Griffith: Luis needs millions more to stay afloat next year
Published: July 21, 2014
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ST. CROIX - Luis Hospital's management team appeared before the Senate Finance Committee on Friday and presented its financial forecast for the 2015 fiscal year as the hospital continues to face dire financial hurdles.
The governor has recommended a general fund appropriation of $20.2 million for Fiscal Year 2015 for the hospital - a recommended budget which is at the same level as the Fiscal Year 2014 appropriation and about $15 million less than what hospital officials believe they need to begin digging their way out of their deep hole of fiscal uncertainty.
Dr. Kendall Griffith, interim chief executive officer of the hospital, said in order to accomplish the hospital's mission, to drive improvement in the health of those they serve while exemplifying compassion and respect, they strategically implemented a three- phased approach that includes stabilization, sustainability and growth.
"The basic economic principle that no ordinary enterprise can continue to operate indefinitely with losses is ever present in the minds of JFL's leadership team," Griffith said. "JFL has experienced multiple years of operational losses, sharp declines in cash collections and decreasing government appropriations that hampers us from recovering."
He said the yearly operational cash deficiency at the hospital has positioned it on a proverbial fiscal cliff and the leadership team has taken on strategies to increase the efforts to bring in cash collections and increase vendor financing management. He admitted that despite the financial crisis, the hospital had not been as aggressive as it could or should be in collecting payment for services rendered.
Griffith said the working capital of the hospital is a function of cash collection from operations and appropriations from the government. While the hospital experienced a steady increase of cash collection from fiscal 2009 through 2013, with a sharp decline in 2014, the appropriations that they have been receiving from the government have been decreasing annually, Griffith said.
Griffith said the government should fund the hospital at the level of uncompensated care it is projected to perform - $46.9 million for fiscal year 2015. He said local law states that payments from the general revenues of the government are intended to compensate the facilities for otherwise uncompensated care, in order to ensure the availability of quality, comprehensive health care to indigent as well as other residents of the Virgin Islands, until such time as the health care facilities become self-sufficient.
The dramatic decline in cash collection, according to Griffith is attributable to a significant reduction in the population with the closing of Hovensa more than two years ago and a decline in surgical volume due to limited finances which affect the hospital's ability to buy supplies and recruit additional surgeries.
"On a daily basis, we strategically monitor cash flow and direct the outflow of cash based on patient care supplies, pharmaceuticals, payroll and other operating expenses," Griffith said. He said their already strapped-for-cash situation was exacerbated this past fiscal year when they were made to repay the Centers for Medicare and Medicaid Services for a $1.7 million overpayment which the hospital finally fulfilled in April.
Griffith outlined a number of issues that speak to how serious the fiscal situation has become, admitting to deducting monies from employees to pay loans and other obligation, but never forwarding the money to pay the employees' debt, something senators took great exception to.
Sen. Nerieda O'Reilly said the livelyhoods of the employees, their futures and their credit score is all being jeopardized by the hospitals actions and it has to stop. "This is criminal, as a matter of fact, it is beyond criminal that you would operate like this," she said.
But Luis Hospital is not only withholding payments to private institutions on behalf of their employees, Griffith said the decrease in cash has limited their ability to make payments to the federal Internal Revenue Service, V.I. Internal Revenue Bureau and V.I. Government Employees' Retirement System.
Griffith said the situation is critical because this past May the hospital was notified by the IRS that if they do not pay outstanding balances of just over $2 million the situation could result in the garnishment of operating accounts and or holding Griffith and the Chief Financial Officer Michael Younger personally and criminally liable. That deadline was in June and Luis additionally owes IRB $11.8 million.
In a special session Wednesday, senators approved part of the governor's proposal to amend a bill borrowing $50 million to help the territory's hospitals pay their utility bills, address other needs and help close the current fiscal year's budget deficit.
The $50 million authorized by the Senate will go to the hospitals and toward other needs in the government including $1 million for Luis Hospital to upgrade medical records and $11 million for Luis Hospital to meet payroll from July to September.
Griffith said the hospital only made payroll this month by choosing not to pay vendors or buy needed medical supplies.
He said the hospital only had $45,538 in its bank account and will need $2.5 million just to pay the next payroll and cover vendor commitments for the month of July.
- Contact reporter Fiona Stokes at 714-9149 or email email@example.com.