Gov. Juan F. Luis Hospital cannot pay vendors or utilities, is facing criminal sanctions for not paying employees’ taxes, garnished for employee health insurance and retirement, has already used its full year’s budget and cannot make next payroll, officials said during budget hearings Friday.
The hospital’s longstanding financial problems have dramatically worsened, with a sharp drop in patient revenues over the last year, Interim Chief Executive Officer Kendall Griffith told the Finance Committee. "The yearly operational cash deficiency has positioned JFL on a proverbial “fiscal cliff,” Griffith said.
The hospital has been unable to make mandatory payments to the U.S. Internal Revenue Service, V.I. Internal Revenue Bureau and Government Employees Retirement System, he said. It currently owes the IRS $2.1 million, according to Griffith.
In May, the IRS "served notice to JFL that the past due balance owed to the agency was due in June and no payment on this balance could result in the garnishment of operating accounts and/or holding the chief executive officer and chief financial officer personally liable to include garnishment of their personal assets and possible imprisonment," Griffith said.
Also he said IRB nearly seized their accounts over a past-due balance that stands at $11.8 million.
And it owes its vendors more than $58 million and cannot get supplies without advance payment.
The Office of Management and Budget helped by advancing its budget allotment.
"However, the entire Fiscal Year 2014 appropriation has been exhausted as of June’s allotment, with three more months remaining in the fiscal year. JFL needs a significant infusion of operating cash immediately to buy time for longer term fiscal rehabilitation," Griffith said.
Earlier this week, the Legislature approved bonding authority that will allow the government to borrow to pay a portion of the most pressing needs. (See Related Links below)
The hospital has a large built-in deficit because V.I. law mandated it treat all in need, without regard to ability to pay, but the government’s and other funding for the hospital stands.
Griffith said that in this upcoming year, "JFL should be compensated $46.9 million” – as opposed to the proposed $20.1 million. He said JFL would have absorbed on average $42 million each year of uncompensated care provided to the people of the Virgin Islands, costing the hospital about $297 million for fiscal years 2009 – 2015.
"Fairly compensating JFL for the uncompensated care it provides will enable us to pay our vendors, as well as expand and improve health service," Griffith said.
Along with the structural deficit, JFL collected much less revenue this year than last. According to Griffith, the hospital saw a steady increase of cash collections from fiscal years 2009 thru 2013 with a sharp decline in FY14.
"The dramatic decline in cash collections is attributable to a decline in surgical case volumes due to limited finances, which affected our ability to procure supplies and recruit needed general surgeons," he said.
Sen. Clifford Graham, chairman of the Finance Committee, asked what the hospital is doing to garnish wages and collect from patients who are able to pay.
Acting Chief Financial Officer Michael Younger said the hospital stopped collecting altogether for awhile but had resumed.
"We are actively re-engaging self-pay patient billing," Younger said. "For a period of time, bills did not go out to self-pay patients and we are restarting that process," he said. If a patient cannot pay, they may go to court for a judgment, he said.
"Some of your debt is from not billing? How can it be?" Jackson asked.
"In 2013 it just stopped. No one was watching the shop. But we are re-engaging the process," Younger said.
Griffith resigned as interim CEO last July amidst a conflict with then-Chief Financial Officer Deepak Bansal and his assistants, and with several members of the JFL governing board. The board reinstated him after the Legislature scheduled a session, at Sen. Alicia "Chucky" Hansen’s urging, to consider reinstating him as hospital CEO by legislative fiat. (See Related Links below)
Griffith initially took the post of interim CEO when former CEO Jeff Nelson was forced out in January after making unpopular decisions to lay off nurses to save money. Hansen and other senators demanded Nelson’s ouster last year.
Despite the dire situation, the hospital can turn the corner if it gets the full amount it is requesting this year, and if a recent application to update its Medicare reimbursement rates is approved. Right now, the hospital is reimbursed at 1996 levels. A 2012 request to update the rates was turned down due to "a missed deadline," Griffith said.
"What I am hearing is you really need the handout right now so in the future you will only need the hand up. But right now you are so far behind the eight ball you need the handout right now," Graham said.
"That is exactly right," Griffith said.
Griffith presented the hospital’s General Fund budget request of $35.4 million, saying funding "at this level will allow JFL to maintain its current level of service, pay down outstanding debt, bring the inventory levels for pharmaceutical and medical supplies to par, as well as make the necessary capital investments."
That request is $15.3 million more than the executive budget recommendation of $20.15 million-flat from the year before. Of that, $15.35 million is for wages and salaries; $4.8 million for fringe benefits, Social Security and Medicare taxes.
The hospital expects $126.7 million in gross patient revenues, with $41.5 million left after "contractual adjustments" to pay doctors and other costs, for local revenue of $77.63 million. Of that, $38.57 million is for wages and salaries; $9.18 million for fringe benefits and taxes; $11.82 million for supplies; $12.54 million for other services and charges; and $5.52 million for utilities.
No votes were taken at the information gathering budget hearing.
