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MCH Accounting Revision: Audit Committee Recommends New Accounting Practice

June 20, 2008

By Geoff Folsom, Odessa American, Texas

Jun. 20–Though Medical Center Hospital may adopt a new way of accounting, officials vow it won’t affect the benefits retirees receive.

On a 2-1 vote, the Ector County Hospital District’s Board of Directors’ Audit Committee recommended adopting a new liability system. Judy Hayes and David Dunn voted for recommending the proposal to the full board at its July 1 meeting, while Abraham Torres opposed the change.

The vote impacts hospital accounting for health insurance benefits for 380 employees who were with Medical Center before Jan. 1, 1993, when the hospital switched to a Medicare-based system. If approved, it would switch the hospital’s liability from around $59 million back to zero, as of the start of fiscal year 2008, which was last October.

The change, which is being allowed under Government Accounting Standards Board Statement No. 45, will help the hospital’s balance sheet, Robert Abernethy, chief financial officer said. Under the change, MCH’s long-term debt equity would go from 0.1782 to 0.1168, with lower numbers being better.

“We’re being penalized from a bond-rating standpoint,” Chief Executive Officer Bill Webster said. “We think by adopting GASB 45 it will more accurately present our finances.”

Webster said the change is possible because it deals only with balance sheet, non-cash transactions.

“It’s strictly how the hospital will reflect our financial statements,” he said.

Torres said he didn’t think anything is wrong with the current system.

“I’m uncomfortable simply because of the effort we put over 15 years,” he said. “Both options are good. In my opinion, I think we should just leave it where it is.”

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