will submit a "slate" of
names, the integrity of these slates will not be broken
up as they are compiled by the Chairman. The Committee
will be presented these names as a slate, Mlan Comm-
itrae member~,;l~bmit individual. names not i??►'~nrtn,
vi'oto~ tlB_a "elate." nlnAne <n<ii..nN.. this in.enti Th~..
individual names will be compiled along with other indi-
viduals no that we do not need to have 18 slates to
review.
3. Determtnatron of ri„nt atrN
The Committee will
attempt to create a proposed slate of Board of Trustees
Members at its meeting on February lo, 1086, This
process will be proceeded by a 30 minute period that
allows Committee members to study eho names and
"reasons" offered by follow Committee members.
"
nF:NTON COUNTY COMtJISSIONERS COURT
Buddy Cole, County Judge
Ruth Tansey, Commissioner Precinct 1
Sandy Jacobs, Commissioner Precinct 2
Lee Walker, Commissioner Precinct 3
Bill Switzer, Commissioner Precinct 4
PENTON CITY COUNCIL
Richard 0. Stewart, Mayor, Place 7
Charles Hopkins, Mayor Pro Tempore, Place 6
Marie Chew, District 1
Joe Alford, District 2
Jim Riddlesperger, District 3
Ray Stephens, District 4
Linnie McAdams, Place 5
BLUE RIBBON COMMITTEE
ON
FLOW MEMORIAL HOSPITAL
RECORMENDATIONS
j
DEWIBER, 1985
s
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BLUE RIBBON COMMITTEE MEMBERSHIP
James Killingsworth, Chair
Ruth Tansey, 1st Vice-Chair
Mahlon Freeman, 2nd Vice-Chair
Barbara Cramer, Recording Secretary
David Yoder, Corresponding Secretary
Frank Davila, Chair Admissions Subcommittee
Don Holt, Chair institutional Development
Subcommittee
Sennett Kirk, Chair Capital Formation
Subcommittee
Ken Newman, Chair Management Subcommittee
Beverlee Barr
George Hilz
Robert Hankins
Charles Hopkins
Tracey Kunkel
William Watling
Bill McKee
Roger Nunn
Jim Riddlesperger
Keith Pate
r I
a
December 17, 1985
Dear Judge Cole► Mayor Stewart,
Denton County Commissioners and
Members of the Denton City Council?
T am peasthe BluetRibbont Commto you
adopted b by
Hospital. we have met weekly since late September to
consider the hospital's future course. The recommenda-
tions of the Committee result from a vigorous examina-
tion of all options for reorganizing and revitalizing
Flow Memorial Hospital.
The support of Denton City and County officials, hospital
Board members, hospital medical staff, hospital adminis-
tration► university officials and faculty, and invited
guests from Denton and other Texas communities
contributed greatly to the work of the Blue Ribbon Comm-s Woman foreproviding rooms fsoUrnBlueiversRiitybdebonseCommittrves
The Committee recommendations call for fundamental and
permanent changes at the hospital. in 1984 9.68
of Texas' acute care, short-stay hospitals ceased their
operations. Flow memorial must successfully compete,
over the long-haul, in a dynamic marketplace where cost-
control on the part of the public sector and rigorous,
capital-intensive pressure from Denton's growing inves-
tor owned hospitals make survival for the hospital peri-
uToad-forhead fist-class struggle health got r health depends care upon success
in the he resourcess
The Blue Ribbon Committee recommendations recognize that
the hospital industry of 1986 will penalize with bank-
ruptcy any hospital that finds itself under-capitalized,
managerially isolated, bereft of the power to make rapid
and authoritative deciisions# saddled and unablepublic duties
beyond its abili y to deliver# long-range regional plan for the future of its market
area.
The Committee recommends that a now governance structure
be created under the purview of community-based, Texas
non-profit: hospital c recommendation requires corporation othera ac301 tion~s)~~))' This
basic
1) assured access to bank financing and/or capital
kom equipmentits facilities
and replace obsolete
2) financialnlifor the citizens of Denton ability incurred through future hospital
operations.
.w
W
S.
page 2.
I 3) enlargement of the Governance structure at
the hospital to ensure service for the public
good of Denton County and the Denton region.
4) solidification and enhancement of management
capacity at the hospital.
3) recognition that Flow has a speoial community
oriented role to play in the North Texas region,
a regional role as both a first-class hospital
and as a major non-profit, post-controlling in-
stitution.
6) careful and continuous evaluation of the ad-
missions policies of the hospital by a community-
based dovernance structure.
