Cash crunch about to get worse at Luis
Published: April 7, 2014
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ST. CROIX - With Luis Hospital on track to use up the last of its Fiscal Year 2014 government allotment in May - approximately four months shy of the end of the fiscal year - hospital officials have pushed for quick execution of a $1.2 million contract with an outside vendor aimed at beefing up hospital revenues.
The need for quick cash, though, clashed at times last week with the need for board oversight and conducting due diligence.
Friday morning, during the second discussion in two days on Luis' proposed contract with The Advisory Board Company, territorial hospital board chairwoman Lynn Millin Maduro raised more issues and concerns over the contract - including the fact that she still had not seen one.
Although the board never reached a quorum to conduct business during the telephone meeting on Friday, Millin Maduro informed Luis Hospital Interim Chief Executive Officer Dr. Kendall Griffith and Interim Chief Financial Officer Nellon Bowry, as well as other hospital officials, about what she wanted to see before she could sign off on the deal.
The hospital had provided territorial board members with a document about the deal, but Millin Maduro said that what board members were looking at was not actually a contract.
"I would call that their proposal, what they're proposing they can do," she said of The Advisory Board document board members received. "Trust me, I know what a contract looks like, and I haven't seen a contract. I've seen two variations of a proposal, one geared for today's discussion and one that they submitted, I believe, on March 19."
Bowry said that he thought the board would take action on parameters for the contract - but would not actually sign the contract itself.
"I would sign it as territorial board chair, and definitely as territorial board chair, would require to see the contract in advance," Millin Maduro said.
Luis Hospital's board does not have a quorum to conduct business. Instead, the territorial hospital board has been taking action on matters that normally would have gone before the Luis board. Before it lost quorum, though, the Luis board required board approval on all contracts more than $100,000.
As Property and Procurement Commissioner, Millin Maduro is in charge of the Central Government's contracting. The hospitals, though, are semi-autonomous and do their own negotiating to enter into their own contracts.
Although Luis Hospital legal counsel Royette Russell pointed out some pages in the document the board received Friday that contained some terms for a contract, Millin Maduro said that she did not see a number of the basic components of a contract.
"There's nothing that gives you the guarantees that you would have in a contract," Millin Maduro said.
She also noted that she did not see terms that - should an issue arise with the contract - would cure the issue or terminate the contract without getting involved in protracted litigation. She noted this has been a problem with government contracts in the past.
"We let outside vendors tell us what we're going to acquiesce to, and we need to start looking at protecting the best interests of the government of the Virgin Islands and the institution," she said.
The proposed contract with The Advisory Board is for a revenue cycle optimization project - aimed at capturing more revenue for the struggling hospital through better billing and collection practices and other means. Officials said the contract involves a comprehensive approach at enhancing revenues, and also contains a comprehensive portion on containing costs and becoming more efficient.
The territorial board heard the proposal initially on Wednesday, but members said they needed more information before they could take action. A telephone meeting was set up for Friday.
At times during and after the telephone meeting on Friday, the frustration among Luis Hospital officials was obvious.
They said they had hoped to have The Advisory Board start work on Tuesday.
Luis Hospital owes its vendors well in excess of $40 million, and has been getting advances on its government allotment for months in order to make payroll.
Because of those advances, officials anticipate that the hospital will use up its entire FY 2014 allotment from the Central Government in May, leaving more than four months before FY 2015 - and a new budget cycle - starts on Oct. 1.
The hospital has two major sources of revenue: appropriations from the government and revenues from operations. Officials said they hope to start seeing an increase in revenues from The Advisory Board's work by the time the government allotment runs out.
However, there are a variety of concerns over the proposed contract.
Discussion at the territorial hospital board meeting on Wednesday indicated that the proposal would have the hospital pay The Advisory Board $250,000 spread out over the first four months, then officials would reassess, set new benchmarks, and enter into an arrangement for the remaining eight months of the year.
The maximum the hospital would be responsible for paying The Advisory Board over the course of the year would be $1.2 million - with all but the initial $250,000 tied to The Advisory Board's performance and whether it accomplishes what it says it can do, officials said.
However, it was not clear where the hospital was going to come up with the $250,000 for the first four months - a cause for concern among the board.
Millin Maduro also had questions about the procurement process, as well as why the Luis Hospital contract was so much higher than a contract Schneider Regional Medical Center has with the same company. Although both hospitals expect a return of $6 million on the deals, Schneider will pay a maximum of $300,000.
Luis Hospital officials suggested that the cost-containment portion of the contract accounts for the difference in costs. Schneider's contract with The Advisory Board has already been executed.
Millin Maduro also had concerns about staff training.
Although a quorum was never established and Friday's telephone meeting for the territorial hospital board was never officially called to order, Luis Hospital officials did get some instructions.
They were ultimately asked to provide the board with a proposed contract in a certain format, provide a memo on the procurement process that led to the deal, and provide information on how Luis Hospital intends to pay for the first four months of the contract.
Millin Maduro said the board could call a special meeting to consider the contract once it has all the necessary information. The next scheduled meeting is in May.
- Contact reporter Joy Blackburn at 714-9145 or email email@example.com.