Audit 355131

FINDING 2024-002 USDA LOAN COVENANTS COMPLIANCE Federal programs Federal Assistance Listing Number 10.766 U.S. Department of Agriculture (USDA) Direct Award, Community Facilities Loans and Grants Material Weakness Criteria The Hospital is required to maintain a debt service coverage ratio of 1.5 and have 90 days of cash on hand at fiscal year-end. Condition The Hospital’s debt service coverage ratio for the year ended June 30, 2024 was less than the required 1.5. Additionally, the Hospital had 72 days of cash on hand at June 30, 2024, which was less than the required 90 days. Cause The Hospital implemented a new accounting and electronic health record (EHR) system in May of 2023 and experienced significant delays in being able to bill and process claims. In addition, there was a cyberattack on the Hospital’s claims processing clearinghouse in February 2024 that took the hospital offline from processing claims. These two events had a negative and material impact on overall operating results as additional accounts receivable allowances for both contractual adjustments and bad debts were necessary at June 30, 2024. Effect The Hospital was unable to meet the required 1.5 debt service coverage ratio and had less than 90 days of cash on hand at June 30, 2024. Questioned costs None. Perspective/Context The majority of the EHR implementation issues and subsequent cyberattack were outside of Hospital management’s control and directly related to issues associated with the accounting and EHR system vendor and Clearinghouse vendor. Hospital management notified its USDA representatives and received a waiver from the required 1.5 debt service coverage ratio and required 90 days of cash on hand for the period ended June 30, 2024. Recommendation We suggest Hospital management continue working with its accounting and EHR system vendor to resolve issues affecting its operating results and suggest Hospital management increase their cyber liability coverage limits. Views of responsible officials and planned corrective actions The implementation of the new electronic health records created a delay in operational workflow processes which required vendor modifications and corrections to the system. This delayed submitting insurance claims for reimbursement continued throughout fiscal year 2024. Operations have now stabilized and the debt service coverage ratio is expected to be in compliance in fiscal year 2025. Hospital management notified its USDA representatives and received a waiver from the required 1.5 debt service coverage ratio and required 90 days of cash on hand for the period ended June 30, 2024.

FINDING 2024-003 COMPLETION AND TIMELY FILING OF SINGLE AUDIT REPORTS Federal programs Federal Assistance Listing Number 10.766 U.S. Department of Agriculture (USDA) Direct Award, Community Facilities Loans and Grants Criteria The Hospital is required to have its financial statement and compliance audits completed and filed with the Federal Audit Clearinghouse nine months after the end of the audit period. Condition The Hospital’s financial statement and compliance audits for the June 30, 2024 reporting period were not filed within the required timeline. Cause The Hospital implemented a new accounting and electronic health record (EHR) system in May of 2023 and experienced significant delays in being able to bill and process claims. In addition, there was a cyberattack on the Hospital’s claims processing clearinghouse in February 2024 that took the Hospital offline from processing claims. These two events resulted in the financial statement audit requiring significantly more time to complete. Effect The Hospital was unable to meet the required nine month filing deadline. Questioned costs None. Perspective/Context The majority of the EHR implementation issues and subsequent cyberattack were outside of Hospital management’s control and directly related to issues associated with the accounting and EHR system vendor and Clearinghouse vendor. Hospital management also notified the USDA that the financial statement and compliance audits would be delayed due to these issues. Recommendation We suggest Hospital management continue working with its accounting and EHR system vendor to resolve issues affecting its operating results and suggest Hospital management increase their cyber liability coverage limits. Views of responsible officials and planned corrective actions The financial statement and compliance audit will be filed with the Federal Audit Clearinghouse shortly after issuance.

FINDING 2024-002 USDA LOAN COVENANTS COMPLIANCE Federal programs Federal Assistance Listing Number 10.766 U.S. Department of Agriculture (USDA) Direct Award, Community Facilities Loans and Grants Material Weakness Criteria The Hospital is required to maintain a debt service coverage ratio of 1.5 and have 90 days of cash on hand at fiscal year-end. Condition The Hospital’s debt service coverage ratio for the year ended June 30, 2024 was less than the required 1.5. Additionally, the Hospital had 72 days of cash on hand at June 30, 2024, which was less than the required 90 days. Cause The Hospital implemented a new accounting and electronic health record (EHR) system in May of 2023 and experienced significant delays in being able to bill and process claims. In addition, there was a cyberattack on the Hospital’s claims processing clearinghouse in February 2024 that took the hospital offline from processing claims. These two events had a negative and material impact on overall operating results as additional accounts receivable allowances for both contractual adjustments and bad debts were necessary at June 30, 2024. Effect The Hospital was unable to meet the required 1.5 debt service coverage ratio and had less than 90 days of cash on hand at June 30, 2024. Questioned costs None. Perspective/Context The majority of the EHR implementation issues and subsequent cyberattack were outside of Hospital management’s control and directly related to issues associated with the accounting and EHR system vendor and Clearinghouse vendor. Hospital management notified its USDA representatives and received a waiver from the required 1.5 debt service coverage ratio and required 90 days of cash on hand for the period ended June 30, 2024. Recommendation We suggest Hospital management continue working with its accounting and EHR system vendor to resolve issues affecting its operating results and suggest Hospital management increase their cyber liability coverage limits. Views of responsible officials and planned corrective actions The implementation of the new electronic health records created a delay in operational workflow processes which required vendor modifications and corrections to the system. This delayed submitting insurance claims for reimbursement continued throughout fiscal year 2024. Operations have now stabilized and the debt service coverage ratio is expected to be in compliance in fiscal year 2025. Hospital management notified its USDA representatives and received a waiver from the required 1.5 debt service coverage ratio and required 90 days of cash on hand for the period ended June 30, 2024.

FINDING 2024-003 COMPLETION AND TIMELY FILING OF SINGLE AUDIT REPORTS Federal programs Federal Assistance Listing Number 10.766 U.S. Department of Agriculture (USDA) Direct Award, Community Facilities Loans and Grants Criteria The Hospital is required to have its financial statement and compliance audits completed and filed with the Federal Audit Clearinghouse nine months after the end of the audit period. Condition The Hospital’s financial statement and compliance audits for the June 30, 2024 reporting period were not filed within the required timeline. Cause The Hospital implemented a new accounting and electronic health record (EHR) system in May of 2023 and experienced significant delays in being able to bill and process claims. In addition, there was a cyberattack on the Hospital’s claims processing clearinghouse in February 2024 that took the Hospital offline from processing claims. These two events resulted in the financial statement audit requiring significantly more time to complete. Effect The Hospital was unable to meet the required nine month filing deadline. Questioned costs None. Perspective/Context The majority of the EHR implementation issues and subsequent cyberattack were outside of Hospital management’s control and directly related to issues associated with the accounting and EHR system vendor and Clearinghouse vendor. Hospital management also notified the USDA that the financial statement and compliance audits would be delayed due to these issues. Recommendation We suggest Hospital management continue working with its accounting and EHR system vendor to resolve issues affecting its operating results and suggest Hospital management increase their cyber liability coverage limits. Views of responsible officials and planned corrective actions The financial statement and compliance audit will be filed with the Federal Audit Clearinghouse shortly after issuance.