7) autonomy and flexibility for the hospital's
policies and operations to allow for the
economic and programmatic diversification of
hospital services.
specific recommendations addressed to these 7 points are
contained in the report which follows.
t
in developing these recommendations the Committee was
guided by several principles a oommunity-oriented
hospital to serve the health care needs of the Denton
N region forms part of F'low's historic role, autonomy and
flexibility for the hospital must be assured for the
sake of competitive deoision-making, and responsibility
for hospital decisions must be matched by the authority
f„# to implement choices.
These principles were a plied in the review of the
options available to the hospital. Among these options
were the following
a o Retention of the present City/County hospital
arrangement.
0 Sale or Iong-term lease of Flow to an investor
F" owned, multi-hosti,ral system.
1w
ks
~ a
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page 3.
' o Assets transfer to a Community-based, mon-
~ profit Corporation to operate the facility.
o Management contract with a full service man-
a9ment corporation to bolster management
system capacity at the hospital.
withtthefuFebruaryzA/ in1985tPosition CPaper t of c the uFlow
Hospital Board in its finding that the hospital "cannot
hope to exist by continuing its present course," A
retention of the current City/County structure was not
supported by the Committee. Similarly, the creation of a
management contract with a full-service management
corporation would atop short of the fundamental
changes required for long-term survival of the facility.
Unlike the ad hoc Task Force, the Blue Ribbon Committee
determined that a long-term lease to a 501 (c)(3) oor-
poration would also fall short of the basio, structural
vector-oneded mat the ulti-hospitallsystema would sale
not onlynrunr
counter to the history of the hospital, it would reduce
local control by placing docision-making power in the
hands of people outside the community and open the
patients of the hospital ro rates determined by the
needs of a for-profit system.
The decision of the Committee to recommend the transfer
of assets to a new 501 (c)(3) corporation satisfies many
of the objections leveled against other options:
o responsibility and authority are centered in
n one placer the ascot base needed for capital
development would be accessible, to the hospi-
tal without financial liability confronting
the citizens of the County,
o the advantages of a 501 (o)(3) lease, as ad-
voosted by the Ad floc Taak Forco, are avail-
able through this arrangement as well.
µr
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page A.
o through the board structure of the new
501 (a)(3), the continuity of community
control could be assured so that obli-
gations of the hospital (including its
role in the provision of indigent care)
would be maintained.
o the provision of management consolidation
and enhancement would be obtained readily
under the recommended governance structure.
o the authority to make rapid, creative
decisions would accompany the establish-
ment of the 501 (o)(3) under this plan,
thereby giving the new corporation a degree
of flexibility required for the first-class
provision of health services.
The governance atruature at the cantor of this new $01
(c)(3) corporation (sae full report) includes both an
autonomous, oommunity-basod board arrangement and new
management capability to support the operation of the
now structure. Viewed as a whale, the enhanced manage-
Mont and expanded board structure amounts to a fundamon-
tal change designod to ensure the long-range development
of Flow hospital on the basis on transferred assets from
the City and County.
The Committee recommendations that follow are presented
under captions that refloat the extensive sub-committee
work of the full Blue Ribbon Committee. While certain
issues have been separated for clarification, the key
recommendations fall under the headings off aspita].
structure, management, admissions, and institutional de-
velopment.
rw
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IM
IN
page 5.
The recommendations of this report summarize the efforts
of 18 members of the Committee, each participating from
the standpoint of his or her special expertise. The
Committee recognizes that a complex, turbulent industry
like the health industry offers few painless solutions
or panaceas. It is the position of the Committee,
however, that creation of a non-profit corporation to
govern the destiny of the hospital can► with proper cap-
ital structuring, produce a first-rate regional hospital
suited to providing continued high quality care for the
people of Denton County,
we hope that this report will aid the City Council and
the County Commissioners Court in their effort to solve
the major, long-term problems confronting Flow Memorial
Hospital. Your decision to create the slue Ribbon
Committee has led to a close review of the options
before the hospital over a 4-month period. we recom-
mend that the positions taken in the report be adopted
and suggest the following timetable for their irapplemen-
tation (see Appendix IT for a detailed Timetable)i
T. Approval of concepts Mid to Late Deoember►
in the Committtee 1986
Report
11. Creation of Legal January, 1986
Agreement
TIT. Resolutions of Appro- Late January to Early
Val for Agreement February, 1986
(Notice of Hearing)
~t
TV. Hearing 18/30 Days After
Resolutions
` V. Order Implementing February/Early Maroh►
Agreement and SRC 1986
Board Recommendations
F<+
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page 6.
On behalf of the full Slue Ribbon Committee, I
respaotfully submit our final recommendations.
