The public hospital in Austin, Texas, may be for sale after city officials were surprised by a $20 million "accounting error" that may force it to lay off employees and slash other expenses.
Executives of 356-bed Brackenridge Hospital said the facility actually lost about $20 million in the past two fiscal years, instead of a making a profit, as had been thought. An audit of the hospital is expected to be completed in March.
Hospital executives were trying to calm the feelings of uncertainty among the hospital's 1,900 employees.
"The mayor and city manager have said that the sale of the hospital is a real possibility," said Deborah Lee-Eddie, the hospital's administrator, in a memo to employees this month. However, if the hospital is sold, it "will need a quality work force to continue its mission," she added.
In the meantime, the hospital is reviewing ways to increase revenues and reduce costs. A decision on layoffs will be made in a couple of weeks, Ms. Lee-Eddie said.
Moody's Investors Service, a New York-based rating agency, said it was monitoring the situation but wouldn't making any immediate change in the city's bond rating. Austin's $535 million in general-obligation bonds are rated AA by Moody's. Moody's officials didn't know how much of that debt was related to the hospital.
City and hospital officials are blaming the losses on hospital accounting procedures that didn't record some of the discounts on patient bills related to Medicare, Medicaid and managed-care payers. As a result, revenues were overstated, officials said. They offered no further information on how the discrepancies occurred.
Ms. Lee-Eddie said the accounting problems first showed up in November, when financial executives reported a $7.5 million operating loss. After more auditing, the loss was discovered to be about $20 million.
According to HCIA, a Baltimore-based healthcare research company, Brackenridge reported a profit of $42.7 million on revenues of $124.2 million in 1992. In 1991, the hospital reported a profit of $13.6 million on revenues of $99.2 million. The 1992 profit likely was boosted by Medicaid disproportionate-share funds of $33 million, according to state records.
The hospital's chief financial officer, Russell Kyler, was asked to resign last June because of an alleged conflict of interest involving a company that was doing business with the hospital. However, that problem doesn't appear to be related to the auditing problems at the hospital.