NATCHEZ — Natchez Regional Medical Center had a $7.6 million loss from operations in 2013, a cost that was offset by the county-owned hospital’s settlement with its former operating company.

The hospital’s board of trustees met Monday with the Adams County Board of Supervisors to discuss its fiscal year 2013 audit.

Click here for a full copy of Natchez Regional Medical Center’s 2013 audit report

Included in the audit was a line item labeled “Extraordinary item lawsuit settlement.” The audit lists the settlement as $9.79 million.

This is the first time an official number has been made public about the hospital’s settlement with Quorum Health Resources.

The suit was based on the hospital’s allegations that QHR mismanaged NRMC until its 2009 bankruptcy.

The lawsuit was originally for $42 million, but the details of the December 2012 settlement were sealed by a federal judge at the request of the parties involved.

NRMC’s 2013 losses were split between the hospital and the Natchez Medical Foundation. The hospital lost $4.65 million, while the Natchez Medical Foundation — a multi-specialty group practice of doctors primarily affiliated with NRMC — lost $3.86 million.

David Williams with the Horne Group said in his dealings with hospital-based physician clinics, those clinics are typically losing an average of $180,000 per physician.

When Supervisor David Carter asked why the hospital had lost so much money and why it continued to lose money, Williams said it included a combination of operating expenses going up, losses due to federal sequestration and changes in how Medicare pays.

“When your operating expenses go up 3-4 percent and you are only getting a half-percent increase in revenue, you are going to go upside down,” Williams said.

Auditor Clint King likewise cited Medicare and Medicaid Recovery Audit Program losses as significant hits to revenue.

RAC auditors review hospital billing and records practices, and decide to award or deny payment based on if the auditor believes Medicaid or Medicare was billed properly.

NRMC was hit with significant RAC denials during 2013, and when the hospital decided to declare bankruptcy earlier this year, administrators cited RAC audits as one of the reasons it became necessary.

Hospital trustee Lee Martin said the hospital board was not told of the RAC audits until August, when the hospital received its big hit.

However, since August, the hospital has had a contractor to appeal and monitor RAC audits, Martin said.

NRMC Chief Financial Officer Charles Mock said the appeal process for the RAC audits prior to August was unorganized.

“We didn’t have things in place to fight it,” he said. “Our approach wasn’t organized enough to do it at the time, but the person who can answer for that at this time is not here anymore.”

Mock’s statement was an apparent allusion to former hospital chief executive officer Bill Heburn, and Supervisor Mike Lazarus responded by saying he’d had problems getting past audits from Heburn.

Heburn retired in October.

NRMC CEO Donny Rentfro said RAC audits are an ongoing process, and have been since 2009.

“Every month they have an opportunity to request an additional number of patient records that are reviewed,” Rentfro said. “This year they have aggressively expanded and accelerated that process.”

King said the audit was given with the highest level of assurance that could be provided on a set of financial statements.

The audit came with no significant changes in accounting practices or unusual transactions noted, he said.

The hospital’s long-term debt decreased by approximately $851,000 as a result of making bond payments, King said.

However, the hospital had a 5-percent reduction in patient inflow and a $916,000 decrease in gross patient revenue.

Likewise, the hospital was reimbursed less for outpatient procedures in 2013 due to changes in hospital reimbursement law, King said.

The hospital also spent $2 million to convert to electronic records, he said.

Williams said the hospital will receive some reimbursement for the funds spent converting to electronic records.

“Mississippi currently has more hospitals that have operating losses than they do operating excesses,” Williams said. “Last year, that was 52 percent of hospitals; I haven’t seen the numbers for this year, but I would suspect it is north of that today.”

During the meeting, Lazarus asked what the hospital’s plan is if the federal court appoints a patient care ombudsman during a bankruptcy hearing this week.

The ombudsman’s duty would be to oversee hospital finances to ensure a continuity of patient care. The county has a contract with Healthcare Management Partners for  similar oversight now.

“I don’t want to get in a position where we are paying two people,” Lazarus said.

NRMC attorney Walter Brown asked for the board to enter into executive session to discuss the matter.

Supervisor Calvin Butler made a motion to enter into executive session, but other board members hesitated to second it. After a moment, Lazarus seconded the motion.

Butler and Supervisor Angela Hutchins voted to enter into executive session, but Carter voted against it.

Lazarus voted for the motion after a moment’s hesitation, telling Carter, “You’ve put me on the spot.”

Supervisor Darryl Grennell was not present.

After the meeting, Lazarus said he did not want the discussion to be in executive session but believed he would not have been able to get the information he wanted without entering into the session. “The meeting would have ended and everyone would have walked out,” he said.

Adams County board attorney Scott Slover said the two boards also discussed an asset purchase agreement the hospital’s prospective buyer had submitted.

The hospital has entered into a letter of intent — a formal but not final step — with a potential buyer, and is in the process of negotiating a final asset purchase agreement before taking the hospital to auction.

If no one outbids the negotiated asset purchase agreement, the hospital will automatically be sold to the buyer.

At the end of the meeting, both boards voted to accept and ratify the audit.