Sinoerely yours,
a
James R. Killingsworth, Chairman
Blue Ribbon Committee on Flow Memorial Hospital
R
F. I
1
1
SUMMARY LISTING Op MAJOR RECOMMENDATIONS
&4Qmmen- 8- e-- lu
o Summar Paae L1.L=
Y Of Recommendations
page 1
° City and County create a community.
based, Texas non-profit Corporation to
serve as a new governance framework for pages A-q
plow Memorial Hospital
o 'Pransfer of assets to the 501 c
capital formation and taxpayer protection
(responsibility and authority centralized) page 8
o Consideration defined in terms of 9,3, with a reasonable cap on plow responsibility
page 10
o pull-service hospital management contract
o Boards of the new non- pegs 12
poration profit hospital aor-
pages 12-ig
o Blue Ribbon Committee role in initial Board
selection
page 13
0 Admissions policy, education and responsibility pa e 17
0 Institutional Development, g
regional coat containment Flow Foundation, pages 18-19
Regional Medical Center" plan, and plow
e
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04
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RECOMMENDATIONS
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BLUE RIBBON COMMITTEE ON FLOW MEMORIAL HOSPITAL
, AUMMARY 0"M1 1 Ng
The Blue Ribbon Committee recommends the creation of a
community-based, non-profit corporation with legal re-
sponsibility for operating Flow Memorial Hospital,
This now corporation must be financially viable, free
from political dependence, vigorously managed, responsive
to needs of the region, and capable of making a now image
for the hospital. Thus, the Committee also recommendse
c a complete and irrevocable transfer of City/
County assets to the new corporation to assure
access to loans and capital markets- overall
financial viability and taxpayer protection
from liability for the institution.
o creation of a new, autonomous, oommunity-based
board structure for the hospital.
o provision of new management capability by the
awarding of a full-service management contract
for the operation of the hospital,
o implementation of a clear, carefully explained
and administered admissions policy,
o institutional development at the hospital
to recognize the regional role of the facility,
rrrrr rrrrrwrr rrrrrrrr rrrrr-rrrrrrwrr rrrrrrrrrrrrrrrrrrrrr
rNTROD r .TT0
Blue Ribbon Committee recommendations address issues now
confronting Denton County and the entire American health
industry, in 1989, 9,68 of Texas' aoute-care, short-
stay hospitals were forced out of business due to ciroum-
stances very much like those confronting Plow Memorial
Hospital, These hospitals found themselves excluded from
bank loans and/or capital markets, compelled to provide
~w -1-
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4
Recommendations
page 2
medical services with outmoded facilities and equipment,
faced with an increasingly competitve market service
area, deficient in management system capacity, and
discouraged, if not legally prohibited, from making
flexible innovations in the hospital's organizational
form, including joint ventures and sub-corporations.
The reorganization and revitalization called for in the
recommendations of the Committee would achieve
fundamental and permanent changes at Flow Memorial
Hospital. But even the recommended changes in legal
structure, financial base, governance organization, man-
t:gment capacity, and admissions orientation cannot alone
ensure the future viability of the hospital, In
addition, the new Boards of the hospital must respect
the historio role of Flow Memorial and forthrightly ad-
dress the fundamental problems and challenges which
threaten its continued service to Denton County,
~a
f
Recommendations
page 3
BACKGROUND
Under a dual mandate from the City Council of Denton and
the Denton County Commissioners Court, the Blue Ribbon
Committee on plow Memorial Hospital was empowered to
consider all the options available to the hospital and
to determine standards for solutions to problems that
now beset the institution. The role of the Committee
emerged from a series of events, includings an initial
Position Paper by the Flow Hospital Board of Manageral a
aeries of recommendations from the Ad Hoc City/County
Task Force on Flow Hospital favoring the creation of a
community-based, non-profit corporation to lease and
operate the hospitals the Committee's own review of
propoeals, testimony, and internal discussion of the
options open to the hospital,
Blue Ribbon Committee recommendations for revitalizing
and reorganizing the hospital were developed over the
past 13 weeks. They respond to the mandates of both the
City and the County and acknowledge the history of events
leading to the creation of the Committee.
F
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1
Recommendations
page 4
RECOMMENDATIONS
501 (c)(,31 Corporation Position
The Blue Ribbon Committee's review of options recognized
major forces threatening the contined existence of the
hospital. The capital needs of the facility must be
addressed. Current estimates by a series of consultants
place these needs at between $b and $11 million. The
competitive environment of the hospital necessitates
corporate flexibility; rapid and timely decision-making;
autonomy essential fot the creation of joint-ventures,
sub-corporations, and new organizational formate; the
and of managerial isolation and enhanoad, solidified
management systems. Rolatedly, the population of
Denton County requires a facility dedicated to the con-
tinuance of Tow's tradition of service to the North Texas
region and capable of controlling overall County medical
costs.
