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Audit shows hospital financially fit in 2013

Douglas County Hospital (DCH) was financially healthy in 2013, according to an audit presented last week.

The hospital’s total operating revenue for 2013 was $124 million and total operating expenses were $117 million.

The hospital reported an operating income of approximately $6.7 million for 2013 compared to 2012’s operating income of $7.3 million.

According to a summary statement, DCH had operating revenue growth of 12 percent in 2013. Operating expenses increased at a level of 13.5 percent. Operating expenses rising at higher percentage than operating revenue decreased operating gain by $652,422 in 2013.

One of the primary reasons for the 12 percent operating revenue increase was due to a full year on the books after the integration of DCH and Alexandria Clinic on July 1, 2012. The increased revenue from the 12 months in 2013 versus only six months in 2012 contributed to the majority of the increase.

A full year of integration with Alexandria Clinic in 2013 versus the six months in 2012 attributed to 10.8 percent of the 13.5 percent increase in operating expense in 2013.

As of December 31, 2013, DCH’s net position was $73.4 million. That’s a 5 percent increase over the hospital’s 2012 net position of $69.9 million.

Carl Vaagenes, DCH’s CEO, said, “We are all very pleased with the results of our annual audit in light of the significant reform that has already started to impact reimbursement and operations.”


$124 million

Most of DCH’s 2013 revenue was generated by patient services – a total of $119.5 million, which is the adjusted total after contractual adjustments and provision for bad debt.

Vaagenes explained Medicare reimbursement is projected to be reduced by more than $70 billion as part of the Affordable Care Act.

As a result, Vaagenes said, “Hospitals are estimating the need to reduce expenses by 15 to 20 percent over the next several years as government reimbursement rates are reduced. 2013 was a difficult year for health care providers, including the federal sequester, which resulted in cuts in reimbursements of roughly $1 million for DCH.  In spite of that, our management and staff are to be credited for helping us come in at our targeted budget for the year.”


$117 million

DCH’s 2013 operating expenses were spent on:

--Salaries and employee benefits, $48.5 million;

--Professional fees and purchased services, $28.2 million;

--Supplies and other, $32.2 million;

--Depreciation, $6.3 million; and

--MinnesotaCare tax and surcharge, $2 million.


As of December 31, 2013, the hospital’s long-term debt stood at $38.4 million. However, over the life of the bonds, the actual debt is estimated to total about $72.8 million, which includes interest.

DCH’s interest expense was $2 million in 2013 – an increase of $248,000 over 2012. In 2012, Douglas County issued two bonds to fund the Alexandria Clinic integration, totaling $15 million. The increase in interest expense is attributed to a full 12 months of interest payments on those bonds.


When asked about his reaction to the audit, Vaagenes told the Echo Press, “This was only accomplished by the dedication and hard work of our entire team through managing their departments and themselves by making adjustments to ensure the highest quality health care continues to be provided while maintaining control over our expenses. Our finance department also does an outstanding job providing support in the way of negotiating our contacts with third party payers, as well as forecasting, tracking and reporting our financials to ensure we are financially viable.


The 2013 audit also noted selected financial ratios measuring things like patient days, hospital length of stay and total profit margin:

--Patient days: In 2013, DCH posted a total of 13,314 patient days in the hospital; that’s compared to 14,157 days in 2012. On average, there were about 36.5 patients in the hospital each night in 2013; there were 39 patients on average in 2012.

--Hospital length of stay: In 2013, the average length-of-stay for a patient was 3.7 days. In 2012, it was 3.8 days. Overall, the length-of-stay stats are near the industry average statewide.

--Total profit margin: In 2013, DCH’s total profit margin was 2.8 percent, compared to 5.1 percent in 2012 and 3.6 percent in 2011. The audit notes, with the exception of 2011, DCH’s total margin has historically been above or near industry standards.

Eide Bailley was the firm that completed the hospital's audit.


--$124 million, total operating revenue for 2013

--$117 million, total operating expense for 2013

--$73.4 million, net position as of December 31, 2013

--36.5, on average, number of patients in the hospital each night in 2013

Amy Chaffins

Amy Chaffins is a journalist working for the Echo Press newspaper in Alexandria, Minnesota.

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