Business

$30 million accounting oversight at St. Francis leads to layoffs

St. Francis Hospital is eliminating 80 jobs effective immediately as it wrestles with a $30 million accounting inaccuracy it discovered last month, President and CEO Robert Granger said on Thursday.

Former Chief Financial Officer Matt Moore, who had been with the hospital for nine years, was suspended on Oct. 27 and “permanently relieved of his duties” Nov. 14, Granger said.

Granger and the Board of Trustees have been operating for at least three years with reports that overestimated the hospital’s revenues and underestimated its expenses by $29.7 million, Granger said.

While Granger and the board thought the hospital was operating at a point that was break-even or better, it was actually losing money.

The corrected financial information shows that St. Francis is currently operating at a $12.8 million deficit for 2014. They expect that to increase before the end of the year.

The layoffs, which include 65 people and 15 open positions, were a direct result of the inaccurate financial data, Granger said.

“We knew immediately that we would need to make some financial changes in our operations,” he said, “so we began working on the cost-reduction plan.”

Granger said it would affect “the executive level all the way through the rank-and-file.”

“We don’t expect it to have any impact on direct patient care,” he said.

The workforce reduction will result in more than $11 million in annual savings, Granger said.

Board members have known of the issue for about three weeks, said board Chairman Richard “Bo” Bradley. The board hired Michelle P. Madison of Morris, Manning and Martin LLP of Atlanta to conduct an independent investigation. No criminal activity has been discovered, Granger said.

“This is not embezzlement,” Granger said. “This was not a theft.”

When asked how such a major error could occur, Granger said, “I think it was a combination of errors and oversight and ... I don’t know, I can’t speculate on how Matt chose to do his duties.”

Both Granger and Bradley, the board chairman, said they were “shocked” when they learned of the errors. The inaccurate financial information began to come to light in October as Moore was moving out of his job as CFO and into another position with the hospital.

New Chief Financial Officer Greg Hembree, who came from South Georgia Medical Center in Valdosta, Ga., was hired in August and began to take control of the accounting information.

Granger, who has been the CEO for 10 years, has not offered his resignation to the board, nor has it been asked for, Bradley said.

“If that is what the board thought was the answer, I would gladly step aside,” Granger said. “I have a responsibility to this organization and I feel horrible that this happened while I was the CEO, but as the CEO, you have the right to rely upon the financial reports provided to you by a competent and qualified CFO.”

Granger and Moore had worked together previously in south Florida and Granger recruited Moore for the CFO job.

Granger said that Moore apologized to him when confronted, but the CEO declined to reveal the rest of his conversation with Moore.

Moore did not respond to a request for comment from the Ledger-Enquirer Thursday afternoon.

St. Francis has had regular audits from the Albany, Ga., accounting firm of Draffin & Tucker LLP, but Granger and the board did not reveal the mistakes that were discovered last month.

In addition to hiring an outside investigator, the hospital has assembled a subcommittee of its board to handle the matter. The board has also brought in retired Synovus Chairman Jimmy Yancey, TSYS Chairman Phil Tomlinson, Dr. Luther Wolff Jr. and Dr. Rajinder Chhokar to work with the board to formulate a plan and determine the scope of the financial challenges.

The hospital has about 2,800 full- and part-time employees and an annual budget of $295.7 million.

In July, Granger was questioned by multiple media outlets, including the Ledger-Enquirer, about the hospital’s financial status after an email circulated throughout the community claiming that some vendors were not getting paid in a timely manner.

Granger denied it and responded with a July 24 memo to his board that stated: “Clearly someone in the area has an agenda to smear our good name, and it is quite disappointing that an individual has chosen to do this. We will continue to operate as normal and enjoy the high road. The view is much better from there.”

Granger said Thursday he has since discovered there were some issues with payment of some of the hospital’s more than 2,200 vendors.

“Do we feel like our vendor payables are where we want them to be?” he said. “No, we do not. We have some issues we need to work on.”

Two of St. Francis’ partner physicians, Leland C. McCluskey and Sylvester McRae, said their primary concern is patient care. Both are members of the hospital’s foundation board.

“I may be naive, but I trust the community leaders and Robert, and we are confident we can go about the business of taking care of the patients,” McCluskey said. “I think patients feel they are getting that quality care when they come in to the hospital. And I don’t see that changing just because of the numbers on the books.”

McRae said he felt betrayed.

“Not in the individuals here, but in the individual responsible for the error,” McRae said. “The board members are intricately involved in this process. They have been out here long hours since this thing broke. We have something good here. ... We’re doing good things and that ought to be reflected. And it is reflected in the patient care.”The issues come after the hospital has undergone a major expansion and renovation.

In October 2011, St. Francis Hospital broke ground on a $110 million expansion — the largest ever — of its campus on Manchester Expressway.

The $150 million project, completed a year ago, expanded its 600,000 square feet of space to nearly 1 million. It included two large structures — a clinic services tower and medical office building — and creation of a new Heart Hospital and a Women’s Hospital.

Other elements of the expansion included a larger surgical suite, a new operating room, a cardiovascular intensive care unit and a medical intensive care unit. It also brought 230 private patient rooms, an improvement from the previous 75 private and 110 semi-private rooms at the hospital. There’s also a new conference center with a 324-seat auditorium.The hospital added about 300 jobs during the project.

The expansion was financed by the U.S. Department of Housing and Urban Development Federal Housing Administration’s Section 242 Hospital Mortgage Insurance Program, officials said, with the hospital having access to a loan of up to $210 million, which allowed the hospital to consolidate existing debt.

Granger said Thursday that HUD and Columbus Bank and Trust Co., the hospital’s two largest lenders, have been notified of the misinformation on the financial reports. He said no payments to either institution had been missed.The St. Francis announcement comes less than three weeks after its competitor Columbus Regional Health eliminated 219 positions that would save the company $23 million.

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