The Committee recommends thatr@ new co unity-buss Texas
non-p of corporation be c ea ed as the meat mg hod-for
assuring th2survival of the has.-.pitsl. in calling for the
~,t 1
establishment of this 501 (c)(3) corporation, the Committee
4 togk„into account the following.
1 A "501 (c)(3) corporation designates provisions of
the code dealing with non-profit (hospital) cor-
porations, This is a short-hand way for referring to a
community-based, Texas non-profit hospital corporation
legal structure,
iss
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Recommendations
page 5
J
o A 501 (c) (3) hospital structure addresses
Immediately the need for ~lexibil+y, and
v are$tina a aovernanae s r tntuN
~abable of ftsx~,~hee, It would
be Free to deternineBsignificanp"t capital, man-
agment, and institutinnal development issues
outside the encumbrance of political or legal
restriotions,
o A-non-
I! ruatures. ens+ e_ the ma~nt e„A. a
dontroi and the wont+nL+;` ~v a,Ai~ ;
servicea_to Demon nt,nt' , tY_men__~oa~
The k3oard of Advisors structure
proposes a system whereby community input
to the deoisions of the Board of Trustees
(sae below) is guaranteed,
o '
new S faff~l a
~t th.~inanoia~ 7~abilltV Of ~~Ssa New,.
t~ neHbelow)
0
while thi While
t+ the loss of an escape v
alve forgthevhospital,
It compensates the hospital by ensuring that
it was released in a financially viable
w circumstance and is free to operate without
e politically limited governance system,
o The Texas non profit corporation recommended
R by the Committee tee for would pati
retaentis trean 9 tlnmtedmlMmewa
hosptta atthe
e
to
0 11fltSaaaman . svs Ame h t11o hOBn1M
9~.fl1]athened b a ~--_____f.,.,sl who it d, bA
r kt+ the new 5a~ f ffa~ , - _
below) oar8~ e~,~~~9gs• (sae
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Recommendations
page 6
In adopting its recommendation favoring the creation of
501 (c)(3) corporation with full asset transfer, the
Committed rejected other optionst
o a lease arrangement with a 501 (c)(3) Cor-
poration. This approach would remove the
operation of the hospital from the glare of
publicity for its decisions and add orga-
nizational flexibility while ensuring local
control. It would noG a ea tv""anae Hp
)tos»ital's aacesa.to aAnital m kets ,~'~tl~out
ri~t~roteat taxpevera from +nan ~bt t~ i
lity and woutd add an aaa~,~onal boa cwt
the absence of an assef;,_transfer
o sale to an investor-owned, multi-hospital
system. This approach would infuse capital
and ensure indigent care through a trust or
other consideration. rt woyt~d a~Qa _A er,
4hara_„^,es" ,an t oss ,Q~,~gt-aontMat b .t,n~X
~Z.b th~rer,_,cha~c s o n o ~p o1';
hosni ats (1) Trust fund arrangements often
created by investor-owned groups to meet the
need Cor indigent care run short of funds as
the interest generated from the trust is out-
paced by the 169 rate of cost increases
typical of tho health care industry,
local- con . et oP heat+ h re, aourcaA are nn~
uarAnIjid
_Hjysuch a satQ.
o creation of a hospital tax district.
S The ~g~ion nettern of such Anft~tee to
ureauaraay~~
1>Il_g911_tiaal denendexay r i ~ • ~ ~ ns ne
'charity" Image o~ the hbeba pt
The Committee al„o recognized that proceeds from a sale to
an investor owned chain would be divided among City and
County owners--thus reducing the total amount of the Con-
sideration made available to either party,
6.
ty
i
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Recommendations
page 7
Capital Pormation Position
With immediate physical plant modernization needs esti-
mated at $1.2 million, and basic architectural changes set
at between $6 and $11 million, it is clear that the long
term capital needs of the hospital must be addressed, in
this regard the Committee recommends an assets transfer
to the hospital,' Without a long-term commitment to
modernize its equipment and facilities, it cannot meet
the challenges of its highly competitive marketplace, No
hospital has the power to finance capital improvements
from current operating income. Under its current status
with the City and the County, Flow Memorial must have
the approval and endorsement of the two governing bodies
to raise capital, similarly, any bank loans or revenue
bond issues are a direct obligation of the City and the
County. Underatandably, both governing bodicA have bean
reluctant to consider, approve, and finance capital im-
provement plans.
