North Sunflower Medical Center executives faced scrutiny from the Sunflower County Board of Supervisors this week over delays in the hospital’s completion of its 2023 financial audit.
This came one day after special agents arrested former NSMC Board of Trustees member Phil McNeer and his employee Chris Waldrup for “allegedly concealing the true identity of McNeer’s business through the submission of fraudulent invoices to NSMC under Waldrup’s name.”
The Office of the State Auditor has issued a $1.2 million demand to McNeer and Waldrup.
While the county-owned hospital’s audit situation and the arrests are seemingly unrelated, the county invited the hospital’s brass to its Wednesday special called meeting to answer questions about both situations.
The board of supervisors have discussed NSMC’s audit delinquency on a number of occasions in the past year, as the hospital’s financial report is a component of the county’s overall audit.
“When you reach a circumstance when the state audit department has come in and arrested a former board member, and then we as the owner of the hospital do not have the current audit, that’s not good,” Board Attorney Johnny McWilliams told the NSMC executives during Wednesday’s special called meeting. “Whatever it takes, we need to get it.”
According to the state auditor’s office, “between March 2015 and March 2025, McNeer and Waldrup allegedly submitted 216 fraudulent invoices to NSMC, causing the hospital to make payments to, and for the benefit of, businesses owned by Phil McNeer. As a NSMC board member, McNeer was prohibited by law from using his position to benefit himself or any business he is associated with.”
McNeer operates a landscaping company and is represented by attorney Mike Carr of Cleveland.
"This is just another example of Shad White posting yet another case on social media for his own attention and political benefit,” Carr said in a statement to The Enterprise-Tocsin. “Every time Mr. White does this, it impedes a defendant's right to a fair trial, including that of Mr. McNeer and his co-defendant. An indictment is just a piece of paper. It proves absolutely nothing. Proof comes from the witness chair. That's it. The rest is hot air. We look forward to litigating this case in court - and not online."
If convicted, McNeer faces up to $26,000 in fines and up to 30 years in prison, according to the state auditor’s release this week. Waldrup, if convicted, faces up to $21,000 in fines and up to 20 years in prison.
NSMC CEO Daniel Ceja told the county board that he had been contacted by the state auditor’s office about 10 months ago regarding an investigation that was prompted by an anonymous tip.
“Right away, I contacted my board and the board attorney, and I explained what the subpoena was and the information that was being requested,” Ceja said. “We’ve been cooperating with the investigation for about 10 months.”
Ceja said that he was contacted on Tuesday by investigators notifying him that McNeer’s arrest was imminent.
“Ultimately, it had nothing to do with the hospital, other than he was a board member,” Ceja said.
Ceja said that the hospital did its due diligence in obtaining and turning in the correct documentation for the contractor who was paid for the landscaping services in question.
“From a hospital standpoint, we were paying an individual contractor,” Ceja said. “We had no recollection as far as who the company belonged to, if there was any dealings with a former board member. I did everything within my power to cooperate with the authorities to make sure they got what they needed. As far as the hospital is concerned, we have nothing to do with it and we did everything within our power to cooperate with it.”
Ceja also told the board that the auditor’s $1.2 million demand seems to be much higher than the invoices they were able to provide to the agency. He estimated from the invoices he had seen that the number was somewhere between $450,000 and $500,000.
The NSMC CEO noted that landscaping and lawn care services for all of the hospital’s campuses cost between $60,000 and $75,000 a year.
“It’s quite an endeavor,” he said. “It’s quite an expense.”
Audit Questions
As for the 2023 audit, Ceja told Board President Gloria Dickerson that the hospital’s auditor should have everything they need this week in order to complete that financial report. He noted that work should start soon on the 2024 audit.
Ceja said that a number of things contributed to the delays, including the hospital’s transition into a new electronic medical records system, the loss of key staff members and the February 2024 cyberattack on Change Healthcare, which delayed much of the hospital’s health care reimbursements from February 2024 until July of that year.
Supervisor Dickerson questioned Ceja about the hospital’s delays in reconciling bank statements.
“You can’t do an audit until bank statements are reconciled,” Dickerson said.
Ceja and hospital financial officer Charlotte Sherwood said that they are working on getting the bank statements caught up. They said that a typical bank statement for the hospital is around 100 pages long.
“It almost takes a full-time employee to do that, and with the shortage that I’ve had, it has really set us back,” Ceja said.
Sherwood noted, “There’s been something done on every bank statement all the way up to the current period, but they are not finalized… It’s time consuming. We’ve had issues with the new system when we had that put in. I’m getting there…I’m spending every day on it.”
After more board questioning, Ceja revealed that the hospital’s overall cash position has taken several hits in the last couple of years.
NSMC had a total cash balance of $18.4 million in the bank in September 2022, according to board meeting minutes available on the hospital’s website. The balance had dipped to $13 million by the same time in 2023 and had dropped to $5.5 million this time last year.
Ceja said the hospital currently has enough money in the bank to cover two weeks of expenses.
“That’s every hospital in the country, and some have less than that,” Ceja said.
The Change Healthcare hack contributed quite a bit to the decline in funds, Ceja said, along with other expenses like the multi-million-dollar investment the hospital made in its new Greenwood campus.
Ceja and the late Billy Marlow, who served as executive director for decades at NSMC, asked the county board in April 2024 to approve a $9.5 million line of credit in case the hospital needed money to cover expenses.
Even with monthly expenses totaling around $5.5 million, Ceja said the hospital has held steady, choosing to not draw from that line.
The hospital is currently receiving reimbursements and Ceja said that the Greenwood clinic just received its rural health clinic certification and should be generating more revenue soon.
“We’re not fully recuperated yet, but we’re trying to get to that point,” Ceja said. “Our goal is to get back to a good and stable financial position. Having 30 to 40 to 50 days of cash on hand is the goal.”
