HERMANN — The report on the annual audit of Hermann Area District Hospital (HADH) is about as bleak as it could be: Unless turnaround efforts are successful, and fairly quickly, the county seat community very well might join the list of other small towns that no longer has a hospital.

“We have doubts you’ll be continuing to operate” after 2024 or maybe 2025, said Cori Schoenke of the auditing firm that has performed the HADH audit in recent years. The harsh assessment of the medical facility’s financial standing was presented at Monday night’s regular monthly meeting of the Board of Directors. The report noted that the hospital’s net loss for 2022 was more than $2 million.

The key to keeping the doors open appears to lie in efforts by hospital officials to recruit additional doctors, increase so-called “swing bed” use by other healthcare providers and strengthen alliances with Mercy Healthcare or other hospitals.

“You’ve got to keep on these (efforts),” Schoenke said. “Hence, the reason I am optimistic about you for another year.”

The audit bears out what HADH Administrator Dan McKinney has been saying for the past year or more — contracting for outside workers is draining the hospital’s bank account. Lessening reliance on agency staffing, particularly nurses, who are paid more than $100 an hour in some cases, is crucial, according to the audit report.

“That’s basically killing your bottom line,” the auditor said of contract labor, who cautioned that the situation won’t improve without significant changes being made. “It’s going to kill you in the future if things don’t get better,” she said.

There are other reasons for the precipitous position in which the hospital finds itself: The need to bolster some internal controls and procedures, such as a review of proposed write-off of bills, improved collections by third-party payers (insurance companies, Medicare and Medicaid payments) as well as overall debt collection (use on-staff personnel or contract with outside collectors).

The good feelings at HADH the past two years were fueled by the influx of government money as a result of the coronavirus pandemic, money that pushed the hospital into the black — at least for a while. But, as Schoenke noted, if the government funding received in 2021 was removed, the hospital still would have lost about $700,000.

And there was an uptick in patient care during 2021, again the result of the pandemic.

Schoenke set the stage for the critical report at the outset of her presentation to the board.

“I wish I could bring you some good news,” she said, adding “I always seem to be bringing bad news.”

The bottom line of the audit report is that the hospital’s bottom line simply isn’t long enough.

“You currently cannot cover your debt,” the auditor said, noting that 43 percent of the facility’s operating expenses is in salaries and benefits — and that doesn’t include the amount being spent on agency staffing.

Board members listened intently to Schoenke’s report, asking few questions during the 45-minute presentation. There was one visible reaction to one of the auditor’s comments — Mercy Administrator Eric Eoloff smiled, looked down at the table and shook his head slightly when Schoenke referred to HADH’s efforts to enlist the aid of Mercy Healthcare as a way of keeping open the hospital doors.

Board President Dale Ridder acknowledged that the audit report didn’t come as a surprise.

“We knew things weren’t going to be great,” he said, recognizing that the financial figures of 2021 and 2022 were somewhat artificial. “You have to throw out last year, maybe eliminate two years” because of the pandemic funding, he said.

“We’ve known for a long time about the continuing problems we had about generating revenue,” Ridder said, ending the discussion and leading the board into the regularly scheduled business portion of the meeting.

Ridder was re-elected to another term as president while Dave Johnson, serving his second stint on the board, was elected vice president.

Trig Render was re-elected as board treasurer and HADH Administrative Assistant Shirley Viola was reappointed as board secretary.