A
The capital needs of the hospital (see "501 (c)(3) Corp,
Position") have been and continue to bee iisguised since
no reserve has been maintained to account for the
depreciation of assets. This pattern overstates
operating income and understates operating losses, No
cash reserve is in place to finance needed renovations,
v
Recommendations
page 8
By living off its operating capital and finding itself
unable to modernize rapidly, Flow Mmorial Hospital has
become a wasting asset. As its assets have deterior-
ated, so has its competitive position, Where once the
hospital enjoyed a monopoly in health services, now the
hospital must compete for patients and doctors with for-
profit hospitals in the County which are willing and s
able to commit funds required to deliver premium health
care to the public, Although Flow provides a vitally
needed option for the region, its competitive position
will continue to deteriorate while ite need for inoreas-
ing amounts of financial assistance from the City and
County will proceed unchecked, From the standpoint of
the two governing bodies, the extent of future financial
liability is unknowable and virtually open-ended until
the day comen when Flow's doors may close.
The nnut n„ .,a _ a 502 (al faf aer ore ion
y `2?~...,.ynder a prear_
burden a a_„~~
i
The new corporate Board would
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Recommendations
page 9
be given, thereby, both the responsibility,and the au-
thority to ensure the long-term viability of Flow Memor-
ial Hospital. The transaction would be straightforward
and irrevocable, Flow Hospital and its new board are
offered the unfettered opportunity to succeed.
An outright transfer of assets beings with it a number
of other advantages. With assets to use for collateral,
borrowing costs would be lose than for bonds or loans
recured by the revenue of the institution. By central-
izing authority over institutional finanoes, immediate
financial decisions could be made in response to comps-
tition while lines of authority would be clarified, The
sense that "everyone is in charger so no one is in
oharge" would disappear, hence bolstering the confidence
of both physicians and patients and encouraging board
members to center their concerns solely on Flow Hospi-
tal. if board members are responsible for Flow's
successful operation, they deserve to have the authority
to carry out the task to the best of their ability.
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Re commend ationa
page 10
ConBiderat+on Posst~n++
An outright transfer of assets to the hospital
eliminates the financial liabilities now facing the
taxpayers of Denton County. Not only is this true for
the risk of insolvency, it is equally true for the
current system of subsidy for Flow memorial. In ex-
change for and in consideration of the asset transfer to
the new 601 (c)(3) corporation, Flow Hospital would
provide indigent care at the hospital under the new
definition of 3.B4 1 as it applies to Denton County.
(see Appendix Iii)
The Committee ecomm ndsi
11- that the hoBp~ al undertake .t ha 13rovision of
inpatient ertdtaien hospital Berv~aeB for hos
IIt®gt_nq_the e3 ia±bi i , ~eg~;,1•rements of the naw t agj it a
Lion flee ylpendtx TT f6r meant gibititvl
21 n.-any E anet~x the hoB w, mil d A A d
e144asta ,n n
021--a 121 to
indigents in the oin v rested at she hnn w
would aa]_ita aon-r~bit at _hi
s le al Ines AGi1t1X..ISx
for data on rndtgnsn awe "B
11
31 that the hospital b
e Burrende~;ta aaaeas H,Q
Large annual aik.idiea in retL+~rn ~r HY~nsxer or
8@6atB.
tl This Committee recommendation takes into account the
fact that too high a percentage of gross patient
iN
revenues would jeopardize the hospital's financial via-
,.K
bility and h
~ _.~i1,ti~Q_ltaanital aanno bear more than JJ!A
is
(2) Net Patient Service Revenue . Gross Patient Revenues
(Contractual Adjustments for Malioare/f4edicaid + Provis.ton for
Doubtful Accounts)., in 1986, fur exampls, NPSR u $15,404,202.00
and treatment of eligible indigents (Appendix 111) would 34
' of NPSR. As MR rises, obviously, total monies
available for indigent care services rise as well.
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Recommendations
page 11
reasonable ability to bear. The imposition of more
than a reasonable burden for indigent care upon the hos.
pital would act as a "sick tax" where patients who can
pay are charged for the care of county indigents,
Manaaement Position
Committee recommendations concerning management must be
understood broOe', to encompass tha overall governance
structure of t 301 (c)(3) as well as the traditional
management sy4tem concerns of modern hospital administra-
tion, The recommendations follow a review of current
t~
and histovioal management issues at plow Memorial Hospi-
tal, study of consulting reports and proposals submitted
to the hospital, and reflection upon the considerable
changes occurring in Flow's service area and the hospi-
tal industry generally,
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Recommendations
page 12
In view of the complexity of managing a hospital in
today's swiftly changing environment,
~mmir~,e e-
~4mtttenda that the hosn+ at { s Boa
next eec*+nn, below) sates
a 1t t va
aa~nt 491llg nv to_ aonduot the day ro day. o~iions of
the howl at The company would recommend a Chief Exe•
cut1ve Officer and a Chief Finanoial Officer for approval
by the Board of Trustees, both of these officers would
report diroctly to the Board of Trustees. The manage-
ment company should offer an adequate resource base to
the hospital as indicated by its current management of
at least twenty hospitals under full service management
contracts,
fioard gwtoAP+on and + (nutt+
The .o MIF4ee reaommAndg_the dear
aevsrN ++he new ~Ot lntr~l
j~or9'.IAn, n Board AP
-.w Ad 80tH
~irlents and a t3A&rr9 Aa
Aag,. The functions of
t these Boards are described in the next eachiona.
