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County rides to rescue of nursing home

Tuesday, July 10, 2012

McCOOK, Nebraska -- Red Willow County, Nebraska, commissioners Monday morning authorized a $1 million bank loan to save the county-owned nursing home from financial woes that could threaten to close its doors.

Commissioners declared the financial situation at Hillcrest Nursing Home an "emergency," legally allowing the county to borrow money to make sure that obligations of the facility are paid, and that 82 residents won't have to make other living arrangements.

The money will be borrowed from McCook National Bank for five years at an interest rate of 3.55 percent. The annual payment will be $221,000. Brian Esch, President / CEO at McCook National Bank, said the loan will be a "single advance" and not treated as a "line of credit," as discussed earlier.

County attorney Paul Wood told commissioners that the resolution authorizing the loan directs how the loan will be repaid -- with revenues generated by the nursing home and / or a tax levy not to exceed 7 cents (on each $100 of value on all taxable property within the county).

Jerry Rothmeyer -- interim administrator at the nursing home since Peggy Rogers walked away from her position on May 16 -- told commissioners, "I'm comfortable that Hillcrest can pay this debt" from nursing home revenues. Randy Dean, a member of the nursing home's board of trustees, echoed Rothmeyer's feeling, "I really think we can pay $221,000 a year on a million-dollar loan."

The tax levy is "just in case that doesn't happen," commission chairman Earl McNutt said. Dan Miller, the county's budget clerk, told commissioners and Hillcrest trustees that the tax levy would most likely be about 3 cents.

Dean said it's possible that the nursing home won't need the entire $1 million. He said that interest rates on the loan "are very, very fair, and there is no penalty for pre-payment."

Dean and fellow trustee Jim Hall agreed that there is strong interest in the new resident rooms under construction / renovation now. Hall told commissioners, "Our census is running strong. And in August, we'll have 10 new beds. Income will be coming back. I'm confident this is a totally new situation."

The existing financial situation started with a cash shortfall created when a billing clerk was let go in February and Medicare and Medicaid reimbursement requests / billings -- together generating about $225,000 per month -- were not made for three months. Those claims have since been submitted and reimbursements are coming in, Rothmeyer said.

A sale of bed licenses that did not materialize as planned also put a kink in the nursing home's budget. The sale was expected to generate $250,000, but, Wood said, the sale did not take place because the proper paperwork was not submitted to the Nebraska Department of Health and Human Services. "This was a surprise to trustees, as it was presented to trustees as otherwise," he said.

Payroll and operating expenses at the nursing home amount to about $360,000 per month. The nursing home has in its checking account and a couple construction funds a total of $723,505.28. Accounts payable for June are $118,570.16.

It owes general contractor Ra-Dec Construction two payments -- $314,606 due in June (late, but not delinquent, Dean said), and $596,626 due in August -- on the construction of the $3.5 million renovation / construction project going on now. The nursing home owes a $32,000 interest payment on bonds taken out to finance that project.

The nursing home also needs to make the last two bond payments -- $165,000 each, one due Nov. 1, the other next year -- on a previous 20-year construction / renovation project. Money was to have been being put aside each month to make these two payments, but trustees have discovered that those monthly installments were not being made.

In June, as cash flow problems at the nursing home became critical, commissioners okayed advancing the nursing home up to $300,000 from the county's inheritance tax fund.

Wood said he does not recommend expending all of the facility's available funds to pay for construction costs, bond payments, an interest payment, payroll and operating expenses,"leaving the nursing home flat broke."

Randy Dean said that the Hillcrest Nursing Home Foundation is a private non-profit organization separate from the nursing home, and cannot gift to the nursing home money that has been given to the foundation and earmarked by donors for specific projects. "The Foundation has put $200,000 into our construction fund. The Foundation has stepped up for us," Dean said.

Wood said in June that a bank loan could be used to pay the nursing home's "three big obligations" -- the two construction bills and the first $165,00 of the two bond payments, which total $1,076,232 -- freeing revenues (including Medicare / Medicaid reimbursements) to pay for payroll and operating expenses. "These big obligations you know exist. You have to be able to meet them," he said.

Wood said Monday the situation "to me is extreme. The problem as I see it is a cash flow problem. The emergency (declaration) and loan gives the facility time to develop a budget, budget carefully, save money, and see where we are one year from now."

He continued, "One year from now, we'll look at money available on hand, and determine if revenues can handle the next 20-year bond. Hopefully, revenues can handle this bonded indebtedness."

Wood concluded, "The fact of the matter is, Red Willow County owes this money. These are county debts, and these are county employees. The loan is breathing room to get organized again." Wood said he is concerned that if Hillcrest can't cover the loan repayment and its own bonded indebtedness with revenues that the county will be responsible for those expenses in addition to paying for bonds sold to finance the county's new $5.1 jail.

Tax payers decided to keep the jail bond tax levy of 4 1 / 2 cents within the state-mandated 50-cent tax levy. The levy to repay the Hillcrest bond would also be within the 50-cent tax levy.

