St. Charles Parish Hospital is $12 million in debt, audit says

Publicly owned St. Charles Parish Hospital ended the past fiscal year with a cumulative debt of $12.1 million, according to an audit report released Monday by the state’s legislative auditor.

Almost $5 million of the debt was related to a lump-sum pension payment that the St. Charles Parish Hospital Service District, which manages the nonprofit hospital, plans to pay off over a decade, hospital CEO Federico Martinez Jr. said Monday.

The audit, which covered the fiscal year that ended July 31, was conducted by LaPorte, a Metairie accounting firm, and was submitted to the state March 11.

The hospital entered the 2012-13 fiscal year with a $4.3 million deficit, which subsequently grew by $7.8 million, including about $4.7 million that went toward the pension payment, the report said.

Martinez said he’s optimistic the hospital will be able to turn around its finances in the near future.

“With everything that we’re doing, we hope to be able to reverse some of our losses of the last few years and start showing a profit,” he said.

The audit also cited several problems with the hospital’s procedures and internal controls, including the lack of a written policy for use of credit cards. In addition, it said, money generated from general obligation bonds allegedly was spent for reasons that did not correlate with the bonds’ intended purpose as stated ahead of the April 2012 election that authorized them.

A review of the hospital’s credit card statements uncovered charges “with either no supporting receipt or approval” for the spending, though the charges appeared to be hospital-related, the report said. In response, hospital administrators said they have since drafted a “best practices” policy for credit card use that took effect in January.

The auditors said the hospital issued $14 million in general obligation bonds during the 2012-13 fiscal year, with the money supposed to be used for land purchases, buildings, machinery, equipment and furnishings. Instead, they said, the hospital used $3.7 million of that money for operations and almost $2.2 million for paying professional services fees related to medical services, which the report deems outside the bonds’ stated purposes. The audit recommended that the hospital repay the money used for operational purposes.

Hospital executives said in a response included in the report that the $3.7 million withdrawal was “meant to be temporary” and the hospital plans to replace the money before the end of the current fiscal year. They disagreed that the $2.2 million spent on service fees was inappropriate, saying they had informed the public before the election that a substantial portion of the proceeds would go toward “physician and new service line development.”

Hospital officials also said they are exploring “some form of affiliation with a larger health care system” due to rising costs tied to implementation of the federal Affordable Care Act. “As a small rural hospital, it has become very difficult to operate in such a volatile health care environment,” the administrators said.

Martinez said in an interview that the hospital is hoping to strengthen an existing relationship with Ochsner Health System, which provides primary and specialty care services at the Luling hospital.

“With more of their doctors at the hospital, we can maintain more of the patients at our hospital without having to transfer them,” Martinez said. “This all kind of goes along really with goals that we’ve set for the hospital.”

In May, St. Charles voters will decide whether to renew a $2.6 million property tax millage that goes largely toward funding emergency services at the hospital. The May 3 vote would extend the 2.48 mill tax for a decade.

St. Charles Parish Hospital recently broke ground on a $15.5 million building in Destrehan that is slated to be completed by May 2015. It will house additional specialty physicians and urgent care facilities, as well as offices, an optometry center and a pharmacy, Martinez said.