Mishap costs millions — Hospital suffers estimated $3 million loss via materials management error
A failure to mentor Weston County Hospital District’s materials management employees on how to enter journal entries and charges into the accounting software implemented under former CEO Randy Lindauer at the beginning of 2024 has resulted in a financial loss to the district, current hospital officials say. They are now trying to salvage the situation, which could cost the district as much as $3 million.
CEO Cathy Harshbarger, who became the interim CEO on June 24, 2024, the day before Lindauer’s departure, said in a phone interview that when the hospital converted to Sage computer systems in January 2024, not all the “pieces” were fully implemented.
The materials department was overlooked in the implementation of Sage, Harshbarger told the News Letter Journal.
Tish Miller, the hospital’s chief financial officer, said at the hospital board’s Dec. 19 meeting that when she joined the hospital staff on Nov. 4, the inventory module in Sage had never gone live.
“All of the inventory or the supplies are recorded into inventory because that part works, but the part that takes the requisition to the department doesn’t work,” she said. “It’s never gone live. What goes from the floor to the patient isn’t happening. So we haven’t billed any patients for any supplies since January of this year (2024).”
Collection of these funds will be difficult now for a number of reasons. Miller said that the hospital would need to rebill insurance for the supplies. Most insurance companies have a 45-day block, and the hospital would need to put itself as the secondary, or tertiary, insurance so that the patients themselves wouldn’t get billed.
Medicaid pays “on a sliding scale” and hospitals receive less money for reimbursement purposes as each month passes, so the hospital won’t receive full payment because of how old the claims are, Harshbarger explained further, in a follow-up.
“Re-billing will not be fruitful due to time constraints,”
she told the NLJ. “We billed for all other services, minus the materials.”
Harshbarger said at the meeting that hospital staff would need to review every patient’s documents regarding supplies to see which items were used — and the notes may not be thorough.
“You’d hope that they wrote down what kind of dressing they used, but they may not have,” she said.
Harshbarger told the NLJ that Lindauer had signed a contract with Wipfli, an accounting and advisory firm based in Milwaukee, that was supposed to ensure that training regarding the transition was implemented. Also, training that was supposed to be done before that did not get completed. The materials management employees, who were reporting directly to Lindauer at the time, never received their training, so the hospital was neither charging patients for supplies nor precisely accounting for the charges.
The program should have been fully implemented by “the first part of January” 2024, Harshbarger said at the meeting. The audit showed that the hospital had “a little over $3 million” in costs associated with supplies, but there was no counterpart to that in journal entries for charging for those supplies, according to Harshbarger.
“I don’t know how much of that actually should have been charged and how much of it was true inventory,” she said.
She said the discrepancy was caught as soon as she arrived, and she was able to guide the department in loading entries into Sage, even though she didn’t have training in the system, so that it can be properly placed and counted in the inventory. The information’s been entered, but now it has to “go live” within the system through interfacing, she said.
However, she said that it has been challenging to find someone to identify a solution and correctly implement the interface.
“Part of that delay has been trying to get Wipfli contacted to be able to work with us to make sure that they help get done what they were supposed to have done in the first place and get that fully implemented,” she said. “There was a knowledge that there was a problem there. The problem, though, was not easily resolved because we had to work with Sage and Wipfli — and our staff — to get it done.”
She noted that even after current administrators were able to identify the problem and find the contract with Wipfli, it took weeks for the hospital to get Wipfli to respond to calls. Also, at the time, the hospital had two clerks in the materials department but neither was in a supervisory role.
At the hospital board’s Dec. 19 meeting, trustees decided to address the situation when they approved making one of the clerk positions into a managerial role to facilitate better accountability.
Harshbarger told the NLJ that the hospital is “leaning towards” making the change in the new fiscal year and budget season. Meanwhile, the hospital’s IT employee is helping ensure that implementation of Sage with the materials team “stays on track.”
“We lost a lot of money there for people not taking accountability,” Harshbarger told the NLJ, noting that because the hospital didn’t record where those supplies are, the recorded cost of the supplies may not be accurate either. She said that if the employees had been trained and properly accounting for the materials, it would have helped facilitate accurate cost reporting.
“When I got here, we were trying to get the inventory done,” she explained. “They hadn’t even completed inventory. That should have been completed already.”
She said the hospital “did some inventory,” but administrators aren’t confident it was correct at the time, so
it’s likely that the inventory was overstated, leaving the facility unsure that the account was correct.
“You wouldn’t have a true statement of what your real number is for your materials,” she said.
Harshbarger said the hospital is trying to make recoveries and will have the solutions that are possible in place by the end of January, like the other corrections in the Sage accounting system that administrators need to make. The hospital is creating journal entries and corresponding charges on its Epic system, and they may also be able to make some adjustments in the inventory in an upcoming cost report.
“We probably won’t be able to recover our charges, but we will be able to get back on track with our inventory and make sure that we’re stocking it properly,” she said.
Harshbarger said the hospital “finally” has the contract and is trying to make Wipfli accountable for it and get it done this month.
“It was what I consider a big mistake,” she said. “When people are given a task to do to learn something, they need to be sure to be held accountable to follow through on it.”
“The board, the administration, we’re all working toward finding these problems and getting them taken care of,” board Chair Ann Slagle told the NLJ on Jan. 6.
Hospital Happenings
Notes from the Dec. 19, 2024, meeting of the
Weston County Health Services Board of Trustees
Quality Director Kim Scharf said that for the latest “Ladies Night Out,” the radiology department scheduled a record-breaking 65 mammograms.
Tish Miller, chief financial officer, said the administration is “still shooting for mid-January” for taking data from fiscal year 2023 and July 2023 through January 2024 out of Meditech. Having that data will allow the hospital to confirm its reconciliations and begin preparing reports for the auditor. Older data will be stored in downloaded reports and on a server. CEO Cathy Harshbarger told the News Letter Journal on Jan. 12 that the hospital is still on track to end its contract with Meditech and to have the data it needs from 2022-2024.
Harshbarger said she would like employees to go through a Weston County Health Services training in 2025 that would hone in on excellence in customer service, the employee handbook, and ensuring that all staff are “aware that expectations from all employees are consistent.” The community health needs assessment results indicated the hospital could work on “making sure that people really feel like they’re welcome when they come in” and extending hours for the clinic. Hospital administration is exploring options, but acknowledged that there is local competition in this realm. Harshbarger told the NLJ that she would like managers and directors to go through the Leadership Academy first, followed by the rest of the hospital’s employees.
Miller said she sent the hospital’s data charge master with usage to REDiHealth, which is based in Salt Lake City. The company will compare the hospital with similar hospitals and make recommendations for changes in charges based on market share. Harshbarger said the hospital last did this four years ago. Harshbarger told the NLJ that the company should complete this project by the end of February.