KINGMAN – Board member Logan Marsh gained permission from the board on March 10th to continue working with KHI/KRMC on re-negotiating the hospital’s lease with the board. He will be joined by Chairman, Katie Tacheron.
There have been eight amendments since May12, 2012. The amendments included defining hospital facilities; required review of insurance coverages; use of premises; alterations and improvements; sublease of hospital facilities; and, importantly, an extension of the lease (in 2012) for 10 years which will automatically renew every month.
Some years the lease amount goes down and in other years it goes up. In 2024/2025 the lease payment went from $300,000 per month to $200,000 per month and was scheduled to reduce further to $100,000 per month. It appears the current rate remains at $200,000 per month or $2,400,000 annually.
The district’s fund balance is essentially reduced to zero or a negative figure each year as it pays for IGAs (Intergovernmental Agreements) with KRMC and AHCCS (Arizona Health Cost Containment System).
One IGA is for GME (General Medical Education) which, according to hospital officials, pays for certain doctor’s expenses for continuing education. The other program, APSI (Access to Professional Services Initiative) is also an AHCCS program that “provides enhanced support to Qualified Practitioners who deliver services to AHCCS members in Designated Hospitals.”
Effectively, if the board wanted to do major renovations, buy additional property or, say, build a parking garage, it would be necessary to issue bonds or impose a tax in order to do so as long as the IGAs continue.
Dr. Newmyer said she would not be inclined to approve a tax or issuance of bonds and Marsh said he would not be either.
“I’m not advocating for a new tax at all but I think it’s important that the public understands that we are a special taxing district with that authority; and that this whole district was formed on, and the original lease was formed on bonds [the hospital was purchased from Mohave County through issuance of bonds]…I am making certain that in the new lease that the authorities are still kept in place…prior board members gave away authority to KHI which I want to rein back in,” explained Marsh.
Representatives of Baker-Tilly, Kristen Olko, Engagement Reviewer and Shannon Ramirez, Audit Manager for both the district’s financial statements and the Kingman Hospital provided a PowerPoint display of audit results and answered questions from board members.
Board member, Dr. Carol Newmyer, asked who the auditors were referring to as the “management team.” The response from Olko was Barry Moore (KRMC Controller), Josh Hoffman (KRMC Chief Financial Officer) and Kevin Keener (KRMC Finance Director).
“The chair (Katie Tacheron) and I have discussed proposing that the full board consider moving to a different audit firm going forward so there is a clearer separation and independence, but that would require formal board action,” said board member Logan Marsh.
Moore (who was present but is now retired) answered questions about the district’s financial statements. According to Moore, the board is “locked in” to a contract with Baker-Tilly until after 2027.
Ms. Olko stated that the audit was clean and there are no major problems. Dr. Newmyer asked Ms. Olko if she finds it troubling that the net position decreased by $1.7 million in 2025 compared to an increase by $300,000 in 2024.
“It is really driven from…the lease agreement with the hospital.” Ms. Olko stated. “Yeah, so like I said, this is probably a management question, but from my understanding, because of the additional increase that is being paid, that the hospital is going to benefit from, my understanding that a lease negotiation will likely happen next year, so that additional funding will cover that payment, if that makes sense.”
“So, this is based on that 10-year agreement that in effect at the end of 2025. The reason for that large decrease in the net position, which was an increase in intergovernmental payment for the year,” said Moore.
“So, there was…if you look at the intergovernmental payments line…that’s an operating expense that last year was $1.3 million, and that was solely for the GME matching program.
“Whereas this year…it went up a little bit…maybe it’s like $1.6 million or something. But on top of that, there’s another program that the district was funding…so, that’s what the increase is for.”
Dr. Newmyer asked what assumptions are being used for the upcoming fiscal period as to major payment exposures, timing of obligations, and dependency of outside payments; or, how it is sustainable if a deficit is planned.
“So, this current year to date is negative (-$672,513) … accrual method.” explained Moore.
“The lease revenue is coming in, the IGA payments are going out, that’s the biggest part of this…the activity through January is negative as far as revenues to expenses. It does make sense that it comes back down to this leasing negotiation.”
Becky Foster
