The Clarkfield City Council received a Care Center audit report presented by the consulting group Clifton, Larson, Allen. New Care Center Administrator Justin Boldt and CEO of Minnewaska Health Services Chris Knoll. Minnewaska recently took over the management contract for the Care Center, and the audit is part of their process to determine the exact financial situation of the Care Center.
The report reviewed Care Center financial statements, state regulatory documents, and internal reporting. The firm also compared and contrasted Clarkfield’s performance in relation to state-wide averages and trends at the national level as well.
The report found that average occupancy at the Care Center has declined slightly in recent years. In 2016, the annual average occupancy stood at 87.7% before declining to 75.5% last year. The report expects this trend to stabilize at the mid-70% range. This isn’t much different from the state average of about 80% in 2017. The report recommends that facilities operating at below 80% occupancy should consider reducing the total number of beds, something that the Clarkfield Care Center did several years ago. The Care Center currently operates as a 36-bed facility.
A more troubling trend highlighted by the report can be seen in the operating margin. The report found that the Clarkfield Care Center is operating at a larger loss than the state average. The figure is given as a ratio in which operating income (loss) is represented as a percentage of net resident and tenant service revenues plus other operating revenues. This ratio excludes investment income and contributions and is used to report an organization’s return on operating revenues related to operating expenses.
In 2016, Clarkfield had an operating margin ratio of -2.1%, significantly lower than the state average of -0.5%. The situation improved slightly between then and 2018, when the operating margin ratio rose to -1.1%. The report noted that despite heavy losses during this period, it was a sign of “good management” that the operating margin wasn’t even lower.
The report also assessed overall cash on hand at the Care Center. Cash on hand measures the number of days of average cash expenses that an organization maintains in cash and amounts reserved for capital improvements. High values usually imply a greater ability to meet both short-term obligations and long-term capital replacement needs. The report found that Clarkfield has historically maintained lower levels of cash on hand than the industry average but has increased each of the last two years.
In 2016, for example, total cash on hand for the year stood at 4.0, much lower than the industry average of 33.1 for the same year. In 2018, however, the Clarkfield Care Center had greatly boosted cash on hand to 27.9, close to the industry average for 2017 of 31.9.
Finally, the report calculated the number of net days in accounts receivable. This measure is defined as the average time that receivables are outstanding, or the average collection period. The report determined that the Care Center’s days in accounts receivable decreased compared to the prior year (a low ratio is deemed favorable). In 2016, the Care Center was found to have a total of 29 days in accounts receivable, lower than the industry average of 41.2. After rising briefly in 2017, the number of days dropped in 2018 to 39.7, still below the industry average.
No action was required by the City Council on this matter. Knoll explained that the leadership team at the Care Center will use the information for continuing their transition and making other long-term financial decisions.
In other news:
•City Administrator Amanda Luepke reported that the city’s financial audit will be set for April 29. Luepke said that she will rely on Dana F. Cole to help complete the audit.
•Members of the ordinance committee reported in their progress to Council. They are discussing strategies for removing junk vehicles off properties and how to potentially demolish hazardous structures in town. They will meet again on Thursday, April 4.