Audit finds accounting adjustments, operating loss at Bothwell Regional Health Center; board and auditors outline recovery steps

Sedalia — An audit of Bothwell Regional Health Center presented at the Sedalia City Council meeting on Jan. 20 found accounting adjustments and operational shortfalls that left the hospital with a substantially reduced net position for its most recent fiscal year.

“From what was originally reported, to what ended up in the audit process was a delta or an increase in the decrease in net position of $11,000,000,” Eric Jones of Ovation Healthcare told the council, calling the change “an accounting loss” that does not necessarily equate to the hospital’s cash position.

Lori Whiteman, Bothwell’s chief executive officer, said the hospital’s finance department had suffered turnover that limited timely reporting. Whiteman said the hospital still serves a large outpatient population and is pursuing corrective steps.

Auditors reported operating revenue of about $160 million and said expenses exceeded revenues by about $15 million, which produced the reported operating loss. Jones said the hospital nevertheless showed a net cash gain of about $1.2 million in the audited period after adjusting for noncash items and one-time events, including a FEMA settlement of approximately $2.5 million.

The audit identified material weaknesses: balance-sheet reconciliations were not consistently completed, certain fixed-asset and accounts-receivable valuation processes had broken down, and some post-close review procedures were missing. Jones said some accounts receivable were overvalued during the year and required write-downs when collection experience came in below expectations.

Whiteman and Jones outlined a set of corrective actions: contracting Ovation to restore financial reporting processes and bandwidth, hiring a new finance leader, restructuring the accounting team, and implementing post-close review controls. Jones said he expects a 9–12 month timeline for the finance restructuring to be materially improved.

Whiteman also described operational measures to reduce costs and diversify revenue, including reducing reliance on contract nursing staff, reviewing thousands of contracts for savings, and pursuing a regional hospital network. She told council members the hospital is an early member of a proposed “Show Me Independent Hospital Network” of 18 hospitals that would pursue shared purchasing and clinically integrated arrangements to improve bargaining power with payers.

Council members asked about the causes of the accounting weaknesses. Jones said turnover left key processes orphaned and some transactions were not posted to the general ledger in a timely way. He emphasized that the board had instructed auditors to take a thorough approach.

Whiteman noted one recent federal award: she said Bothwell was notified this week that it is the recipient of $750,200 in community project funding through Rep. Mark Alford’s office to establish a rural innovation hub; the hospital will work with regional partners and BioSTL on the project.

The council received the audit and asked staff and hospital leadership to continue reporting on implementation of the recovery plan.