The Unlearned Lessons of Failing Community Health Centers –

The Unlearned Lessons of Failing Community Health Centers –
Part 3: Financial Statements as Fairytales – Financial Statements that have a somewhat flexible relationship with reality -

Community Health Centers’ central role in providing primary health care to the unemployed, underemployed, and part-time employed (who are uninsured or underinsured) is seriously underutilized.

The way this can be dealt with immediately is through local Community Health Centers that are well-led, well-managed, and well-financed.

If Community Health Centers are vital to resolving the health crisis, what can Community Health Center Board members do to help their Center?

Our sense is that Boards can insist that their Executive Director immediately overcome the following four issues:

1. The lack of transparency.
2. The evolution of community health center financial statements into a dark art.
3. Financial statements as fairytales.
4. The failure of the executive director to believe, despite their mission, and demonstrate through measurable behaviors, that CHCs are established to serve all the medically underserved in its area.

In a prior post we discussed: 2. The Evolution of CHC Financial Statements into a Dark Art.

Today we address:

3. Financial Statements as Fairytales – Financial Statements that have a somewhat flexible relationship with reality -

Examples:
Holding account receivables aging on the Revenue side of the Balance Sheet past ca. 90 days (not marked to collection reality, but marked to myth).

Account receivables not being reported at their true worth (monetary value).

Failure to consistently question costs, billings, collections.

Executive Directors repeatedly signing-of on financial statements to the Board that have a somewhat flexible relationship with reality.

Questions to ask
Do the Board and ED understand that accounting is supposed to allow them to see clearly what their CHC is worth financially?

Do the financial statements make the CHCs finances more transparent?

Do the financial statements make the CHCs finances cloudier?

Is the CHCs Accounts Receivable aging marked to collection-reality or marked to myth? (How much can actually be collected from A/R that is over 90-180 days uncollected?)

· Can a quorum of the Community Health Center Board, the Executive Director, and the CFO, clearly and in outline form, explain these issues:
o Key financial terms: assets, liabilities, capital, depreciation, current ratio?
o The CHC in terms of dollars and cents decision options?
o Basic accounting principles?
o How the balance sheet can be used to examine assets and liabilities?How an income statement is used to assess revenues and expenses?
o Cash Flow statements sources and uses of funds?
o Cash flow statements: where cash comes from and how it is applied?
o If not, can any of them respond to how they comply with the PIN 98-23 requirement of Governing Board function and responsibilities requirement (III - Governance):

3. Governing Board Functions and Responsibilities.
The governing board of a health center provides leadership
and guidance in support of the health center’s mission. The
board is legally responsible for ensuring that the health center is operating in accordance with applicable federal, state and local laws and regulations and is financially viable.

b. Responsibilities
A governing board is responsible for assuring that the
health center survives in its marketplace while it pursues its
mission. This is a massive challenge in an extremely dynamic
health care environment which is placing increasing financial and service delivery pressures on all providers. Boards must be knowledgeable about marketplace trends and be willing to adapt their policies and position to reflect these trends. In addition to approving annual grant applications, plans, and budgets, boards should work with health center management and community leaders to actively engage in long-term strategic planning to
position the health center for the future.

Success is dependent on the health center’s ability to
effectively adapt to marketplace trends while remaining
financially viable…
ftp://ftp.hrsa.gov/bphc/docs/1998pins/PIN98-23.PDF

Where does your Community Health Center fit into this fiduciary continuum?

How can you be sure?

What are the measurements you use?

What are your criteria for effectiveness?

Did the answer you just gave include both the medically served and unserved people in your community?

If not, why not?

Next post: The Unlearned Lessons of Failing Community Health Centers –
Part 4 - The failure of executive directors to believe, despite their mission, and demonstrate through measurable behaviors, that CHCs are established to serve all the medically underserved in its area -