UMC falls millions of dollars into a financial hole

By Tony Cook

Monday, Jan. 15, 2007 | 7:15 a.m.

University Medical Center has fallen behind in paying many of the vendors who provide goods and services to the public hospital, in some cases owing millions of dollars for invoices stretching back as far as 17 months.

The revelation comes just days before UMC officials are to provide Clark County commissioners with financial statements expected to show a larger financial loss than what commissioners have been told in recent months.

Hospital officials told commissioners in November that the facility lost $18.8 million in the fiscal year that ended in June - more than $6 million beyond what was budgeted.

But on Thursday, hospital Chief Executive Lacy Thomas said on "Face to Face With Jon Ralston" that the final figures would show a loss of "a few million" dollars more.

A review of outstanding UMC invoices reveals more about the hospital's shaky financial ground.

The county-owned hospital has skipped payments for nearly a year and a half in some cases and now owes vendors more than $19 million.

A prime example is Cardinal Distribution, the hospital's pharmaceutical supplier and largest vendor.

The hospital began skipping payments 17 months ago, and now owes more than $4.25 million to the company. Although UMC has made partial payments to the company, its payments still routinely exceed the standard 90 days.

In reality the hospital might be lagging much further behind on the payments because the hospital provided figures representing just a fourth of UMC's outstanding accounts payable, said Floyd Stevens, the hospital's controller.

He could not provide data on the rest of UMC's outstanding bills because they have not been entered into the computer, he said.

"There is no surprise in the acknowledgement that we are stressed cash flow-wise," Stevens said.

The hospital finds itself in similar situations with dozens of other vendors.

Because UMC is a county hospital that often serves indigent patients who cannot pay, most vendors understand the delay, Stevens said.

"Our finances are built on relationships," said Kristina Zemaitis, a hospital public relations specialist.

The lag in payments - also highlighted in recent reports about UMC falling 10 months behind on payments into the county's self-funded health insurance plan - is a concern for county officials, who fear the county will have to bail out the hospital with a large subsidy in addition to the $12.7 million already budgeted.

"We've been concerned about the payables at UMC," Commission Chairman Rory Reid said. "They've inched up over time. We've asked the (UMC) administration both privately and at our hearing to explain that to us."

Reid said while he is waiting for the financial audit Tuesday before passing judgment, his emotion would go from "concern to something very different" if the hospital is deeper in the red than initially reported.

"It's troubling," he said of Thomas' comments on the Ralston show. "When they were at our hearing a few weeks ago, they told us just the opposite."

Stevens said the situation cannot persist and that the hospital is relying on increased collections from patients.

"We are optimistic that our revenue cycle work will result in increased patient collections," he said. "We definitely need to have larger cash collections than what we've had."

It's the possibility - some would argue probability - of the county bailing out UMC that makes the hospital's vendors willing to let the debt ride.

"It's in the suppliers' interest to have the hospital continue to be a customer," Stevens said. "They understand the county backs us up."

Thomas could not be reached for comment.