The Boards of the hospital must be chosen by the City
W County on the basis of experties► rooognition, prestige,
and with sensitivity for the potential liability issues which
can face Board members,
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Recommendations
page 13
that the familiarity of the Blue gibbon Committee with
issues and g or blame acing Flow Memorial Hospital be nut
to beat advantage-by allowing the committee to make
recommendations to ,,,he Cary Council and the County Com-
misaiogers Court _P.or_initial appointments to both the
Board of A visnrs and the So&Xd of Trustees (described
belowy• These recommendations would be on a generic
basis (also described below) and would be arrived at by
a consensus process$
Board gf Advisors
Tha Com.=itteerecommende that a 28-person aoagd of Ad-
vi®ors be aRgoigtad to-meet. paodically and to advise
the Board o£ Trut,-oag (aae belgwl gf the hospital con-
co n+nqhealth_ care need of the reaipb--and to agaigt
with the futu de a opmant_.o£_tha boap tal The Board
N=
Recommendations
page 14
of Advisors would be separate from the Board of Trustees
with no member of the Board of Advisors serving on the
Board of Trustees, The Board of Advisors would replace
members of the Board of Trustees in the case of
vacancies after initial appointment and would certify
reappointments as well,
Generic basis for Board of Advisors recommendation by the
Blue Ribbon Committee includes physicians (6), business
leaders(5), CPA's(2), oducators(2), attorneys(2), commu-
nity leaders(8), and consumer representatives(3), After
initial appointment, the Board of Advisors will appoint
now members as needed to fill vacancies.
Board of Advisors would serve 4-year, staggered terms
with the terms of 7 members expiring every year (initial
appointments would be for 1,203, and 4-year tormal 7 in
oath group), Board of Advisors would not be permittted
to serve aucoessivo terms in order to maximize citizen
involvement with the development of the hospital, Con-
current service on the Board of Trustees and Board of
I Advisors would not be permitted,
Boar of„Trustees
The Commmittea further reoommgnda that a,nine-Mombar
Scard-of Truateeg for the new 581__ aI M aorpor to ion be
e
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Recommondatiors
page 15
created with igga1 responsibility for the
contin 4"
the n:)n-profit co gorat,con's c,harrar ~n 4he
}14 d..S2~.T.ruatees' prime unctions WO Q be thn jatabli-
Bhme, riff hOapital p6liry. ~8 r4nit,
str~atecic p1 ann+na Mcl the selection
ari t dc~t Anah i nn o f_
dav-to-dav management aat~ons ~'or the ho~ital.
Blue Ribbon Committee recommendations for Board of Trustees
members should include representation From phyaioiana,
business and community leadera, 4nd essential areas of
professional expertise,
The Board of Trustees members would serve 6-year
staggered terms with 3 members' terms expiring every 2
years (initial appointments would be for 21 4, and 6-
year termst 3 in each group), The length of the terms
and the overlapping nature of the service period should
ensure continuity in the policies of the hospital. The
members of the Board of Trustees would be eligible for
re-election upon the expiration of their terms,
Appendix. S dies ems ho eta +onsh hip-betwagn... Board of
e Advisors_anc Board o m~tlere,~agt After inital appoint-
Montt the two Boards would be autonomous Boards,
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Recommendations
page 16
Admissions Position
if the new 501 (o)(3) corporation is to provide first-
class patient care, maintain financial viability, and
serve as a center of excellence in the region, it must
adhere to an admission standard of cooperative responsi-
bility between the individual and the community as both
seek to promote health and prevent disease. indigent
status would be defined as indicated in Appendix iii
and on the basis of requirements in 8.s. 1.
4
This point of views is based on the Committee's study of
7 hospital admissionz policies in the region, coneulta-
tion with Flow staff, and the review of consulting
materials available through Flow hospital. The recom-
mendation also derives from analysis of available hospi-
tal data in order to identify areas of greatest burden
t
in the non-payment of hospital services.