Wood called Hillcrest's cash flow problem "an unfortunate chain of events." He said that the facility's process to make bond payments with revenues "has worked in the past." And Rothmeyer, Dean and Hall all feel it will work that way again.

To default on bonds is not an option, commissioners and trustees agreed.

Commissioners agree they want a better handle on nursing home operations and budgetary concerns than they have had in the past. "We've had no control over what's gone on," McNutt said. While he said that the former process "was fine until there was a lapse in proper billing," he continued, "it's about full accountability." Fellow commissioner Steve Downer requested a financial statement from Hillcrest each month, "to keep surprises at a minimum." And Dan Miller, the county's budget clerk, was asked to write a proposal to help create the Hillcrest budget.

Wood suggested that commissioners be "more interactive" with the nursing home and with the new administrator, who was offered a contract Friday.

Downer said he prefers a five-year loan over a three-year loan, to help Hillcrest rebuild some stability within it budgets. "So we don't have to do this every month," he said.

McNutt and fellow commissioner Vesta Dack, who sits on the nursing home's board as the commissioners' representative, said it's important to rebuilt confidence in the facility. "It's a wonderful place," Dack said. "I trust the trustees. I know we will make them accountable for everything they do."

She continued, "I trust them (the trustees) to pay as they say they can. They've met their obligations before."

Downer made the motion to adopt the resolution to authorize the loan, and Dack seconded it. "We're out of choices," Dack said, and McNutt added, "It's obviously an obligation we have to take care of. It's (the nursing home) not doing anyone any good if it can't operate."

Brian Esch encouraged the trustees to look at these challenges "as a great opportunity" after times of adversity. He said that with improved teamwork and morale, a new administrator, new processes and more buy-in and accountability, Hillcrest could become "a better facility in the long run."

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Let me see if I have this straight? We have a county owned facility, that has a Board of Directors and Commisioners to answer to! And not one of these officials caught on to what was happening? The administrator of Hillcrest resigns, with no explaination to the taxpayer as to why! Then they want us to think this is a problem that has been here for a few months? Not to mention the fact that they are spending money they don't have for renovations on a facility that can't pay their bills anyway! The elderly and the taxpayer will pay for this debacle! That money will never be payed back in good faith without those people in that facility paying for it! Not just out of their pocketbooks, but their care. The Board is to blame for this! The Commissioners were a secondary part of this, because the people sitting on that board see the day to day financial reports! Why wasn't somebody stepping up and saying something before this got out of hand??

-- Posted by smz on Tue, Jul 10, 2012, at 12:35 PM

If this can happen in Lancaster County (which it did and all because of Medicare/caid payments not being filed for properly, it can happen in McCook Nebraska. The rennovations were sorely needed also because the heating and cooling systems in those areas did not work properly and they had to move residents out of those areas when it got extremely hot or cold and the room temperature could not be moderated properly. Here's the deal, I am pretty sure that this will be worked out, BUT, Lancaster County determined that they did not want to be in the Nursing Home business anymore and consequently sold the property. Having had people in diferent Nursing Homes over the last 12 years, I can say that McCook's facility was by far the cleanest, and for the most part, the staff was the most caring. That being said in late 2010 or early 2011, something changed for the worse in the level of care that some of the most helpless clients were receiving, which I know first hand. Complaints for the most part were handled internally and now that the board can take a breath from the finances, I would suggest that they look at all internal investigations for the last two years. In addition, it would seem that fund raising for special projects should be put on hold and if someone wishes to donate to Hillcrest, those donations should be used directly against indeptedness. I would hate to see Hillcrest put into private hands and an outside auditor would be appropriate from this point on. It is nearly impossible for a volunteer board to catch administrator error and especially impossible if trust has clouded oversite. Just my opinion.

-- Posted by McCook Muse on Tue, Jul 10, 2012, at 3:00 PM

Muse, With all due respect, how can you compare the two counties? I don't think this should happen anywhere! You are right, no one wants to see Hillcrest fall into private hands! The heating and cooling problem has been complained about for years, not just lately! I have also had family members in this facility and any complaints I or any other family members had, fell on deaf ears!! A volunteer Board is to be let off the hook for this? Why? Did they volunteer because somebody twisted their arm? Did they do it on a dare? Or was it to make them look good in the community? That dog won't hunt my friend!! What you are saying is just plain nonsense! Look at what the gazette printed today. All the money that we as the taxpayer have given to bail them out, and yet not one Board member bothered to investigate what was going on? These people all know how a business operates. To catch an administrator error is impossible? Bet they would have caught it if it was their money! When you serve on a Board it's a privilege, not a burden. If it is then don't accept the position! I hope the gazette keeps digging into this because we are not being told the whole story. Every member of that Board should be held accountable for what they, not just the administrator has done! To let this happen to our taxpayers and older citizens that have earned the right to be taken care of by people that care about their welfare without any real explaination as to how this happened is about as low as you can get!

-- Posted by smz on Wed, Jul 11, 2012, at 2:33 PM

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