IRB levels tax lien on Luis Hospital accounts

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ST. CROIX - The V.I. Internal Revenue Bureau placed a lien on Luis Hospital's bank accounts Friday in an effort to collect outstanding payroll taxes, but hospital officials said a compromise was struck and the lien was released by the end of the day.

Nonetheless, the cash-strapped hospital owes the IRB somewhere between $8 million and $10 million, representing amounts the hospital withheld from employee paychecks as income tax, but never sent to the Internal Revenue Bureau as it was supposed to, officials said.

"There was a lien placed against the accounts of the hospital by the IRB, and with the assistance of a lot of people, we were able to have a conversation with the IRB. We were able to begin discussions on a payment plan," said Dr. Kendall Griffith, Luis Hospital Interim Chief Executive Officer.

Griffith said he thinks the last time the Internal Revenue Bureau was paid was sometime late last year.

There had been some concern about how the lien might affect payroll - Thursday was pay day - but the central government gave the hospital another $1.2 million cash advance on Friday, according to a statement Government House issued Friday night.

"Everything was resolved before it became an issue," Griffith said. "We were concerned about payroll, but that was not a problem."

The unpaid taxes are a mix of current and past-due amounts, officials said.

This is not the first time the Internal Revenue Bureau has placed a lien on Luis Hospital's bank accounts.

It happened at least once last year when the hospital got behind on its payment plan for past-due amounts. Although a new payment plan was put in place with the hopes it would be more sustainable, the hospital was again unable to keep up with the payments.

Luis Hospital Interim Chief Financial Officer Nellon Bowry said that the hospital made a $30,000 payment to the Internal Revenue Bureau on Friday.

The compromise involved the Internal Revenue Bureau removing the lien and hospital officials agreeing to supply the bureau with the facility's financials, with the intent of creating a payment plan that is sustainable, Griffith said.

A Government House statement Friday night said that in addition to releasing the $1.2 million advance to the hospital, members of the deJongh administration's financial team "engaged in conversations with bank officials to ensure that the payroll checks issued on Thursday would be honored."

The hospital has repeatedly requested advances on its monthly allotment from the central government to make payroll. The hospital's Fiscal Year 2014 appropriation is almost used up.

Bowry said there is one more month's allotment left for the entire fiscal year, which runs through the end of September.

"Throughout this process, the administration has kept the Legislature informed about the fact that JFL Hospital was utilizing its Fiscal Year 2014 appropriation at an accelerated rate and at that rate, the JFL Hospital's annual appropriation would be exhausted well before the end of the fiscal year," the Government House release said.

Griffith said the hospital continues to struggle with its financial problems, and he hopes the senators and governor are able to find a cash infusion for the hospital.

Officials have for years sounded the alarm about the hospital's growing mountain of debt to its vendors and a diminishing cash flow.

The money owed to the Internal Revenue Bureau is not the only money associated with payroll that the hospital owes.

Bowry said Friday that the hospital also owes the Internal Revenue Service about $1.6 million for Federal Insurance Contributions Act - Social Security and Medicare - deductions.

The hospital this week received a notice of failure to pay from the IRS, and has been given 30 days to pay up, Bowry said.

In addition, the hospital also owes some employer and employee contributions to the Government Employees Retirement System. The hospital owes GERS about $3.5 million, Bowry said.

"It all stems from the same basic problem: insufficient cash flow," Bowry said.

Because May has three pay days, the month is proving particularly challenging, he said.

According to Bowry, the hospital will be able to make its final pay day for May, because it has already received the government's advance. However, the first pay day in June will require another advance - and that will use up the FY 2014 allocation, he said.

The Government House statement notes the strain that the situation has placed on the central government as well.

The emergency requests for allotment advances from the hospital have "substantially disrupted the central government's cash flow planning," it said.

"Throughout the fiscal year the administration has advised members of the 30th Legislature at various times of JFL Hospital's precarious situation and as recently as last week, the administration advised the members of the 30th Legislature that the situation at the JFL Hospital had gotten worse and that by June 2014, JFL Hospital would have been allotted their entire Fiscal Year 2014 appropriation," the statement said.

Griffith said officials have asked for more money.

"I really want to thank the governor for trying to do all he can. I know he has been in dialogue with the Senate to see what monies can be found to assist JFL in paying off its debt," Griffith said.

Officials said they also hope to get the OK from the territorial hospital board soon for a contract with The Advisory Board Company for a project aimed at beefing up hospital revenues.

Luis Hospital officials pushed hard to get the $1.2 million contract approved in early April, but territorial hospital board members raised questions and concerns about the contract and did not take action at that point.

Luis Hospital has been without a quorum on its board for almost a year, so the territorial hospital board has to step in and make all decisions that normally would be made by the district board.

Although another territorial hospital board meeting had been set for early May, it was canceled because the board could not muster a quorum.

"We've got a lot of revenue enhancement ideas, plans that, once implemented, I think will be very effective," Griffith said. "However, we have to make it through some difficult times."

Bowry said that while working to address the issues raised by the territorial board about the contract, hospital officials also are working on a scaled-back version of the contract with The Advisory Board Company, one that is for less than $100,000 and can be signed by Griffith and does not need board approval.

Officials hope to get the revenue enhancement project started as soon as possible, while continuing to try get the larger contract passed by the territorial board, according to Bowry.

"We simply can't just do nothing," he said.

- Contact Joy Blackburn at 714-9145 or email

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