7
Recommendations
page 17
l The committee reoom_mendo an admissions j2go2ftSA_j
hospital which emnhasi~es pa ~enG_ounae~~tnN ana A~„
cation as well as annrnnr~b~.~ a w, ,
SIS&1. Ce-
sponsibility aonre►p g Through this approach, patients
would be made aware of their role in accepting services
rendered and sharing in the reimbursement of service
costa. Implementation of this admissions process calls
fort training of admissions personnel to educate pati-
onto regarding their financial responsibilities,
sustained efforts to facilitate collection of patient
accounts, full information on each patient account, com-
plete notice procedures for non-emergenoy admissiono,
assistance in locating alternative sources of finance
for hospital coots, language skills assistance,
cultivation of a new region-wide admissions image, ex-
panded outpatient services, and a patient transfer
policy which agrees with H,R, 1963 (1988) requirements,
14
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Recommendations
page 18
institutional Development Position
The changes recommended by the Blue Ribbon Committee
afford the County and the region many unique opportuni-
ties for creativity in the health care field. The maxi-
mum potential of Flow Regional Medical Cantor cannot be
achieved without careful, thoughtful institutional de-
velopment planning. The dynamic flux of the health care
i
field is not without its advantages if change at Flow
can be coupled with well-wrought strategic plans,
in this regard, the Committee enc~oureaea the careful and
coordinated gxpnnsion -of--the Flow Fos ation bjbi,r],,s
nro -acting the-currant re ournea and functions of t is
Foundation. the asaeta of the Foundation can-- bg
increased and new grant monies attracted from coordi
noted work with -ha univarait+ea and othar agencies of
Denton .County conagrnad for the health of he aommunityj
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Recommendations
page 19
To aid in this expansion, the Foundation should retain a
salaried staff with ongoing donation programs and
charged with the responsibility of program development
and obtaining grant monies for use by the Foundation.
dAVA~ ODman~ Of 9_,
rrtA ~nmenl h*AA flle ri'hQr rF1001C1II1@~.~-
.r nnnral nm$nt n,18n eel hh -he eagi~~'bnOA _Of
rfl$1.4nn ~ y
area c anA and inguranCO a2faniga.,5uch a program
Could serve as a mechanism for addressing County-wide
health care costs while it insures Flow's position in
the increasingly organized medical marketplaces Not
only would such a plan assist the development of the
hospital, it would also aid the County in its effort to
provide care for the population at controlled,
manageable rates.
~~C~~A as~at~~, chat the reaienal rQ-
npongibility of--he ho
nee ao da a on "F~ow Reaiona MI iaati GenterA!
♦ h
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Recommendations
page 20
CONCLUSIONS
The recommendations of the Blue Ribbon Committee on Flow
Memorial Hospital seek a new and expanded role for the
hospital while developing a first-class medical center
to serve the needs of Denton County and the region. It
has been the Committee's position that the hospital must
be made competitive and autonomous if it is to have the
degree of flexibility and self-determination required by
the health care industry today, To that and, the Comm-
ittee has sought to recommend methods for matching re-
sponsibility with authority, particularly by calling for
an irrevocable t,.•ansfer of assets to the new 301 (c)(3)
corporation.
if these principles are followed in reorganizing the
hospital, its operations should be removed from the
r
political arena, its decision-making process improved,
its sensitivity to local issues ensured through a local
i
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Recommendations
page 21
~~1 based structure of Boards and through its community-
based, non-profit status.
By recognizing the hospital's history and traditional
role as a provider of care, the Committee seeks responsi-
ble solutions for the indigent care problems facing the
region. Through its lower, non-profit hospital rates,
the hospital can serve to restrain the overall costs of
indigent care in Denton County. As the hospital takes a
leading role in county-wide cost containment planning,
the ability to serve the health needs of the population
will be enhanced considerably.
It is, therefore, the position of the Blue Ribbon Comm-
ittee on Flow Memorial Hospital that fundamental, perma-
nent changes are r6 uired for the long-term survival and
well-being of the institution. Ultimately, the new Flow
} Regional Medical Center can provide health care of the
r.i
highest quality for the population while it adds to the
~d
r•a economic and social development of the County.
