CMS freezes reimbursements for Luis

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Luis Hospital Interim Chief Financial Officer Nellon Bowry on Friday told the territorial hospital board that Medicare is temporarily withholding reimbursements to the cash-strapped hospital to recoup money that it overpaid the hospital in the past.

The withholding of Medicare reimbursements has compounded the hospital's already bleak financial situation, according to Bowry.

The hospital's new interim CFO on Friday presented a report - his first to this territorial hospital board - about his preliminary review of the hospital's fiscal condition.

The Luis Hospital board has only two members and seven empty seats, so it cannot conduct business on its own and the territorial board has to act in its stead.

Bowry told the territorial hospital board on Friday that Luis "continues to operate under fiscal duress" and will have to develop and execute "an aggressive fiscal recovery plan."

He said that such a plan likely would have to include immediate external financial support to allow the hospital to recuperate and recover.

"It's going to take a very aggressive plan to work our way out of it," he said.

Cash flow and timing

Two issues that interplay in the hospital's financial problems are insufficient cash flow and timing, he said. Sometimes the difference between being able to meet payroll and not meeting it is a couple of days, according to Bowry.

He did not say where he thought the additional external support might be coming from, although he did mention that he likely will come before the board soon to get approval to apply for a working capital line of credit.

Bowry said that since his start as interim chief financial officer on Dec. 16 he has been focused on trying to manage the hospital's cash flow.

He spent most of his time, he said, working with the Central Government - the Office of Management and Budget and Finance Commissioner Angel Dawson Jr. - "to make sure we were able to have the advance of monthly allotments to meet the payroll."

This fiscal year, the hospital repeatedly has had to get cash advances on its government allotment to make payroll. Bowry said that Luis has already had to tap into its February allotment.

Financial team changes

At the end of November, Luis Chief Executive Officer Dr. Kendall Griffith fired Chief Financial Officer Deepak Bansal and one of the assistant CFOs, after which the other assistant quit.

The loss of the hospital's senior financial management team has caused a delay in the timeframe that had been planned for the hospital's external audit, according to Bowry.

Also, he said he hopes to complete a cost report in February that has ramifications for reimbursement from the centers for Medicare and Medicaid Services.

Bowry told the board that the Medicare overpayment to the hospital amounted to about $3 million over two years.

According to Bowry, it is not uncommon for there to be an overpayment or an underpayment from Medicare - but the problem has occurred as the hospital sank further into financial trouble. He said two payment plans had been negotiated for the hospital to pay back the money, but the hospital "reneged" on both of them.

When he tried to renegotiate with Medicare for another payment plan, Bowry said he "ran into some fierce resistance."

The balance the hospital owes Medicare at this point is about $980,000, he said.

The temporary lack of Medicare reimbursement until the federal agency recoups the overpayment has put "tremendous pressure on my cash flow," Bowry said.

Recovery plan

Bowry said he is working on drilling things down so that he can get a full understanding of what is causing the cash deficits at Luis.

The average annual working cash deficit in recent years has been approximately $6 million to $8 million, which he said has been passed on to vendors and suppliers.

As of Sept. 30, the hospital owed its suppliers and vendors approximately $40.5 million, according to Bowry.

The financial recovery plan will have to include a combination of more efficient billing and aggressive collection of outstanding amounts the hospital owes, along with re-prioritizing expenses, Bowry said.

Whatever the plan turns out to be, though, it will require continuing support with government appropriations, according to Bowry.

The board listened to the report and asked questions.

Other board business

Most of Friday's territorial hospital board meeting was conducted behind closed doors in a lengthy executive session, which lasted approximately two and a half hours.

Board member Maria Tankenson Hodge said discussion in executive session included selection of an executive search committee for the hospital CEO; an interim contract for Griffith; Dr. Albert Titus; and hospital legislation.

It was not clear how selecting a committee to search for a hospital CEO or discussing hospital legislation qualified as topics that required closed-door discussions.

The board had been in the midst of discussing approval of Bansal's termination when the public discussion stopped and board members went into executive session.

When the board came out, it approved Bansal's firing.

It also ratified action it took in December by email to approve two new certifying officers for Luis Hospital.

In December, the board circumvented the territory's Open Public Meetings Law and the board process altogether by creating a "virtual" approval of the certifying officers through email - without ever taking a vote or involving the public at all.

The board ratified the two new certifying officers on Friday.

- Contact Joy Blackburn at 714-9145 or email

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