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APPENDIX I
BOARD STRUCTURE FOR 501 (CM)
BOARD OF
TRUSTEES4---
-Responsibility for hospital operations " W
(as indicated in $01 (0)(3) Charter)
-Establish hospital policy, participate in Ion term planning
select/delegate day-to-day management actions
-Can be re-appointed
I -Reporting Point for COO and CFO of hospital
F
(Initial
s lection) ect~i
Seleation)
(Assessment/Development)
(Vaoanaies/R~e~appointment)
BOARD OF ADVISORS
1 Of members
-Cross-section of Denton County reaidents
-Fill vacancies in Board of Trustees
-Assess regional health care needs
-Aid in future development of the hospital
-Cannot serve successive terms
CITY AND COUNTY OF DENT - ~
Blue Ribbon Committee recommends initial appointments with
Transfer assets to othe new by City and ouconty
~a
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H5 AllI Y'
oep.}. C.4J
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APPENDIX 11
DETAILED IMPLEMENTATION TIMETABLE
PROXIMATE DATE
1. AuXoval of Concepts Mid to Late December,
of glue Ribbon 1985
Committee Report
II. Creation of Legal Agree- January, 1986
ment (Terms of Agreement) r
by City/County/Flow Board
III. Resolutions Approving the Late January/Early
Agreement and calling for February, 1986
County hearing
IV. Hearing 15/30 days after
County enters order
of "to the best
interest" in
minutes
V. Orders Implementing this February/Early
Agreement and BRC makes March, 1986
recommendations for
y initial appointees to
Board of Trustees and
Board of Advisors
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APPENDIX III
S,B, 1 DEFINITION OF ELIGIBILITY FOR INDIGENT CARE
The consideration provisions of the Committee use
definitions of indigent status provided by S.B. it the
recently adopted legislation of the State of Texas.
That legislation places the County of Denton under
the category of "An Area Served by a Public Hospital,"
Section 10,02, (2), (c) of that Act statest
resources staIf a ndard pdurin thehospoitl used an thaome and
before January it 1988, that was 1989 restrictive ethan
the income and resources requirements established by the
department under Section 1.06 of this Act, the public
hospital shall adopt that standard to determine eligi.
bility under this title."
Section 1.06 and other sections of the act show that the
hospital used a "less restrictive" standard, to wit,
1004 of the U.S. (Federal) Poverty Income Guidelines.
This is taken as the standard of indigent care
eligibility by the Committee.
Also in accord with S.B, It transfer of ownership to a
901 (c)(3) is taken to have no effect on indigent care
responsibilities (see Subtitle E, Section 14,01 of the
Act).
Finally, the Committee defines responsibilities for
health services as does Subtitle B, Section 11101, (a)
Of S.S. 1s "(a) Each public hospital shall provide the
requiredttonprovidetunder hSubdivision v(1) of Subsection
(a) of Section 3,01 of this Act." These services are
therein defined Aso "(1) inpatient and outpatient hospi-
tal services as limited by this titid."
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FLOW MEMORIAL HOSPITAL
INDIGENT CARE REPORT
12/11/85
FY 1983 FY 1984 FY 1985
Hill-Burton $ 190,271 $ 256,329 $ 694,389
' Cost Ratio 791 .789 .669
Coat 150p504 SL 202,243 464 546
Percentage of
Patient Revenue .9 % 1.2 q 2.3 %
County Psychiatric and Jail $ 19,924 $ 33,131 $ 77,i75
Cost Ratio .791 .789 ,669
Coat 15 759 26 140 51o630
County Indigent $ 2800927 $ 550,291 $ - -
Cost Ratio W .791 .789 See Note 5
Cost 222p213 434J79
$ -
Total Hill-Burton
and County $ 491,122 $ 839051 $ 771,564
Cost Ratio .791 .789 .669
Cost 388 477 662 563 516 176
Percentage of Patient Revenue 2.4 Y 3.8 2 2.6 y,
Notes
to The amounts in the classifications are the patient revenues.
2. Coat ratio calculations Operating expenae r patient revenues
Data sourest Audited financial statements
3. Data vas incomplete to make exact determinatio for two months in FY 1985
and one month in FY 1983. The data for FY 1983 and FY 1985 was prorated
for twelve month totals.
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Flow Memorial Hospital
Indigent Care Report
12/11/85
page 2 of 2
Notes (continued)
4. During FY 1983 and FY 1984 the county data was categorized into indigent,
psychiatric, and jail.
FY 1983 FY 1984
Psychiatric $ 4,269 $ 6,848
Jail 15,655 260283
Total $ 19,924 $ 33,131
5. In FY 1985 no payment or classification wad made for county indigent.
The average percentage of total indigent revenue for FY 1983 and FY 1984
Is 3.96 percent. The 3.96 percent of FY 1984 patient revenue, leas
actual amount of indigent revenue, is $20,161.
Calculations
Total Hill-Burton and County Revenue FY 1083 $ 491,122
FY 1984 8391751
$ 1,330,873
Total Patient Revenue FY 1983 $ 16,346,143
FY 1984 17,292,751
L±38, 894
$ 1030,873 t $ 33,638,894 3.96
1.w
FY 1985 Total Patient Revenuo $ 19,993058
r x - - 3.96y
$ 791,725
„f Lees Actual 771,564
200161
Ratio $ .669
M, -
Cost $ 13,487
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